UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1999 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 (650) 326-1700
Securities Registered Pursuant to Section 12(b) of the Act:
Name of Each
Exchange on
Title of Each Class Which Registered
Common Stock ($.01 par value) NASDAQ
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes___X___ No_______
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. ___X____
Aggregate market value of voting stock held by persons other than
Directors, Officers and those shareholders holding more than 5% of the
outstanding voting stock, based upon the closing price per share on the
National Automated System of the National Association of Securities
Dealers Inc. Automated Quotation System on February 29, 2000:
$102,514,124
Number of shares of Common Stock outstanding
as of February 29, 2000: 21,362,185
DOCUMENTS INCORPORATED BY REFERENCE
Parts I, II and IV
Parts I, II and IV are incorporated by reference from Consolidated
Freightways Corporation's 1999 Annual Report to Shareholders. (Only
those portions referenced herein are incorporated in this Form 10-K.)
Part III
Part III is incorporated by reference from the proxy statement to be
filed in connection with the Company's 2000 Annual Meeting of
Shareholders. (Only those portions referenced herein are incorporated
in this Form 10-K.)
CONSOLIDATED FREIGHTWAYS CORPORATION
FORM 10-K
Year Ended December 31, 1999
_______________________________________________________________________
INDEX
Item Page
PART I
1. Business 3
2. Properties 7
3. Legal Proceedings 8
4. Submission of Matters to a Vote of Security Holders 8
PART II
5. Market for the Registrant's Common Stock and
Related Stockholder Matters 8
6. Selected Financial Data 8
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
7A. Quantitative and Qualitative Disclosures About
Market Risk 9
8. Financial Statements and Supplementary Data 9
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 9
PART III
10. Directors and Executive Officers of the Registrant 10
11. Executive Compensation 10
12. Security Ownership of Certain Beneficial
Owners and Management 11
13. Certain Relationships and Related Transactions 11
PART IV
14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 11
Signatures 12
Index to Information Incorporated by Reference 13
Index to Financial Information 14
CONSOLIDATED FREIGHTWAYS CORPORATION
FORM 10-K
Year Ended December 31, 1999
_______________________________________________________________________
PART I
ITEM 1. BUSINESS
(a) General Development of Business
Consolidated Freightways Corporation is a holding company that was
incorporated in Delaware in 1996. It is herein referred to as the
"Registrant" or "Company". The Company was formerly a subsidiary of CNF
Inc. (the former parent) through December 1, 1996. The Company
consists of Consolidated Freightways Corporation of Delaware (CFCD), a
nationwide motor carrier, incorporated in 1958 as successor to the
original trucking company organized in 1929, and its Canadian
operations, including Canadian Freightways Limited, Epic Express, Milne
& Craighead, Inc., Interport Sufferance Warehouses, Blackfoot Logistics
Ltd. and other related businesses; Redwood Systems, Inc., a supply
chain management services provider; and the Leland James Service
Corporation, an administrative service provider. The Company primarily
provides less-than-truckload (LTL) transportation and supply chain
management services throughout the United States and Canada, as well as
in Mexico through a joint venture, and international freight services
between the United States and more than 80 countries.
(b) Financial Information About Industry Segments
Segment information is summarized in Note 10 on page 27 of the 1999
Annual Report to Shareholders and is incorporated herein by reference.
(c) Narrative Description of Business
The Company, headquartered in Menlo Park, California, is the holding
company of CFCD, a full-service trucking company providing less-than-
truckload freight services throughout the United Stated and Canada, as
well as in Mexico through a joint venture, and one-stop international
freight service between the United States and more than 80 countries
worldwide through operating agreements with ocean carriers and a
network of international partners. Operations consist of an extensive
transportation network that typically moves shipments of manufactured
or non-perishable processed products having relatively high value and
requiring consistent, expedited service, compared to the bulk raw
materials characteristically transported by railroads, pipelines and
water carriers. Less-than-truckload (LTL) is an industry designation
for shipments weighing less than 10,000 pounds. CFCD is one of the
nation's largest LTL motor carriers in terms of 1999 revenues. The
Company also provides supply chain management services through its
wholly-owned subsidiary, Redwood Systems, Inc. (Redwood). Redwood is a
third party, non-asset based logistics company that offers complete
supply chain management services including dedicated contract
warehousing and carriage, just-in-time delivery and specialized time-
definite distribution, information-based logistics services and
worldwide multi-modal logistics.
CFCD's primary competitors in the national LTL market are Yellow
Freight System, Inc., Roadway Express, Inc. and Arkansas Best
Corporation. CFCD also competes for LTL freight with regional LTL
motor carriers, small package carriers, private carriage and freight
forwarders. Competition for freight is based primarily upon price,
service consistency and transit time. The Company is faced with a
steady erosion of its traditional "greater than 1,500 miles" length-of-
haul market due to trends such as the "regionalization" of freight due
to just-in-time inventory practices, distributed warehousing and other
changes in business processes. Also contributing to this decline are
new longer length-of-haul service offerings by regional and parcel
carriers. To remain competitive, the Company is continuing to invest
in its infrastructure to facilitate operations in the 500 to 1,500 mile
length-of-haul market. This includes closing some terminals and
expanding others to expedite freight through the system, reducing
handling and related costs. The Company successfully launched second
day service in certain eastern bound markets in early 1998, reducing
transit times by 1 to 2 days, and aggressively expanded this service
offering in 1999. Additionally, the Company must continue to develop
services tailored to customers' needs, like CF PrimeTime, the Company's
premium expedited service offering. The Company must also continue to
improve its freight profile through yield management programs designed
to seek appropriate compensation for the freight it handles.
As a large carrier of LTL general freight, at December 31, 1999, CFCD
operated 38,435 vehicle units including inter-city tractors and
trailers and pick-up and delivery units. It had a network of 351 U.S.
and Canadian freight terminals, metro centers and regional
consolidation centers.
There is a broad diversity in the customers served, size of shipments,
commodities transported and length of haul. No single commodity
accounted for more than a small fraction of total revenues.
CFCD operates daily schedules utilizing relay drivers who drive
approximately eight to ten hours each day and sleeper teams, which in
1999 approximated 20% of all linehaul miles in North America. Road
equipment consists of one tractor pulling two 28-foot double trailers
or, to a limited extent, one semi-trailer or three 28-foot trailers.
CFCD generally utilizes trailer equipment that is 102 inches in width.
CFCD continued to maximize use of lower-cost rail services where
feasible in 1999. Rail miles as a percentage of total linehaul miles
approximated 27%. In 1999, CFCD operated in excess of 649 million
linehaul miles.
CFCD and several Canadian subsidiaries serve Canada through terminals
in the provinces of Alberta, British Columbia, Manitoba, New Brunswick,
Nova Scotia, Ontario, Quebec, Saskatchewan and in the Yukon Territory.
The Canadian operations utilize a fleet of over 1,530 trucks, tractors
and trailers.
Cyclicality and Seasonality
The LTL trucking industry is affected directly by the state of the
overall economy and seasonal fluctuations, which affect the amount of
freight to be transported. Freight shipments, operating costs and
earnings are also affected adversely by inclement weather conditions.
The months of September, October and November of each year usually have
the highest business levels while the first quarter has the lowest.
Employees
At December 31, 1999, approximately 82% of the Company's domestic
employees were represented by various labor unions, primarily the
International Brotherhood of Teamsters. On April 13, 1998, the
International Brotherhood of Teamsters ratified a new five-year
National Master Freight Agreement with CFCD and three other national
motor freight carriers.
Labor costs, including fringe benefits, averaged approximately 64% of
the Company's 1999 revenues. The Company had approximately 22,100,
21,000 and 21,600 employees at December 31, 1999, 1998 and 1997,
respectively.
Fuel
The average fuel cost per gallon, excluding taxes, was $0.578,
$0.462 and $0.659 for the years ended December 31, 1999, 1998 and 1997.
During periods of sharply higher fuel costs, the Company's rules tariff
implements a fuel surcharge when the average cost per gallon of on-
highway diesel fuel exceeds $1.10, including tax, as determined from
the Energy Information Administration of the Department of Energy's
publication of weekly retail on-highway diesel prices. A fuel
surcharge was implemented throughout all of 1997 and was discontinued
in early 1998, when fuel prices started to decline. However, as fuel
prices began to increase again in 1999, the Company implemented a fuel
surcharge effective in July. 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. There
can be no assurance that the Company will be able to maintain this
surcharge or successfully implement such surcharges in response to
increased fuel costs in the future.
Year 2000
The Company successfully completed the conversion of its internal
systems for Year 2000 compliance. Costs to modify operational and
financial systems and applications in 1999 were $4.9 million, and
include payroll and payroll-related costs as well as the costs of
external consultants. Total life-to-date costs of modifying
operational and financial systems and applications for Year 2000
compliance were $11.1 million. In certain cases, management opted to
replace rather than modify certain of its financial systems and
applications. Costs associated with the replacement of those systems
and applications have been capitalized. As of December 31, 1999, $41.2
million has been capitalized and includes the costs of hardware,
software, and payroll costs, as well as the costs of external
consultants. Given the possibility that not all Year 2000 problems
would appear on January 1, the Company is continuing to monitor its
internal systems, as well as its ability to transact with major
customers and suppliers. However, the Company does not expect that the
impact of any subsequent Year 2000 disruptions will have a material
adverse effect on the Company's financial position or results of
operations.
Federal and State Regulation
Regulation of motor carriers has changed substantially in the last 20
years. The process started with the Motor Carrier Act of 1980, which
allowed easier access to the industry by new trucking companies,
removed many restrictions on expansion of services by existing
carriers, and increased price competition by narrowing the antitrust
immunities available to the industry's collective ratemaking
organizations. This deregulatory trend was continued by subsequent
legislation in 1982, 1986, 1993 and 1994. The process culminated with
federal pre-emption of most economic regulation of intrastate trucking
regulatory bodies effective January 1, 1995, and with legislation which
terminated the Interstate Commerce Commission (ICC) effective January
1, 1996.
Currently, the motor carrier industry is subject to federal regulation
by the Federal Highway Administration (FHWA), the Federal Motor Carrier
Safety Administration (FMCSA) and the Surface Transportation Board
(STB), all of which are units of the United States Department of
Transportation (DOT). The FHWA performs certain functions inherited
from the ICC relating chiefly to motor carrier registration, cargo and
liability insurance, extension of credit to motor carrier customers,
and leasing of equipment by motor carriers from owner-operators. The
FMCSA, which was created in March 2000, enforces comprehensive trucking
safety regulations relating to driver qualifications, drivers' hours of
service, safety-related equipment requirements, vehicle inspection and
maintenance, analysis of and record-keeping for accidents, and
transportation of hazardous materials. Because CFCD makes large and
increasing use of rail "piggyback" (trailer-on-flatcar) service as
permitted under its current collective bargaining agreements, CFCD must
also comply with the hazardous materials transportation regulations of
DOT's Federal Railroad Administration. Compliance with similar
regulations of DOT's Federal Aviation Administration is required when
CFCD tenders shipments to air carriers in the PrimeTime Air program.
As pertinent to the general freight trucking industry, the STB has
authority to resolve certain types of pricing disputes and authorize
certain types of intercarrier agreements under jurisdiction inherited
from the ICC.
At the state level, federal pre-emption of economic regulation does not
prevent the states from regulating motor vehicle safety on their
highways. In addition, federal law allows all states to impose
insurance requirements on motor carriers conducting business within
their borders, and empowers most states to require motor carriers
conducting interstate operations through their territory to make annual
filings verifying that they hold appropriate registrations from FHWA.
Motor carriers also must pay state fuel taxes and vehicle registration
fees, which normally are apportioned on the basis of mileage operated
in each state.
Canadian Regulation
Although the provinces in Canada have regulatory authority over intra-
provincial operations of motor carriers, they have elected to
substantially eliminate intra-provincial regulation of the general
freight trucking industry. Federal legislation to phase in deregulation
of the extra-provincial motor carrier industry took effect January 1,
1988 and the phase in was completed in 1997. The new legislation
relaxed economic regulation of extra-provincial trucking by easing
market entry restrictions. The Canadian provinces have implemented
safety regulations of trucking services applicable to both extra-
provincial and intra-provincial operations of motor carriers. CFCD and
its Canadian affiliates wrote off substantially all of the unamortized
cost of their Canadian operating authorities in 1992.
General
The research and development activities of the Company are not
significant.
During 1999, 1998 and 1997 there was no single customer of the Company
that accounted for 10% or more of consolidated revenues.
The Company is subject to Federal, state and local environmental laws
and regulations relating to, among other things, contingency planning
for spills of petroleum products, and its disposal of waste oil.
Additionally, the Company is subject to significant regulations dealing
with underground fuel storage tanks. The Company stores some of its
fuel for its trucks and tractors in 252 underground tanks located in 48
states. The Company believes that it is in substantial compliance with
all such environmental laws and regulations and is not aware of any
leaks from such tanks that could reasonably be expected to have a
material adverse effect on the Company's competitive position,
operations or financial position. However, there can be no assurances
that environmental matters existing with respect to the Company, or
compliance by the Company with laws relating to environmental matters,
will not have a material adverse effect on the Company's business,
financial position or results of operations.
The Company has in place policies and methods designed to conform with
these regulations. The Company estimates that capital expenditures for
upgrading underground tank systems and costs associated with cleaning
activities for 2000 will not be material.
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. Under CERCLA, PRP's
are jointly and severally liable for all site remediation and expenses.
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.
(d) Financial Information About Foreign and Domestic Operations and
Export Sales.
Geographic information is summarized in Note 10 on page 27 of the 1999
Annual Report to Shareholders and is incorporated herein by reference.
ITEM 2. PROPERTIES
The following summarizes the terminals, freight service centers and
warehouses operated by the Company or its subsidiaries at December 31,
1999. These major facilities generally consist of a large dock with
loading doors, a small office and a large yard for the movement of
tractors and trailers in the normal business operations. As the Company
continues to invest in its infrastructure to become more competitive in
the shorter length-of-haul lanes, some terminals will be consolidated
and others expanded.
Owned Leased Total
217 138 355
The following table sets forth the location and square footage of the
principal facilities operated by the Company or its subsidiaries:
Location Square Footage
(e) Rancho Cucamonga, CA 419,064
(e) Guadalajara, Mexico 369,750
Mira Loma, CA 280,672
Chicago, IL 231,159
Carlisle, PA 151,100
Kansas City, MO 131,916
(f) Edmonton, Alberta, Canada 121,415
(b) Columbus, OH 118,774
Memphis, TN 118,745
Nashville, TN 118,622
(a) Indianapolis, IN 109,460
Orlando, FL 101,557
(e) Mira Loma, CA 109,790
South Chicago, IL 98,738
(e) St. Petersburg, FL 95,812
(f) Vancouver, British Columbia,
Canada 95,725
(a) Minneapolis, MN 94,890
Charlotte, NC 89,204
St. Louis, MO 88,640
Akron, OH 82,494
Sacramento, CA 81,286
Atlanta, GA 77,920
Houston, TX 77,346
Dallas, TX 75,358
(a)(d) Freemont, IN 73,760
(a)(d) Peru, IL 73,760
Buffalo, NY 73,380
Milwaukee, WI 70,661
Salt Lake City, UT 68,480
Seattle, WA 59,720
(f) Toronto, Ontario, Canada 53,431
(c) Springfield, MA 51,760
(a) Facility partially or wholly financed through the issuance of
industrial revenue bonds.
(b) Property pledged as collateral for the benefit of CNF Inc. for
workers' compensation claims prior to the spin-off of the Company
from its former parent, as required under the Reimbursement and
Indemnification Agreement dated October 1, 1996.
(c) Property is leased from a subsidiary of CNF Inc. through
December 1, 2005.
(d) Terminal closed in January 2000 as part of consolidation.
(e) Dedicated contract warehouse and distribution facility operated
by Redwood.
(f) Property is owned by one of the Company's Canadian subsidiaries.
ITEM 3. LEGAL PROCEEDINGS
The legal proceedings of the Company are summarized in Item 8.
Discussions of certain environmental matters are presented in Items 1
and 7.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock is listed for trading on the NASDAQ Stock
Market's National Market. The Company's Common Stock began trading on
December 3, 1996. The quarterly ranges of the market price of the
Company's Common Stock during the period January 1, 1998 to December
31, 1999 are presented in the "Quarterly Financial Data" on page 30 of
the 1999 Annual Report to Shareholders and are incorporated herein by
reference. Currently there are no cash dividends paid on the Company's
Common Stock. The Company presently expects that it will not pay a
dividend in 2000. The Company's dividend policy thereafter will be
dependent on the circumstances then in existence. There can be no
assurance, however, that the Company will pay any cash dividends on its
Common Stock in the future.
During 1999, the Company repurchased 1,407,725 shares of its Common
Stock for $12.6 million. This completed a $25 million stock repurchase
program approved by the Board of Directors in 1998. On December 14,
1999, the Board of Directors authorized the repurchase of an additional
$20 million of Common Stock, of which $19.8 million remains available.
As of December 31, 1999, there were 31,800 holders of record of the
Common Stock ($.01 par value) of the Company.
ITEM 6. SELECTED FINANCIAL DATA
The Selected Financial Data is presented in the "Five Year Financial
Summary" on page 31 of the 1999 Annual Report to Shareholders and is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results
of Operations is presented on pages 16 through 18 of the 1999 Annual
Report to Shareholders and is incorporated herein by reference.
Certain statements included or incorporated by reference herein,
including certain statements under "Management's Discussion and
Analysis of Financial Condition and Results of Operations" referred to
above, constitute "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended, and are subject to
a number of risks and uncertainties. Any such forward-looking
statements included or incorporated by reference herein should not be
relied upon as predictions of future events. Certain such forward-
looking statements can be identified by the use of forward-looking
terminology such as "believes," "expects," "may," "will," "should,"
"seeks," "approximately," "intends," "plans," "pro forma," "estimates,"
or "anticipates" or the negative thereof or other variations thereof or
comparable terminology, or by discussions of strategy, plans or
intentions. Such forward-looking statements are necessarily dependent
on assumptions, data or methods that may be incorrect or imprecise and
they may be incapable of being realized. In that regard, the following
factors, among others, and in addition to matters discussed elsewhere
herein and in documents incorporated by reference herein, could cause
actual results and other matters to differ materially from those in
such forward-looking statements: changes in general business and
economic conditions; increases in domestic and international
competition and pricing pressure; increases in fuel prices; uncertainty
regarding the Company's ability to improve results of operations; labor
matters, including shortages of drivers and increases in labor costs;
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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative and qualitative disclosures about market risk are
presented on page 17 of the 1999 Annual Report to Shareholders and are
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and Auditors' Report are
presented on pages 19 through 29, inclusive, of the 1999 Annual Report
to Shareholders and are incorporated herein by reference. The
unaudited quarterly financial data is included on page 30 of the 1999
Annual Report to Shareholders and is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The identification of the Company's Directors is presented on pages 2
and 3 of the Company's 2000 Proxy Statement and those pages are
incorporated herein by reference.
The Executive Officers of the Company, their ages at December 31, 1999
and their applicable business experience are as follows:
G. Robert Evans, 68, Vice Chairman of the Board and Chief Executive
Officer of the Company since January 24, 2000. Prior to joining the
Company, Mr. Evans was chairman of Material Sciences Corporation from
1991 to 1998. He has served as a board member of the Company since
1996 and was a director of the former parent from 1990 to 1996. He
replaces W. Roger Curry who retired from the Company.
Patrick H. Blake, 50, Executive Vice President - Chief Operating
Officer of the Company and President of CFCD since May 13, 1999. Mr.
Blake served as Executive Vice President - Operations of the Company
since December 31, 1996 and as Executive Vice President - Operations of
CFCD since July 1994. He was Vice President-Eastern Region of CFCD
from 1992-1994 and a Division Manager from 1985-1992.
Sunil Bhardwaj, 44, Senior Vice President and Chief Financial Officer
of the Company since May 13, 1999. Mr. Bhardwaj served as Vice
President of Planning and Treasurer since December 2, 1996. He
previously served as Vice President of Internal Audit of the former
parent, assuming that position in 1993.
Wayne M. Bolio, 43, Vice President - Human Resources of the Company
since March 1, 2000. From April 1997 through February 2000, Mr. Bolio
served as Assistant General Counsel for the Company and was responsible
for its labor and employment legal matters. Prior to joining the
Company in April 1997, he was an attorney for Southern Pacific
Transportation Company from 1991, most recently as Assistant General
Counsel from 1993.
Patrick J. Brady, 48, Senior Vice President - Sales and Marketing since
February 25, 2000. Mr. Brady had served as Vice President Eastern
Region of CFCD since January 1995 and was a Division Manager before
that.
Stephen D. Richards, 56, Senior Vice President and General Counsel of
the Company since December 2, 1996. Mr. Richards has been Vice
President and General Counsel of CFCD since September 1995. He was
Deputy General Counsel of the former parent for the preceding four
years.
Thomas A. Paulsen, 56, Senior Vice President - Operations of CFCD since
August 1, 1998. Mr. Paulsen was a Vice President of CFCD from March 1,
1985 to July 31, 1998.
Robert E. Wrightson, 60, Senior Vice President and Controller of the
Company since December 2, 1996. Mr. Wrightson has served as Senior
Vice President and Controller of CFCD since July 1994. Prior to
joining CFCD, he was Vice President and Controller of the former
parent, assuming that position in 1989.
ITEM 11. EXECUTIVE COMPENSATION
The required information for Item 11 is presented on pages 8 through
17, inclusive, of the Company's 2000 Proxy Statement, and those pages
are incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The required information for Item 12 is included on pages 4 through 6
of the Company's 2000 Proxy Statement and is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K
(a) Financial Statements and Exhibits Filed
1. Financial Statements
See Index to Financial Information.
2. Financial Statement Schedules
See Index to Financial Information.
3. Exhibits
See Index to Exhibits.
(b) Reports on Form 8-K
No reports on Form 8-K were filed in the quarter ended
December 31, 1999.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Form 10-K
Annual Report to be signed on its behalf by the undersigned, thereunto
duly authorized.
March 29, 2000 CONSOLIDATED FREIGHTWAYS CORPORATION
(Registrant)
By:/s/Sunil Bhardwaj
Sunil Bhardwaj
Senior Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
March 29, 2000 /s/G. Robert Evans
G. Robert Evans
Vice Chairman of the Board and
Chief Executive Officer
March 29, 2000 /s/Sunil Bhardwaj
Sunil Bhardwaj
Senior Vice President and
Chief Financial Officer
March 29, 2000 /s/Robert E. Wrightson
Robert E. Wrightson
Senior Vice President and Controller
March 29, 2000 /s/William D. Walsh
William D. Walsh, Chairman of the Board
March 29, 2000 /s/Paul B. Guenther
Paul B. Guenther, Director
March 29, 2000 /s/John M. Lillie
John M. Lillie, Director
CONSOLIDATED FREIGHTWAYS CORPORATION
FORM 10-K
Year Ended December 31, 1999
_______________________________________________________________________
INDEX TO INFORMATION INCORPORATED BY REFERENCE
Consolidated Freightways Corporation and Subsidiaries
The following items are incorporated herein by reference from the
Company's 1999 Annual Report to Shareholders. The page references
refer to the Annual Report to Shareholders.
Item Page
Item 1(b). Financial Information About Industry Segments 27
Item 1(d). Financial Information About Foreign and Domestic
Operations and Export Sales 27
Item 5. Market for the Registrant's Common Stock and
Related Stockholder Matters 30
Item 6. Selected Financial Data 31
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 16-18
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk 17
Item 8. Financial Statements and Supplementary Data 19-30
The following items are incorporated herein by reference from the
Company's 2000 Proxy Statement. The page references refer to the Proxy
Statement.
Item Page
Item 10. Directors and Executive Officers of
the Registrant 2-3
Item 11. Executive Compensation 8-17
Item 12. Security Ownership of Certain Beneficial Owners
and Management 4-6
CONSOLIDATED FREIGHTWAYS CORPORATION
FORM 10-K
Year Ended December 31, 1999
_______________________________________________________________________
INDEX TO FINANCIAL INFORMATION
Consolidated Freightways Corporation and Subsidiaries
The following Consolidated Financial Statements of Consolidated
Freightways Corporation and Subsidiaries appearing on pages 19 through
29, inclusive, of the Company's 1999 Annual Report to Shareholders are
incorporated herein by reference:
Consolidated Balance Sheets - December 31, 1999 and 1998
Statements of Consolidated Income - Years Ended December 31, 1999,
1998 and 1997
Statements of Consolidated Cash Flows - Years Ended December 31,
1999, 1998 and 1997
Statements of Consolidated Shareholders' Equity - Years Ended
December 31, 1999, 1998 and 1997
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
In addition to the above, the following consolidated financial
information is filed as part of this Form 10-K:
Page
Consent of Independent Public Accountants 15
Report of Independent Public Accountants 15
Schedule II - Valuation and Qualifying Accounts 16
The other schedules have been omitted because either (1) they are
neither required nor applicable or (2) the required information has
been included in the consolidated financial statements or notes
thereto.
SIGNATURE
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included and incorporated by reference in
this Form 10-K, into Consolidated Freightways Corporation's (the
Company) previously filed Registration Statement File Nos. 333-16851,
333-16835, 333-25167, 333-95859, 333-85775 and 333-95861.
/s/Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Portland, Oregon,
March 28, 2000
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Consolidated Freightways Corporation:
We have audited in accordance with generally accepted auditing
standards, the consolidated financial statements included in
Consolidated Freightways Corporation's 1999 Annual Report to
Shareholders incorporated by reference in this Form 10-K, and have
issued our report thereon dated January 26, 2000. Our audit was made
for the purpose of forming an opinion on those statements taken as a
whole. The Schedule on page 16 is the responsibility of the Company's
management and is presented for the purpose of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and,
in our opinion, fairly states in all material respects the financial
data required to be set forth therein in relation to the basic
financial statements taken as a whole.
/s/Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Portland, Oregon,
January 26, 2000
SCHEDULE II
CONSOLIDATED FREIGHTWAYS CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 1999
(In thousands)
DESCRIPTION
ALLOWANCE FOR DOUBTFUL ACCOUNTS
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
1999 $11,413 $18,166 $ - $(16,785)(a) $12,794
1998 $ 7,467 $15,127 $ - $(11,181)(a) $11,413
1997 $ 9,692 $ 8,374 $ - $(10,599)(a) $ 7,467
(a) Accounts written off net of recoveries.
INDEX TO EXHIBITS
ITEM 14(a)(3)
Exhibit No.
(2) Plan of acquisition, reorganization, arrangement, liquidation or
succession:
2.1 Distribution Agreement between Consolidated Freightways
Corporation and Consolidated Freightways, Inc., dated
November 25, 1996. (Exhibit 2.1 to the Company's Form 8-K dated
March 12, 1997.) (*)
(3) Articles of incorporation and bylaws:
3.1 Amended and Restated Certificate of Incorporation of Consolidated
Freightways Corporation. (Exhibit 3.1 to the Company's Form 10 filed
October 2, 1996.) (*)
3.2 Amended and Restated Bylaws of Consolidated Freightways
Corporation. (Exhibit 3.2 to the Company's Form 10-K for the
year ended December 31, 1998.) (*)
(10) Material Contracts:
10.1 Alternative Dispute Resolution Agreement Between Consolidated
Freightways Corporation and Consolidated Freightways,
Inc., dated as of December 2, 1996. (Exhibit 10.2 to the Company's
Form 8-K dated March 12, 1997.) (*)
10.2 Employee Benefit Matters Agreement between Consolidated
Freightways Corporation and Consolidated Freightways, Inc., dated as
of December 2, 1996. (Exhibit 10.3 to the Company's Form 8-K dated
March 12, 1997.) (*)
10.3 Tax Sharing Agreement between Consolidated Freightways
Corporation and Consolidated Freightways, Inc., dated as of December
2, 1996. (Exhibit 10.4 to the Company's Form 8-K dated March 12,
1997.) (*)
10.4 Reimbursement and Indemnification Agreement between
Consolidated Freightways Corporation of Delaware and Consolidated
Freightways,Inc., dated as of October 1, 1996. (Exhibit 10.5 to
the Company's Form 8-Kdated March 12, 1997.) (*)
10.5 Consolidated Freightways Corporation 1996 Stock Option and
Incentive Plan. (Exhibit 10.6 to the Company's Form 10 filed October
2, 1996)(*)(#)
10.6 Consolidated Freightways Corporation 1996 Restricted Stock
Award Agreements. (Exhibit 10.8 to the Company's Form 10-K for the
year ended December 31, 1996.) (*)(#)
10.7 Consolidated Freightways Corporation Deferred Compensation Plan
for Executives. (Exhibit 10.10 to the Company's Form 10-K
for the year ended December 31, 1996.) (*)(#)
10.8 Consolidated Freightways Corporation Supplemental Executive
Retirement Plan. (Exhibit 10.11 to the Company's
Form 10-K for the year ended December 31, 1996.) (*)(#)
10.9 Consolidated Freightways Inc. Executive Split-Dollar Life
Insurance Plan. (Exhibit 10.12 to the Company's Form 10-K for the year
ended December 31, 1996.) (*)(#)
10.10 Reimbursement and Security Agreement dated July 3, 1997
between Consolidated Freightways Corporation and CNF Transportation
Inc. (Exhibit 10.1 to the Company's Form 10-Q for the quarter ended
June 30, 1997.)(*)
10.11 Consolidated Freightways Corporation 1999 Equity Incentive
Plan and Forms of Stock Options Agreements. (Exhibit 10.3 to the
Company's Form 10-Q for the quarter ended June 30, 1999.) (*)(#)
(*) Previously filed with the Securities and Exchange Commission and
incorporated by reference.
(#) Designates a contract or compensation plan for Management or
Directors.
INDEX TO EXHIBITS
ITEM 14(a)(3)
Exhibit No.
10.12 Form of Restricted Stock Award and Deferral Agreement under
the 1999 Equity Incentive Plan. (Exhibit 4.5 to the Company's
Registration Statement on Form S-8 dated August 23, 1999, File No 333-
85775.) (*)(#)
10.13 Consolidated Freightways Corporation Non-Employee Directors'
Equity Plan and Form of Stock Option Agreement. (Exhibit 10.4 to the
Company's Form 10-Q for the quarter ended June 30, 1999.) (*)(#)
10.14 Employment Agreements with Senior Management. (Exhibits 10.21 to the
Company's Form 10-K for the year ended December 31, 1998 and 10.1
to the Company Form 10-Q for the quarter ended June 30, 1999.) (*)(#)
10.15 Consolidated Freightways Corporation Management Change-of-Control
Plan. (Exhibit 10.22 to the Company's Form 10-K for the year ended
December 31, 1998.) (*)(#)
10.16 Credit Agreement between Consolidated Freightways Corporation of
Delaware, ABN AMRO Bank, N.V. and various other financial
institutions, dated as of October 12, 1999.
10.17 Lease Agreement between Consolidated Freightways Corporation of
Delaware, ABN AMRO Bank, N.V. and various other financial
institutions, dated as of October 12, 1999.
(13) Annual Report to Security Holders:
Consolidated Freightways Corporation 1999 Annual Report to
Shareholders. (Only those portions referenced herein are incorporated
in this Form 10-K. Other portions such as the "Letter to Shareholders"
are not required and therefore not "filed" as part of this Form 10-K.)
(23) Consents of Experts and Counsel
(23.1) Consent of Arthur Andersen LLP, independent public
accountants (included on page 15 with the auditor's report
in this Annual Report on Form 10-K)
(21) Significant Subsidiaries of the Company
(27) Financial Data Schedule
(*) Previously filed with the Securities and Exchange Commission and
incorporated by reference.
(#) Designates a contract or compensation plan for Management or
Directors.
Exhibit 10.16
U.S. $175,000,000
CREDIT AGREEMENT
Dated as of October 12, 1999
Among
CONSOLIDATED FREIGHTWAYS CORPORATION OF DELAWARE
as Borrower
and
THE INITIAL LENDERS NAMED HEREIN
as Initial Lenders
and
ABN AMRO BANK N. V.
as Issuing Bank and Administrative Agent
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms 1
SECTION 1.02. Computation of Time Periods 21
SECTION 1.03. Accounting Terms 21
SECTION 1.04. Other Interpretive Provisions 21
ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances 22
SECTION 2.02. Making the Advances 23
SECTION 2.03. Issuance of and Drawings Under Letters of
Credit 25
SECTION 2.04. Fees 27
SECTION 2.05. Termination or Reduction of the Commitments;
Extension of the Facilities 28
SECTION 2.06. Repayment 30
SECTION 2.07. Interest 31
SECTION 2.08. Interest Rate Determination 32
SECTION 2.09. Optional Conversion of Advances 33
SECTION 2.10. Optional Prepayments 33
SECTION 2.11. Increased Costs and Reduction of Return 33
SECTION 2.12. Illegality 34
SECTION 2.13. Payments and Computations 34
SECTION 2.14. Taxes 35
SECTION 2.15. Sharing of Payments, Etc. 38
SECTION 2.16. Use of Proceeds 39
SECTION 2.17. Substitution of Lenders 39
SECTION 2.18. Evidence of Debt 39
SECTION 2.19. Additional Interest on Eurodollar Rate
Advances 40
ARTICLE III CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness 40
SECTION 3.02. Conditions Precedent to Each Borrowing and
Issuance 41
SECTION 3.03. Determinations Under Section 3.01 42
ARTICLE IV REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the
Borrower 42
ARTICLE V COVENANTS
SECTION 5.01. Affirmative Covenants 45
SECTION 5.02. Negative Covenants 48
SECTION 5.03. Financial Covenants 50
ARTICLE VI EVENTS OF DEFAULT
SECTION 6.01. Events of Default 51
SECTION 6.02. Actions in Respect of the Letters of Credit
upon Default 53
ARTICLE VII The Administrative Agent
SECTION 7.01 Appointment and Authorization 54
SECTION 7.02 Delegation of Duties. 55
SECTION 7.03 Liability of the Administrative Agent. 55
SECTION 7.04 Reliance by the Administrative Agent and the
Issuing Bank. 55
SECTION 7.05 Notice of Default. 56
SECTION 7.06 Lender Party Credit Decision 56
SECTION 7.07 Indemnification of the Administrative Agent
57
SECTION 7.08 Administrative Agent in Individual Capacity
58
SECTION 7.09 Successor Administrative Agent. 58
ARTICLE VIII MISCELLANEOUS
SECTION 8.01. Amendments, Etc. 59
SECTION 8.02. Notices, Etc. 60
SECTION 8.03. No Waiver; Remedies 60
SECTION 8.04. Costs and Expenses 61
SECTION 8.05. Right of Set-off 62
SECTION 8.06. Binding Effect; Entire Agreement 63
SECTION 8.07. Assignments and Participations 63
SECTION 8.08. Confidentiality 66
SECTION 8.09. No Liability of the Issuing Bank 66
SECTION 8.10. Governing Law 66
SECTION 8.11. Execution in Counterparts 67
SECTION 8.12. Jurisdiction, Etc. 67
SECTION 8.13. Waiver of Jury Trial 67
Dated as of October 12, 1999
CONSOLIDATED FREIGHTWAYS CORPORATION OF DELAWARE, a
Delaware corporation (the "Borrower"), the banks, financial
institutions and other institutional lenders listed on the
signature pages hereof as Tranche A lenders (the "Initial Tranche
A Lenders"), the banks, financial institutions and other
institutional lenders listed on the signature pages hereof as
Tranche B lenders (the "Initial Tranche B Lenders" and, together
with the Initial Tranche A Lenders, the "Initial Lenders"), and
ABN AMRO BANK N.V., a bank organized under the laws of the
Netherlands ("ABN AMRO") as issuing bank (the "Issuing Bank") and
agent (the "Administrative Agent") for the Lender Parties (as
hereinafter defined), agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this
Agreement, the following terms shall have the following meanings
(such meanings to be equally applicable to both the singular and
plural forms of the terms defined):
"Administrative Agent" has the meaning specified in the
recitals of parties to this Agreement, and shall include any
successor agent.
"Administrative Agent's Account" means the account of
the Administrative Agent maintained by the Administrative
Agent at ABN AMRO Bank N.V. with its office in New York, New
York.
"Advance" means a Tranche A Revolving Credit Advance, a
Tranche B Revolving Credit Advance or a Letter of Credit
Advance.
"Affiliate" means, as to any Person, any other Person
that, directly or indirectly, controls, is controlled by or
is under common control with such Person or is a director or
officer of such Person.
"Affiliate Guaranty" means the Guaranty Agreement, in
substantially the form of Exhibit C hereto, to be executed
by the Guarantors in favor of the Administrative Agent (as
agent for itself and the other Lender Parties), as the same
may be amended from time to time.
"Agent-Related Persons" means ABN AMRO and any
successor Administrative Agent arising under Section 7.09
and any successor Issuing Bank hereunder, together with
their respective Affiliates, and the officers, directors,
employees, agents and attorneys-in-fact of such Persons and
Affiliates.
"Applicable Lending Office" means, with respect to each
Lender Party, such Lender Party's Domestic Lending Office in
the case of a Base Rate Advance and such Lender Party's
Eurodollar Lending Office in the case of a Eurodollar Rate
Advance.
"Applicable Margin" means, as of any date of
determination, a percentage per annum determined as set
forth on Schedule II hereto.
"Applicable Percentage" means, as of any date of
determination, a percentage per annum determined as set
forth on Schedule II hereto.
"Assignment and Acceptance" means an assignment and
acceptance entered into by a Lender Party and an Eligible
Asssignee, and accepted by the Administrative Agent, in
substantially the form of Exhibit F hereto.
"Attorney Costs" means and includes all reasonable fees
and services of any law firm or other external counsel.
"Available Amount" of any Letter of Credit means, at
any time, the maximum amount available to be drawn under
such Letter of Credit at such time (assuming compliance at
such time with all conditions to drawing).
"BABC Agreement" means the Loan and Security Agreement
dated as of November 27, 1996 among the Borrower, the other
Loan Parties (as defined therein), the financial
institutions party thereto, and BankAmerica Business Credit,
Inc., as agent for such financial institutions ("BABC"), as
the same has been amended to date.
"Base Rate" means, for any period, a fluctuating
interest rate per annum as shall be in effect from time to
time which rate per annum shall at all times be equal to the
higher of: (a) the rate of interest announced publicly by
ABN AMRO at its office in Chicago, Illinois, from time to
time, as its prime or base rate; and (b) 1/2 of one percent
per annum above the Federal Funds Rate. Any change in the
prime or base rate announced by ABN AMRO shall take effect
at the opening of business on the day specified in the
public announcement of such change. Such prime or base rate
is determined as a means of pricing credit extensions to
some customers and is not directly related to any external
rate of interest or index, nor necessarily the lowest rate
of interest charged at any given time for any particular
class of customers.
"Base Rate Advance" means an Advance that bears
interest as provided in Section 2.07(a)(i).
"Borrower's Designated Account" has the meaning set
forth in Section 2.02(a).
"Borrowing" means a borrowing consisting of Tranche A
Revolving Credit Advances or Tranche B Revolving Credit
Advances of the same Type made on the same day by the
Lenders.
"Business Day" means a day of the year on which banks
are not required or authorized by law to close in New York,
Chicago or San Francisco and, if the applicable Business Day
relates to any Eurodollar Rate Advances, on which dealings
in U.S. dollars are carried on in the London interbank
market.
"Capital Adequacy Regulation" means any guideline,
request or directive of any central bank or other
Governmental Authority, or any other law, rule or
regulation, whether or not having the force of law, in each
case, regarding capital adequacy of any bank or of any
corporation controlling a bank.
"Capital Lease" means any lease of Property by the
Parent or any of its Subsidiaries which, in accordance with
GAAP, is or should be capitalized on the Parent's or such
Subsidiary's balance sheet, as the case may be, or for which
the amount of the asset and liability thereunder, if so
capitalized, should be disclosed in a footnote to such
balance sheet.
"Cash Equivalents" means: (a) direct obligations of
the Government of the United States or any agency or
instrumentality thereof or obligations unconditionally
guaranteed by the full faith and credit of the Government of
the United States, (b) money market funds with assets in
excess of $1,000,000,000, (c) certificates of deposit
("CDs"), bankers acceptances, eurodollar CDs or Yankee CDs
with (i) U.S. commercial banks with capital of at least
$200,000,000 and a senior long-term dollar denominated debt
rating of at least "A" by Moody's and S&P or (ii) foreign
commercial banks with assets of at least $1,000,000,000 and
a Thompson Bankwatch rating of at least TBW-1,
(d) eurodollar time deposits with the Nassau or Cayman
offshore branches of U.S. commercial banks with capital of
at least $200,000,000 and a senior long-term dollar
denominated debt rating of at least "A" by Moody's and S&P,
(e) commercial paper rated at least "P2" by Moody's and "A2"
by S&P, (f) medium term, fixed or floating rate notes in
offerings of at least $100,000,000 with a maximum tenor of
five years, issued by U.S. corporations with a senior long-
term dollar denominated debt rating of at least "A" by
Moody's and S&P, and (g) repurchase agreements, provided
that (w) the market value of the collateral securing any
such repurchase agreement must be equal to at least 102% of
the repurchase value plus accrued interest, (x) the
collateral (A) has a maturity of three years or less, (B) is
issued by the Government of the United States or any agency
or instrumentality thereof or U.S. commercial banks with
capital of at least $200,000,000 and a senior long-term
dollar denominated debt rating of at least "A" by Moody's
and S&P and (C) has pricing information that is available on
the Bloomberg Reporting Service, (y) must be executed with
primary dealers listed by the New York Federal Reserve Board
and rated at least "P1" by Moody's and "A1" by S&P, and
(z) such collateral must be delivered to the Borrower's
custodian.
"Change of Control" means (a) the acquisition by any
"person" or "group" (as such terms are used in Section 13d
and 14(d)(2) of the Securities Exchange Act of 1934) (other
than a Person who is not an Unrelated Person) of beneficial
ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Securities
Exchange Act of 1934) of 25% or more of the outstanding
shares of voting stock of the Parent; or (b) during any
period of 12 consecutive calendar months, commencing on or
after the Effective Date, the ceasing of those individuals
(the "Continuing Directors") who (i) were directors of the
Parent on the first day of each such period or (ii)
subsequently became directors of the Parent and whose
initial election or initial nomination for election
subsequent to that date was approved by a majority of the
Continuing Directors then on the board of directors of the
Parent to constitute a majority of the board of directors of
the Parent.
"CNF" means CNF Transportation, Inc., a Delaware
corporation.
"CNF Note" means any promissory note payable by the
Parent to CNF under the Tax Sharing Agreement and any
substitute, replacement or refinancing of any such
promissory note, whether such substitute, replacement or
refinanced promissory note is to CNF or other Persons;
provided that the Parent's obligations under any such
promissory note are subordinated to its obligations under
the Affiliate Guaranty and that the terms and conditions of
such subordination may not be amended, supplemented or
otherwise modified after the date hereof in a manner adverse
to the interests of any of the Lender Parties.
"Commitment" means a Tranche A Revolving Credit
Commitment or a Tranche B Revolving Credit Commitment.
"Confidential Information" means information that the
Borrower furnishes to the Administrative Agent or any Lender
Party, but does not include any such information that is or
becomes generally available to the public other than as a
result of actions or omissions of the Administrative Agent
or any Lender Party or that is or becomes available to the
Administrative Agent or such Lender from a source other than
the Borrower.
"Consolidated" refers to the consolidation of accounts
in accordance with GAAP.
"Consolidated EBIT" shall mean, for any period, the sum
of (i) Consolidated Net Income of the Parent and its
Subsidiaries, before total interest expense (whether cash or
non-cash) and provisions for taxes based on income, and
determined without giving effect to any extraordinary gains
or losses but giving effect to gains or losses from sales of
assets sold in the ordinary course of business plus (ii) an
amount not in excess of $15,000,000 related to charges in
connection with the Tax Sharing Agreement plus (iii) any non-
cash charge incurred by the Parent and its Subsidiaries for
the issuance of common shares under the Parent's restricted
stock plan.
"Consolidated EBITDAR" shall mean, for any period,
Consolidated EBIT, adjusted by adding thereto the amount of
all expenses for depreciation, amortization and Consolidated
Rental Expenses that were deducted in determining
Consolidated EBIT for such period.
"Consolidated Funded Indebtedness" means, for any
period, without duplication, the sum of (a) all short term
Debt of the Parent and its Consolidated Subsidiaries
(including the current maturities of long-term Debt) plus
(b) all long-term Debt of the Parent and its Consolidated
Subsidiaries, including obligations in respect of
Capitalized Leases plus (c) the present value (using a
discount rate of 10% per annum) of future payments under
operating leases of the Parent and its Consolidated
Subsidiaries with initial or remaining non-cancellable lease
terms in excess of one year plus (d) the undrawn amount of
all standby letters of credit issued for the account of the
Parent and its Consolidated Subsidiaries, including any
unpaid reimbursement obligations thereunder minus (e) in the
event that the CNF Note is outstanding as of any date of
determination, an amount equal to the lesser of (i)
$40,000,000 and (ii) the outstanding principal amount of the
CNF Note.
"Consolidated Interest and Rental Expense" means, for
any period, total interest expense (including amounts
properly attributable to interest with respect to Capital
Leases in accordance with GAAP, letter of credit costs, and
amortization of debt discount and debt issuance costs) and
Consolidated Rental Expense of the Parent and its
Consolidated Subsidiaries for such period with respect to
all outstanding Debt of the Parent and its Consolidated
Subsidiaries, including without limitation all commissions,
discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing and net
costs or benefits under interest rate protection agreements.
"Consolidated Net Income" means, for any period, the
net income of the Parent and its Consolidated Subsidiaries
for such period determined in accordance with GAAP provided,
however, that if the Parent 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 shall not be
included in Consolidated Net Income.
"Consolidated Rental Expense" means lease payments by
the Parent and its Consolidated Subsidiaries under all
leases having an initial non-cancellable lease term in
excess of one year.
"Consolidated Stockholders' Equity" means, with respect
to any Person at any date, the Consolidated stockholders'
equity of such Person, excluding any amounts attributable to
mandatorily redeemable preferred stock.
"Consolidated Subsidiary" means, as to any Person, at
any date, any Subsidiary or other entity the accounts of
which would be Consolidated with those of such Person in its
Consolidated financial statements if such statements were
prepared as of such date.
"Consolidated Tangible Net Worth" means, for any Person
at any date, the Consolidated Stockholders' Equity of such
Person and its Consolidated Subsidiaries less goodwill and
intangibles determined on a consolidated basis in accordance
with GAAP.
"Consolidated Total Assets" means, as of any date, the
Consolidated total assets of the Parent and its Subsidiaries
as of such date.
"Convert," "Conversion" and "Converted" each refers to
a conversion of Advances of one Type into Advances of the
other Type pursuant to Section 2.08 or 2.09.
"Debt" of any Person means, without duplication:
(a) all obligations and liabilities of such Person in
respect of borrowed money, (b) all obligations and
liabilities of such Person in respect of Hedging Contracts,
(c) all Obligations, (d) all obligations and liabilities of
such Person secured by any Lien on the Property of such
Person, even though such Person shall not have assumed or
become liable for the payment thereof; provided, however,
that all such obligations and liabilities which are limited
in recourse to such Property shall be included in Debt only
to the extent of the book value of such Property as would be
shown on a balance sheet of such Person prepared in
accordance with GAAP, (e) all obligations or liabilities
created or arising under any Capital Lease or conditional
sale or other title retention agreement with respect to
Property used or acquired by a Person, even if the rights
and remedies of the lessor, seller or lender thereunder are
limited to repossession of such Property; provided, however,
that all such obligations and liabilities which are limited
in recourse to such Property shall be included in Debt only
to the extent of the book value of such Property as would be
shown on a balance sheet of such Person prepared in
accordance with GAAP, and (f) all obligations and
liabilities under any Guaranty of the foregoing.
"Declining Tranche A Lender" has the meaning set forth
in Section 2.05(c).
"Declining Tranche B Lender" has the meaning set forth
in Section 2.05(d).
"Default" means any Event of Default or any event that
would constitute an Event of Default but for the requirement
that notice be given or time elapse or both.
"Defaulting Lender" means at any time any Lender with
respect to which a Lender Default is in effect at such time.
"Designated Entity" means any entity identified by the
Borrower to the Administrative Agent in a written notice
delivered prior to the respective Investment in accordance
with Section 5.02.
"Domestic Lending Office" means, with respect to any
Lender Party, the office of such Lender Party specified as
its "Domestic Lending Office" opposite its name on
Schedule I hereto or in the Assignment and Acceptance
pursuant to which it became a Lender Party, or such other
office of such Lender Party as such Lender Party may from
time to time specify to the Borrower and the Administrative
Agent.
"Effective Date" has the meaning specified in
Section 3.01.
"Eligible Assignee" means (a) a commercial bank
organized under the laws of the United States, or any state
thereof, (b) a commercial bank organized under the laws of
any other country which is a member of the Organization for
Economic Cooperation and Development (the "OECD"), or a
political subdivision of any such country, which is acting
through a branch or agency located in the United States;
which, in each case (under clauses (a) and (b) above) has a
combined capital and surplus of at least two hundred million
dollars ($200,000,000), (c) a Person that is primarily
engaged in the business of commercial banking and that is
(i) a Subsidiary of a Lender, (ii) a Subsidiary of a Person
of which a Lender is a Subsidiary, or (iii) a Person of
which a Lender is a Subsidiary, (d) any other Person which
is a "qualified institutional buyer" (as defined in Rule
144A of the Securities Act) which extends credit or buys
loans as one of its businesses, including insurance
companies, investment funds, mutual funds and lease
financing companies, or (e) any Lender and any Affiliate of
any Lender or, with respect to any Lender that is a fund
that invests in loans, any other fund that invests in loans
and is advised or managed by the same investment advisor as
such Lender or by an Affiliate of such Lender.
"Environmental Action" means any action, suit, demand,
demand letter, claim, notice of non-compliance or violation,
notice of liability or potential liability, investigation,
proceeding, consent order or consent agreement relating in
any way to any violation of an Environmental Law or arising
from alleged injury or threat of injury to health, safety or
the environment, including, without limitation, (a) by any
governmental or regulatory authority for enforcement,
cleanup, removal, response, remedial or other actions or
damages and (b) by any governmental or regulatory authority
or any third party for damages, contribution,
indemnification, cost recovery, compensation or injunctive
relief.
"Environmental Law" means any federal, state, local or
foreign statute, law, ordinance, rule, regulation, code,
order, judgment, decree or judicial or agency
interpretation, policy or guidance that has the force or
effect of law relating to pollution or protection of the
environment, health, safety or natural resources, including,
without limitation, those relating to the use, handling,
transportation, treatment, storage, disposal, release or
discharge of Hazardous Materials.
"Equity Interests" means, with respect to any Person,
all of the shares of capital stock of (or other ownership or
profit interests in) such Person, all of the warrants,
options or other rights for the purchase or other
acquisition from such Person of shares of capital stock of
(or other ownership or profit interests in) such Person, all
of the securities convertible into or exchangeable for
shares of capital stock of (or other ownership or profit
interests in) such Person or warrants, rights or options for
the purchase or other acquisition from such Person of such
shares (or such other interests), and all of the other
ownership or profit interests in such Person (including,
without limitation, partnership, member or trust interests
therein), whether voting or nonvoting, and whether or not
such shares, warrants, options, rights or other interests
are authorized or otherwise existing on any date of
determination.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time, and the
regulations promulgated and rulings issued thereunder.
"ERISA Affiliate" means any Person that for purposes of
Title IV of ERISA is a member of the Borrower's controlled
group, or under common control with the Borrower, within the
meaning of Section 414 of the Internal Revenue Code.
"ERISA Event" means (a) (i) the occurrence of a
reportable event, within the meaning of Section 4043 of
ERISA, with respect to any Plan unless the 30-day notice
requirement with respect to such event has been waived by
the PBGC, or (ii) the requirements of subsection (1) of
Section 4043(b) of ERISA are met with respect to a
contributing sponsor, as defined in Section 4001(a)(13) of
ERISA, of a Plan, and an event described in paragraph (9),
(10), (11), (12) or (13) of Section 4043(c) of ERISA is
reasonably expected to occur with respect to such Plan
within the following 30 days but only if the PBGC has not
waived the requirements of Section 4043(b) of ERISA with
respect to a contributing sponsor; (b) the application for a
minimum funding waiver with respect to a Plan; (c) the
provision by the administrator of any Plan of a notice of
intent to terminate such Plan in a distress termination
pursuant to Section 4041(a)(2) of ERISA (including any such
notice with respect to a plan amendment referred to in
Section 4041(e) of ERISA); (d) the cessation of operations
at a facility of the Borrower or any ERISA Affiliate in the
circumstances described in Section 4062(e) of ERISA; (e) the
withdrawal by the Borrower or any ERISA Affiliate from a
Multiple Employer Plan during a plan year for which it was a
substantial employer, as defined in Section 4001(a)(2) of
ERISA; (f) the conditions for the imposition of a lien under
Section 302(f) of ERISA shall have been met with respect to
any Plan; (g) the adoption of an amendment to a Plan
requiring the provision of security to such Plan pursuant to
Section 307 of ERISA; or (h) the institution by the PBGC of
proceedings to terminate a Plan pursuant to Section 4042 of
ERISA, or the occurrence of any event or condition described
in Section 4042 of ERISA that constitutes grounds for the
termination of, or the appointment of a trustee to
administer, a Plan.
"Eurocurrency Liabilities" has the meaning assigned to
that term in Regulation D of the FRB, as in effect from time
to time.
"Eurodollar Lending Office" means, with respect to any
Lender Party, the office of such Lender Party specified as
its "Eurodollar Lending Office" opposite its name on
Schedule I hereto or in the Assignment and Acceptance
pursuant to which it became a Lender Party (or, if no such
office is specified, its Domestic Lending Office), or such
other office of such Lender Party as such Lender Party may
from time to time specify to the Borrower and the
Administrative Agent.
"Eurodollar Rate" means, for any Interest Period for
each Eurodollar Rate Advance comprising part of the same
Borrowing, an interest rate per annum (rounded upward to the
nearest 1/100th of 1%) equal to the rate for deposits in
U.S. dollars for the period commencing on the first day of
such Interest Period and ending on the last day of such
Interest Period which appears on Telerate Page 3750 as of
11:00 A.M., London time, two Business Days prior to the
beginning of such Interest Period. If at least two rates
appear on such Telerate Page for such Interest Period, the
"Eurodollar Rate" shall be the arithmetic mean of such
rates. If the "Eurodollar Rate" cannot be determined in
accordance with the immediately preceding sentences with
respect to any Interest Period, the "Eurodollar Rate" with
respect to each day during such Interest Period shall be
determined by reference to such other publicly available
service for displaying eurodollar rates as may be agreed
upon by the Administrative Agent and the Borrower or, in the
absence of such agreement, the "Eurodollar Rate" shall
instead be the rate per annum equal to the arithmetic mean
(rounded upwards to the nearest 1/100th of 1%) of the
respective rates notified to the Administrative Agent by
each of the Reference Lenders as the rate at which such
Reference Lender is offered Dollar deposits at or about
11:00 A.M., San Francisco time, two Business Days prior to
the beginning of such Interest Period in the interbank
eurodollar market where the eurodollar and foreign currency
and exchange operations in respect of its Eurodollar Rate
Advances are then being conducted for delivery on the first
day of such Interest Period for the number of days comprised
therein and in an amount comparable to the amount of its
Eurodollar Rate Advance to be outstanding during such
Interest Period.
"Eurodollar Rate Advance" means an Advance that bears
interest as provided in Section 2.07(a)(ii).
"Eurodollar Rate Reserve Percentage" of any Lender for
any Interest Period for any Eurodollar Rate Advance means
the reserve percentage applicable during such Interest
Period (or if more than one such percentage shall be so
applicable, the daily average of such percentages for those
days in such Interest Period during which any such
percentage shall be so applicable) under regulations issued
from time to time by the FRB for determining the maximum
reserve requirement (including, without limitation, any
emergency, supplemental or other marginal reserve
requirement) for such Lender with respect to liabilities or
assets consisting of or including Eurocurrency Liabilities
having a term equal to such Interest Period.
"Events of Default" has the meaning specified in
Section 6.01.
"Facility" means the Tranche A Revolving Credit
Facility or the Tranche B Revolving Credit Facility.
"Federal Funds Rate" means, for any day, the rate set
forth in the weekly statistical release designated as
H.15(519), or any successor publication, published by the
Federal Reserve Bank of New York (including any such
successor, "H.15(519)") for such day opposite the caption
"Federal Funds (Effective)"; or, if for any relevant day
such rate is not yet published in H.15(519), the rate for
such day will be the rate set forth in the daily statistical
release designated as the Composite 3:30 P.M. Quotations for
U.S. Government Securities, or any successor publication,
published by the Federal Reserve Bank of New York (including
any such successor, the "Composite 3:30 P.M. Quotation") for
such day under the caption "Federal Funds Effective Rate."
If on any relevant day the appropriate rate for such day is
not yet published in either H.15(519) or the Composite 3:30
P.M. Quotations, the rate for such day will be the
arithmetic mean of the rates for the last transaction in
overnight Federal funds arranged prior to 9:00 A.M. (New
York time) on that day by each of three leading brokers of
Federal funds transactions in New York City selected by the
Administrative Agent.
"Fiscal Year" means the Borrower's fiscal year for
financial accounting purposes. The current Fiscal Year of
the Borrower will end on December 31, 1999.
"FRB" means the Board of Governors of the Federal
Reserve System and any Governmental Authority succeeding to
any of its principal functions.
"Further Taxes" means any and all present or future
taxes, levies, assessments, imposts, duties, deductions,
fees, withholdings or similar charges (excluding net income
taxes and franchise taxes), and all liabilities with respect
thereto, imposed by any jurisdiction on account of amounts
payable or paid pursuant to Section 2.14.
"GAAP" has the meaning specified in Section 1.03.
"Governmental Authority" means any nation or
government, any state or other political subdivision
thereof, any central bank (or similar monetary or regulatory
authority) thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any
corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the
foregoing.
"Guarantor" means the Parent and each Subsidiary of the
Borrower incorporated in any jurisdiction within the United
States of America now existing or hereafter acquired or
created and in each case having assets with a book value in
excess of $10,000,000 or annual revenues in excess of
$10,000,000.
"Guaranty" means, with respect to any Person, all
obligations of such Person which in any manner directly or
indirectly guarantee or assure, or in effect guarantee or
assure, the payment or performance of any indebtedness,
dividend or other obligations of any other Person (the
"guaranteed obligations"), or assure or in effect assure the
holder of the guaranteed obligations against loss in respect
thereof, including, without limitation, any such obligations
incurred through an agreement, contingent or otherwise: (a)
to purchase the guaranteed obligations or any property
constituting security therefor, (b) to advance or supply
funds for the purchase or payment of the guaranteed
obligations or to maintain a working capital or other
balance sheet condition, or (c) to lease property or to
purchase any debt or equity securities or other property or
services, but excluding the endorsement for collection of
checks received in the ordinary course of business.
"Hazardous Materials" means (a) petroleum and petroleum
products, byproducts or breakdown products, radioactive
materials, asbestos-containing materials, polychlorinated
biphenyls and radon gas and (b) any other chemicals,
materials or substances designated, classified or regulated
as hazardous or toxic or as a pollutant or contaminant under
any Environmental Law.
"Hedging Contract" means any interest rate swap
agreement, currency swap agreement, commodities swap
agreement, equity option or put arrangement, cap, floor or
collar agreement, insurance relating to the respective risk
protection or other similar agreement or arrangement
designed to provide such risk protection.
"Indemnified Liabilities" has the meaning specified in
Section 8.04.
"Index Reference" has the meaning specified in Schedule
II hereto.
"Initial Lenders" has the meaning specified in the
recital of parties to this Agreement.
"Initial Tranche A Lenders" has the meaning specified
in the recital of parties to this Agreement.
"Initial Tranche B Lenders" has the meaning specified
in the recital of parties to this Agreement.
"Insufficiency" means, with respect to any Plan, the
amount, if any, of its unfunded benefit liabilities, as
defined in Section 4001(a)(18) of ERISA.
"Interest Period" means, as to any Eurodollar Rate
Advance, the period commencing on the date of such
Eurodollar Rate Advance or on the date of Conversion of any
Base Rate Advance into such Eurodollar Rate Advance, and
ending on the date one, two, three or six months thereafter
as selected by the Borrower in its Notice of Borrowing or
notice of Conversion and, thereafter, each subsequent period
commencing on the last day of the immediately preceding
Interest Period and ending on the last day of the period
selected by the Borrower pursuant to the provisions below;
provided that:
(i) if any Interest Period would otherwise end on
a day that is not a Business Day, that Interest Period
shall be extended to the following Business Day unless
the result of such extension would be to carry such
Interest Period into another calendar month, in which
event such Interest Period shall end on the preceding
Business Day;
(ii) any Interest Period that begins on the last
Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the
calendar month at the end of such Interest Period)
shall end on the last Business Day of the calendar
month at the end of such Interest Period;
(iii) no Interest Period in respect of a
Tranche A Revolving Credit Advance shall end after the
Tranche A Termination Date and no Interest Period in
respect of a Tranche B Revolving Credit Advance shall
end after the Tranche B Termination Date;
(iv) Interest Periods commencing on the same date
for Eurodollar Rate Advances comprising part of the
same Borrowing shall be of the same duration; and
(v) there shall not be more than 10 Interest
Periods applicable to the Tranche A Revolving Credit
Advances at any one time, and there shall not be more
than 10 Interest Periods applicable to the Tranche B
Revolving Credit Advances at any one time.
"Internal Revenue Code" means the Internal Revenue Code
of 1986, as amended from time to time, and the regulations
promulgated and rulings issued thereunder.
"Investment" in any Person, means any loan or advance
to such Person, any purchase or other acquisition of any
capital stock or other ownership or profit interest,
warrants, rights, options, obligations or other securities
of such Person, any capital contribution to such Person or
any other investment in such Person, and any Guaranty in
respect of obligations of such Person.
"Issuing Bank" has the meaning specified in the recital
of parties to this Agreement and shall include any successor
thereto.
"L/C Amendment Application" means an application form
for amendment of outstanding Letters of Credit as shall at
any time be in use at the Issuing Bank, as the Issuing Bank
shall request.
"L/C Cash Collateral Account" means a cash collateral
account to be established and maintained by the
Administrative Agent, over which the Administrative Agent
shall have sole dominion and control, upon terms as may be
satisfactory to the Administrative Agent.
"L/C Related Documents" has the meaning specified in
Section 2.06(c)(ii)(A).
"Lender Default" means (i) the failure of any Lender to
make any Advance it is obligated to make under the terms of
this Agreement, or (ii) the appointment of a receiver or
conservator with respect to such Lender at the direction or
request of any regulatory agency or authority.
"Lender Party" means any Lender and the Issuing Bank.
"Lender" means each Tranche A Lender and each Tranche B
Lender.
"Letter of Credit Advance" means an advance made by the
Issuing Bank or any Lender pursuant to Section 2.03(b).
"Letter of Credit Agreement" has the meaning specified
in Section 2.03(a).
"Letters of Credit" has the meaning specified in
Section 2.01(c).
"Lien" means: (a) any interest in Property securing an
obligation owed to, or a claim by, a Person other than the
owner of such Property, whether such interest is based on
common law, statute, or contract, and including without
limitation, a security interest, charge, claim, or lien
arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, agreement,
security agreement, conditional sale or trust receipt or a
lease, consignment or bailment for security purposes (but
excluding any lease, consignment or bailment which is not
for security purposes) and (b) to the extent not included in
clause (a), any reservation, exception, encroachment,
easement, right-of-way, covenant, condition, restriction,
lease or other title exception or encumbrance affecting
Property.
"Loan Documents" means this Agreement, the Notes, if
any, each L/C Related Document, and the Affiliate Guaranty
in each case as amended, supplemented or otherwise modified
from time to time.
"Loan Party" means the Borrower and each Guarantor.
"Margin Stock" means "margin stock" as such term is
defined in Regulation T, U or X of the Federal Reserve
Board.
"Material Adverse Change" means any material adverse
change in the business, condition (financial or otherwise),
operations, performance or properties of the Borrower or the
Parent and its Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse
effect on (a) the business, condition (financial or
otherwise), operations, performance or properties of the
Borrower or the Parent and its Subsidiaries taken as a
whole, (b) the legality, validity, binding effect, or
enforceability of any Loan Document or (c) the ability of
any Loan Party to perform its obligations in any material
respect under any Loan Document.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a multiemployer plan, as
defined in Section 4001(a)(3) of ERISA, to which the
Borrower or any ERISA Affiliate is making or accruing an
obligation to make contributions, or has within any of the
preceding five plan years made or accrued an obligation to
make contributions.
"Multiple Employer Plan" means a single employer plan,
as defined in Section 4001(a)(15) of ERISA, that (a) is
maintained for employees of the Borrower or any ERISA
Affiliate and at least one Person other than the Borrower
and the ERISA Affiliates or (b) was so maintained and in
respect of which the Borrower or any ERISA Affiliate could
have liability under Section 4064 or 4069 of ERISA in the
event such plan has been or were to be terminated.
"Net Cash Proceeds" means, with respect to the sale or
issuance of any Equity Interests in any Person, the
aggregate amount of cash received from time to time (whether
as initial consideration or through payment or disposition
of deferred consideration) by or on behalf of such Person
for its own account in connection with any such transaction,
after deducting therefrom (without duplication) only
reasonable and customary underwriting fees and discounts,
legal fees, accounting fees and other similar fees and
reasonable and customary printing expenses and, to the
extent, but only to the extent, that the amounts so deducted
are actually paid (i) at the time of the receipt of such
cash or (ii) if later, within 30 days after the consummation
of such transaction (based on such Person's reasonable
estimate of the aggregate amount of all such discounts,
fees, costs and expenses therefor at the time of the
consummation of such transaction); provided, however, that,
notwithstanding any of the foregoing provisions of this
definition, (A) any and all amounts so deducted by any such
Person pursuant to this definition shall be properly
attributable to the transaction and shall be payable solely
to one or more Persons that are not Affiliates of such
Person or of any of the Loan Parties or any Affiliate of any
of the Loan Parties and (B) if, at the time any of the
discounts, fees, costs or expenses referred to in this
definition are actually paid or otherwise satisfied, the
reserve therefor or the amount otherwise retained by such
Person for the payment or satisfaction thereof exceeds the
amount so paid or otherwise satisfied, then the amount of
such excess reserve or retained amount, as the case may be,
shall constitute "Net Cash Proceeds" on and as of the date
of such payment or other satisfaction for all purposes of
this Agreement.
"Note" has the meaning specified in Section 2.18.
"Notice of Borrowing" has the meaning specified in
Section 2.02.
"Obligations" means all present and future loans,
advances, liabilities, obligations, covenants, duties, and
debts owing by any Loan Party to the Administrative Agent
and/or any Lender Party, arising under or pursuant to this
Agreement or any of the other Loan Documents, whether or not
evidenced by any note, or other instrument or document,
whether arising from an extension of credit, opening of a
letter of credit, acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect
(including, without limitation, those acquired by assignment
from others, and any participation by the Administrative
Agent and/or any Lender Party in such Loan Party's debts
owing to others), absolute or contingent, due or to become
due, primary or secondary, as principal or guarantor, and
including, without limitation, all principal, interest,
charges, expenses, fees, attorneys' fees, filing fees and
any other sums chargeable to such Loan Party hereunder or
under any of the other Loan Documents. "Obligations"
includes, without limitation, all debts, liabilities, and
obligations now or hereafter owing from any Loan Party to
the Administrative Agent and/or any Lender Party under or in
connection with the Letters of Credit.
"Other Taxes" means any present or future stamp, court
or documentary taxes or any other excise or property taxes,
charges or similar levies which arise from any payment made
hereunder or from the execution, delivery, performance,
enforcement or registration of, or otherwise with respect
to, this Agreement or any other Loan Documents.
"Parent" means Consolidated Freightways Corporation,
the sole shareholder of the Borrower.
"PBGC" means the Pension Benefit Guaranty Corporation
(or any successor).
"Permitted Liens" means:
(a) Liens for taxes not delinquent;
(b) statutory Liens for taxes in an aggregate
amount not to exceed $5,000,000 at any time provided that
the payment of such taxes which are due and payable is being
contested in good faith and by appropriate proceedings
diligently pursued and as to which adequate financial
reserves have been established on a Loan Party's books and
records and a stay of enforcement of any such Lien is in
effect;
(c) deposits under worker's compensation,
unemployment insurance, social security and other similar
laws, or to secure the performance of bids, tenders or
contracts (other than for the repayment of borrowed money)
or to secure indemnity, performance or other similar bonds
for the performance of bids, tenders or contracts (other
than for the repayment of borrowed money) or to secure
statutory obligations (other than Liens arising under ERISA
or Liens in favor of any Governmental Authority for any
liability under any Environmental Laws or for any damages
arising from or costs incurred by such Governmental
Authority in connection with, any Environmental Action) or
surety or appeal bonds, or to secure indemnity, performance
or other similar bonds in the ordinary course of business;
(d) Liens securing the claims or demands of
materialmen, mechanics, carriers, warehousemen, landlords
and other like Persons, provided that the payment thereof is
not at the time required by Section 5.01(f);
(e) reservations, exceptions, encroachments,
easements, rights of way, covenants running with the land,
and other similar title exceptions or encumbrances affecting
any real estate in which the respective Loan Party has an
interest; provided that they do not in the aggregate
materially detract from the value of such real estate or
materially interfere with its use in the ordinary conduct of
such Loan Party's business;
(f) judgment and other similar Liens arising in
connection with court proceedings, provided that (i) the
existence of such Liens is being contested in good faith and
by proper proceedings diligently pursued, (ii) reserves or
other appropriate provision, if any, as are required by GAAP
have been made therefor, (iii) a stay of enforcement of any
such Liens is in effect, and (iv) the existence of any
judgment or court proceedings upon which such Liens are
based does not otherwise constitute an Event of Default
hereunder;
(g) Liens in existence on the date of this
Agreement which are set forth in Schedule III hereto; and
(h) Liens upon or in any property acquired or
held by any Loan Party to secure the purchase price or
construction costs (and, to the extent financed, sales and
excise taxes, delivery and installation costs and other
related expenses) of such property or to secure indebtedness
incurred solely for the purpose of financing or refinancing
the acquisition or construction of any such property to be
subject to such Liens, or Liens existing on any such
property at the time of acquisition, or extensions, renewals
or replacements of any of the foregoing for the same or a
lesser amount, provided that such Lien is established within
thirty days of the acquisition of said property or
expenditure of said construction costs, and provided,
further, that no such Lien shall extend to or cover any
property other than the property being acquired and no such
extension, renewal or replacement shall extend to or cover
any property not theretofore subject to the Lien being
extended, renewed or replaced, and provided, further, that
the incurrence of any Debt secured by the Liens permitted by
this clause (h) shall not exceed the amount then allowed
under any of the covenants set forth in Section 5.03.
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust,
unincorporated association, joint venture, limited liability
company or other entity, or a government or any political
subdivision or agency thereof.
"Plan" means a Single Employer Plan or a Multiple
Employer Plan.
"Pricing Index" has the meaning specified in Schedule
II hereto.
"Property" means any interest in any kind of property
or asset, whether real, personal or mixed, or tangible or
intangible.
"Pro Rata Share" means, as to any Lender at any time,
the percentage equivalent at such time of such Lender's
Tranche B Revolving Credit Commitment divided by the
aggregate Tranche B Revolving Credit Commitments, or, if the
Tranche B Revolving Credit Commitments have expired or been
terminated, the percentage equivalent at such time of the
outstanding amount of such Lender's Tranche B Revolving
Credit Advances divided by the aggregate outstanding amount
of all Tranche B Revolving Credit Advances.
"Real Estate" means all of the present and future
interests of any Person, as owner, lessee, or otherwise, in
real property, including, without limitation, any interest
arising from an option to purchase or lease any such real
property.
"Reference Lenders" means ABN AMRO Bank N.V. and Bank
One, NA or each such other Lender Party as may be agreed by
the Borrower and the Administrative Agent from time to time.
"Register" has the meaning specified in
Section 8.07(d).
"Request for Letter of Credit Issuance" has the meaning
specified in Section 2.03(a).
"Required Lenders" means at any time Lenders owed at
least a majority in interest of the then aggregate unpaid
principal amount of the Advances owing to Lenders, or, if no
such principal amount is then outstanding, Lenders having at
least a majority in interest of the Commitments.
"Required Tranche B Lenders" means at any time Tranche
B Lenders owed at least a majority in interest of the then
aggregate unpaid principal amount of the Tranche B Revolving
Credit Advances owing to Tranche B Lenders, or, if no such
principal amount is then outstanding, Tranche B Lenders
having at least a majority in interest of the Tranche B
Revolving Credit Commitments.
"Responsible Officer" means the chief financial
officer, treasurer or controller of the respective Person.
"S&P" means Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc.
"Securities Act" means the Securities Act of 1933, as
amended, or any successor Federal statute, and the rules and
regulations of the Securities and Exchange Commission
promulgated thereunder, all as the same shall be in effect
from time to time.
"Single Employer Plan" means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, that (a) is
maintained for employees of the Borrower or any ERISA
Affiliate and no Person other than the Borrower and the
ERISA Affiliates or (b) was so maintained and in respect of
which the Borrower or any ERISA Affiliate could have
liability under Section 4069 of ERISA in the event such plan
has been or were to be terminated.
"Subordinated Debt" means any Debt that is subordinate
in right of payment to the Obligations, including, without
limitation, the CNF Note.
"Subsidiary" of any Person means any corporation,
partnership, joint venture, limited liability company, trust
or estate of which (or in which) more than 50% of (a) the
issued and outstanding capital stock having ordinary voting
power to elect a majority of the Board of Directors of such
corporation (irrespective of whether at the time capital
stock of any other class or classes of such corporation
shall or might have voting power upon the occurrence of any
contingency), (b) the interest in the capital or profits of
such limited liability company, partnership or joint venture
or (c) the beneficial interest in such trust or estate is at
the time directly or indirectly owned or controlled by such
Person, by such Person and one or more of its other
Subsidiaries or by one or more of such Person's other
Subsidiaries; provided that the term "Subsidiary" shall not
include any Designated Entity that would otherwise have
constituted a Subsidiary hereunder.
"Taxes" means any and all present or future taxes,
levies, assessments, imposts, duties, deductions, fees,
withholdings or similar charges, and all liabilities with
respect thereto, excluding, in the case of each Lender Party
and the Administrative Agent, respectively, taxes imposed on
or measured by its overall net income by the jurisdiction
(or any political subdivision thereof) under the laws of
which such Lender Party or the Administrative Agent, as the
case may be, is organized and, in the case of each Lender
Party, where an Applicable Lending Office is maintained.
"Tax Sharing Agreement" means that certain Tax Sharing
Agreement dated December 2, 1996 between the Parent and CNF,
as it may be amended from time to time.
"Tranche A Lenders" means, at any time, any of the
Lenders that has a Tranche A Revolving Credit Commitment or
any outstanding Tranche A Revolving Credit Advance at such
time.
"Tranche A Revolving Credit Advance" has the meaning
specified in Section 2.01(a).
"Tranche A Revolving Credit Commitment" means, with
respect to any Tranche A Lender at any time, the amount set
forth opposite such Tranche A Lender's name on Schedule I
hereto under the caption "Tranche A Revolving Credit
Commitment" or, if such Tranche A Lender has entered into
one or more Assignments and Acceptances, set forth for such
Tranche A Lender in the Register maintained by the
Administrative Agent pursuant to Section 8.07(d) as such
Tranche A Lender's "Tranche A Revolving Credit Commitment,"
as such amount may be reduced at or prior to such time
pursuant to Section 2.05.
"Tranche A Revolving Credit Facility" means, at any
time, the aggregate amount of the Lenders' Tranche A
Revolving Credit Commitments at such time.
"Tranche A Termination Date" means October 10, 2000, as
such date may be extended pursuant to Section 2.05(c), or
the earlier date of termination in whole of the Tranche A
Revolving Credit Commitments pursuant to Section 2.05 or
6.01.
"Tranche B Lenders" means, at any time, any of the
Lenders that has a Tranche B Revolving Credit Commitment or
any outstanding Tranche B Revolving Credit Advance at such
time.
"Tranche B Revolving Credit Advance" has the meaning
specified in Section 2.01(b).
"Tranche B Revolving Credit Commitment" means, with
respect to any Tranche B Lender at any time, the amount set
forth opposite such Tranche B Lender's name on Schedule I
hereto under the caption "Tranche B Revolving Credit
Commitment" or, if such Tranche B Lender has entered into
one or more Assignments and Acceptances, set forth for such
Tranche B Lender in the Register maintained by the
Administrative Agent pursuant to Section 8.07(d) as such
Tranche B Lender's "Tranche B Revolving Credit Commitment,"
as such amount may be reduced at or prior to such time
pursuant to Section 2.05.
"Tranche B Revolving Credit Facility" means, at any
time, the aggregate amount of the Tranche B Lenders' Tranche
B Revolving Credit Commitments at such time.
"Tranche B Termination Date" means October 11, 2002, as
such date may be extended pursuant to Section 2.05(d), or
the earlier date of termination in whole of the Tranche B
Revolving Credit Commitments pursuant to Section 2.05 or
6.01.
"Type" refers to the distinction between Advances
bearing interest at the Base Rate and Advances bearing
interest at the Eurodollar Rate.
"Unrelated Person" means any Person other than (a) a
Subsidiary of the Parent or (b) an employee stock ownership
plan or other employee benefit plan covering the employees
of the Parent or its Subsidiaries.
"Unused Tranche A Revolving Credit Commitment" means,
with respect to any Tranche A Lender at any time,
(a) such Tranche A Lender's Tranche A
Revolving Credit Commitment at such time minus
(b) the aggregate principal amount of all
Tranche A Revolving Credit Advances made by such
Tranche A Lender, in each case in its capacity as a
Tranche A Lender, and outstanding at such time.
"Unused Tranche B Revolving Credit Commitment" means,
with respect to any Tranche B Lender at any time,
(a) such Tranche B Lender's Tranche B
Revolving Credit Commitment at such time minus
(b) the sum of (i) the aggregate principal
amount of all Tranche B Revolving Credit Advances made
by such Tranche B Lender and outstanding at such time,
plus (ii) such Tranche B Lender's Pro Rata Share of (A)
the aggregate Available Amount of all Letters of Credit
outstanding at such time and (B) the aggregate
principal amount of all Letter of Credit Advances made
by the Issuing Bank pursuant to Section 2.03(b) and
outstanding at such time other than any such Letter of
Credit Advance which, at or prior to such time, has
been assigned in part to such Tranche B Lender pursuant
to Section 2.03(b).
"Utilization Fee" means, as of any date of
determination, a percentage per annum determined as set
forth on Schedule II hereto.
"Voting Interests" means shares of capital stock issued
by a corporation, or equivalent interests in any other
Person, the holders of which are ordinarily, in the absence
of contingencies, entitled to vote for the election of
directors (or persons performing similar functions) of such
Person, even if the right so to vote has been suspended by
the happening of such a contingency.
"Withdrawal Liability" has the meaning specified in
Part I of Subtitle E of Title IV of ERISA.
"Year 2000 Compliant" has the meaning specified in
Section 4.01(j).
"Year 2000 Problem" has the meaning specified in
Section 4.01(j).
SECTION 1.02. Computation of Time Periods. In this
Agreement in the computation of periods 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 mean "to but
excluding."
SECTION 1.03. Accounting Terms. Unless the context
otherwise clearly requires, all accounting terms not expressly
defined herein shall be construed, and all financial computations
required under this Agreement shall be made, in accordance with
generally accepted accounting principles consistent with those
applied in the preparation of financial statements referred to in
Section 4.01(e) ("GAAP"). If GAAP changes during the term of
this Agreement such that any covenants contained herein would
then be calculated in a different manner or with different
components, the Borrower, the Lender Parties and the
Administrative Agent agree to negotiate in good faith to amend
this Agreement in such respects as are necessary to conform those
covenants as criteria for evaluating the Borrower's financial
condition to substantially the same criteria as were effective
prior to such change in GAAP; provided, however, that, until the
Borrower, the Lender Parties and the Administrative Agent have so
amended this Agreement, all such covenants shall be calculated in
accordance with GAAP as in effect immediately prior to such
change.
SECTION 1.04. Other Interpretive Provisions. (a) The
meanings of defined terms are equally applicable to the singular
and plural forms of the defined terms.
(b) The words "hereof," "herein," "hereunder" and similar
words refer to this Agreement as a whole and not to any
particular provision of this Agreement; and subsection, Section,
Schedule and Exhibit references are to this Agreement unless
otherwise specified.
(c) The term "including" is not limiting and means
"including without limitation."
(d) In the computation of periods of time from a
specified date to a later specified date, the word "from" means
"from and including" the words "to" and "until" each mean "to but
excluding," and the word "through" means "to and including."
(e) "issue" means, with respect to any Letter of
Credit, to issue or to extend the expiry of, or to renew or
increase the amount, or otherwise amend to change any other term
of, such Letter of Credit; and the terms "issued," "issuing" and
"issuance" have corresponding meanings.
(f) The captions and headings of this Agreement are
for convenience of reference only and shall not affect the
interpretation of this Agreement.
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances. (a) Tranche A Revolving
Credit Advances. Each Tranche A Lender severally agrees, on the
terms and conditions hereinafter set forth, to make advances
(each a "Tranche A Revolving Credit Advance") to the Borrower
from time to time on any Business Day during the period from the
Effective Date until the Tranche A Termination Date in an
aggregate amount for each such Advance not to exceed such Tranche
A Lender's Unused Tranche A Revolving Credit Commitment at such
time. Each Borrowing shall be in an aggregate amount of
$2,000,000 or an integral multiple of $1,000,000 in excess
thereof and shall consist of Advances of the same Type made on
the same day by the Tranche A Lenders ratably according to their
respective Tranche A Revolving Credit Commitments. Within the
limits of each Tranche A Lender's Tranche A Revolving Credit
Commitment, the Borrower may borrow under this Section 2.01(a),
prepay pursuant to Section 2.10 and reborrow under this
Section 2.01(a).
(b) Tranche B Revolving Credit Advances. Each Tranche B
Lender severally agrees, on the terms and conditions hereinafter
set forth, to make advances (each a "Tranche B Revolving Credit
Advance") to the Borrower from time to time on any Business Day
during the period from the Effective Date until the Tranche B
Termination Date in an aggregate amount for each such Advance not
to exceed such Tranche B Lender's Unused Tranche B Revolving
Credit Commitment at such time. Each Borrowing shall be in an
aggregate amount of $2,000,000 or an integral multiple of
$1,000,000 in excess thereof and shall consist of Advances of the
same Type made on the same day by the Tranche B Lenders ratably
according to their respective Tranche B Revolving Credit
Commitments. Within the limits of each Tranche B Lender's
Tranche B Revolving Credit Commitment, the Borrower may borrow
under this Section 2.01(b), prepay pursuant to Section 2.10 and
reborrow under this Section 2.01(b).
(c) Letters of Credit. The Issuing Bank agrees, on the
terms and conditions hereinafter set forth and subject to such
other terms as the Issuing Bank may separately and mutually agree
with the Borrower, to issue letters of credit (the "Letters of
Credit") for the account of the Borrower from time to time on any
Business Day during the period from the Effective Date until 90
days before the Tranche B Termination Date in an aggregate
Available Amount for all Letters of Credit issued by the Issuing
Bank not to exceed at any time the aggregate Unused Tranche B
Revolving Credit Commitment at such time. No Letter of Credit
shall have an expiration date (including all rights of the
Borrower or the beneficiary to require renewal) later than the
Tranche B Termination Date. Subject to the limits referred to
above, the Borrower may request the issuance of Letters of Credit
under this Section 2.01(c), repay any Letter of Credit Advances
resulting from drawings thereunder pursuant to Sections 2.03(b)
and 2.10 and request the issuance of additional Letters of Credit
under this Section 2.01(c). Each Letter of Credit issued
pursuant to this Section 2.01(c) shall, effective upon its
issuance and without further action, be issued on behalf of all
Tranche B Lenders (including the Issuing Bank) according to their
respective Pro Rata Shares. Each Tranche B Lender shall, to the
extent of its Pro Rata Share, be deemed irrevocably to have
participated in the issuance of such Letter of Credit and shall
reimburse the Issuing Bank promptly for Letter of Credit Advances
in accordance with Section 2.03.
SECTION 2.02. Making the Advances. (a) Each
Borrowing shall be made on notice, received not later than 10:00
A.M. (San Francisco time) on the third Business Day prior to the
date of the proposed Borrowing in the case of a Borrowing
consisting of Eurodollar Rate Advances, or not later than 10:00
A.M. (San Francisco time) on the date of the proposed Borrowing
in the case of a Borrowing consisting of Base Rate Advances, by
the Administrative Agent, which shall give to each Lender prompt
notice thereof by telecopier. Each such notice of a Borrowing (a
"Notice of Borrowing") shall be by telephone, confirmed promptly
in writing, or telecopier, in substantially the form of Exhibit B-
1 hereto, specifying therein the requested (i) date of such
Borrowing, (ii) Tranche and Type of Advances comprising such
Borrowing, (iii) aggregate amount of such Borrowing, (iv) in the
case of a Borrowing consisting of Eurodollar Rate Advances,
initial Interest Period for each such Advance and (v) the
Borrower's deposit account into which funds for such Advance are
to be deposited (the "Borrower's Designated Account"). Each
Lender shall, before 11:00 A.M. (San Francisco time) on the date
of such Borrowing, make available for the account of its
Applicable Lending Office to the Administrative Agent at the
Administrative Agent's Account, in same day funds, such Lender's
ratable portion of such Borrowing in accordance with the
respective Commitments under the applicable Facility of such
Lender and the other Lenders. After the Administrative Agent's
receipt of such funds and upon fulfillment of the applicable
conditions set forth in Article III, the Administrative Agent
will make such funds available to the Borrower in the Borrower's
Designated Account selected by the Borrower in the applicable
Notice of Borrowing; provided, however, that, in the case of any
Tranche A Revolving Credit Advance or Tranche B Revolving Credit
Advance, the Administrative Agent shall first make a portion of
such funds equal to the aggregate principal amount of any Letter
of Credit Advances made by the Issuing Bank and by any other
Tranche B Lender and outstanding on the date of such Tranche A
Revolving Credit Advance or Tranche B Revolving Credit Advance,
as applicable, plus interest accrued and unpaid thereon to and as
of such date, available to the Issuing Bank, and such other
Tranche B Lenders for repayment of such Letters of Credit
Advances.
(b) Anything in subsection (a) above to the contrary
notwithstanding, the Borrower may not select Eurodollar Rate
Advances for the initial Borrowing hereunder (if the initial
Borrowing occurs on, or within 3 Business Days after, the
Effective Date) or for any Borrowing if the aggregate amount of
such Borrowing is less than $2,000,000 or if the obligation of
the Lenders to make Eurodollar Rate Advances shall then be
suspended pursuant to Section 2.08 or 2.12.
(c) Each Notice of Borrowing shall be irrevocable and
binding on the Borrower. In the case of any Borrowing that the
related Notice of Borrowing specifies is to be comprised of
Eurodollar Rate Advances, the Borrower shall indemnify each
Lender against any loss, cost or expense incurred by such Lender
as a result of any failure to fulfill on or before the date
specified in such Notice of Borrowing for such Borrowing the
applicable conditions set forth in Article III, including,
without limitation, any actual loss, cost or expense incurred by
reason of the liquidation or reemployment of deposits or other
funds acquired by such Lender to fund the Advance to be made by
such Lender as part of such Borrowing when such Advance, as a
result of such failure, is not made on such date.
(d) Unless the Administrative Agent shall have received
notice from a Lender prior to the date of any Borrowing that such
Lender will not make available to the Administrative Agent such
Lender's ratable portion of such Borrowing, the Administrative
Agent may assume that such Lender has made such portion available
to the Administrative Agent on the date of such Borrowing in
accordance with subsection (a) of this Section 2.02 and the
Administrative Agent may, in reliance upon such assumption, make
available to the Borrower on such date a corresponding amount.
If and to the extent that such Lender shall not have so made such
ratable portion available to the Administrative Agent, such
Lender and the Borrower severally agree to repay to the
Administrative Agent forthwith on demand such corresponding
amount together with interest thereon, for each day from the date
such amount is made available to the Borrower until the date such
amount is repaid to the Administrative Agent, at (i) in the case
of the Borrower, the interest rate applicable at the time to
Advances comprising such Borrowing (and such interest shall be in
lieu of, and not in addition to, interest otherwise owed by the
Borrower in respect of such corresponding amount in accordance
with Section 2.07(a) hereof) and (ii) in the case of such Lender,
the Federal Funds Rate. If such Lender shall repay to the
Administrative Agent such corresponding amount, such amount so
repaid shall constitute such Lender's Advance as part of such
Borrowing for purposes of this Agreement and the Borrower's
obligation to make repayment in respect thereof shall terminate.
(e) The failure of any Lender to make the Advance to be
made by it as part of any Borrowing shall not relieve any other
Lender of its obligation, if any, hereunder to make its Advance
on the date of such Borrowing, but no Lender shall be responsible
for the failure of any other Lender to make the Advance to be
made by such other Lender on the date of any Borrowing.
SECTION 2.03. Issuance of and Drawings Under Letters
of Credit. (a) Request for Issuance. Each Letter of Credit
shall be issued upon notice, received not later than 11:00 A.M.
(San Francisco time) on the third Business Day prior to the date
of the proposed issuance of such Letter of Credit, by the Issuing
Bank with a copy to the Administrative Agent. Each notice of
issuance of a Letter of Credit (a "Request for Letter of Credit
Issuance") shall be by telephone, confirmed promptly in writing,
or telecopier, in substantially the form of Exhibit B-2 hereto,
specifying therein the requested (A) date of such issuance (which
shall be a Business Day), (B) Available Amount of such Letter of
Credit, (C) expiration date of such Letter of Credit (which,
subject to Section 2.01 (c), shall be no later than one year from
the date of such issuance), (D) name and address of the
beneficiary of such Letter of Credit, and (E) form of such Letter
of Credit, and shall be accompanied by such application and
agreement for letter of credit as the Issuing Bank may specify to
the Borrower for use in connection with such requested Letter of
Credit (a "Letter of Credit Agreement"). If (x) the requested
form of such Letter of Credit is acceptable to the Issuing Bank
in its sole discretion and (y) it has not received written notice
from the Administrative Agent or the Required Tranche B Lenders
that the conditions to issuing such Letter of Credit have not
been satisfied or duly waived, the Issuing Bank will, upon
fulfillment of the applicable conditions set forth in Article
III, make such Letter of Credit available to the Borrower at the
office of the Issuing Bank referred to in Section 8.02 or as
otherwise agreed with the Borrower in connection with such
issuance. In the event and to the extent that the provisions of
any Letter of Credit Agreement shall conflict with this
Agreement, the provisions of this Agreement shall govern.
(b) Drawing. The payment by the Issuing Bank of a demand
for payment under any Letter of Credit shall constitute for all
purposes of this Agreement the making by the Issuing Bank of a
Letter of Credit Advance, which shall be a Base Rate Advance, in
the amount of such demand. Upon written demand by the Issuing
Bank, with a copy of such demand to the Administrative Agent,
each Tranche B Lender shall purchase from the Issuing Bank, and
the Issuing Bank shall sell and assign to each such Tranche B
Lender, such Tranche B Lender's Pro Rata Share of such
outstanding Letter of Credit Advance as of the date of such
purchase, by making available for the account of its Applicable
Lending Office to the Administrative Agent for the account of the
Issuing Bank, by deposit to the Administrative Agent's Account,
in same day funds, an amount equal to the portion of the
outstanding principal amount of such Letter of Credit Advance to
be purchased by such Tranche B Lender. Promptly after receipt
thereof, the Administrative Agent shall transfer such funds to
the Issuing Bank. The Borrower hereby agrees to each such sale
and assignment. Each Tranche B Lender agrees to purchase its Pro
Rata Share of an outstanding Letter of Credit Advance on (i) the
Business Day on which demand therefor is made by the Issuing
Bank, provided notice of such demand is given not later than
11:00 A.M. (San Francisco time) on such Business Day or (ii) the
first Business Day next succeeding such demand if notice of such
demand is given after such time. Upon any such assignment by the
Issuing Bank to any other Tranche B Lender of a portion of a
Letter of Credit Advance, the Issuing Bank represents and
warrants to such other Tranche B Lender that the Issuing Bank is
the legal and beneficial owner of such interest being assigned by
it, free and clear of any liens, but makes no other
representation or warranty and assumes no responsibility with
respect to such Letter of Credit Advance or the Loan Documents.
If and to the extent that any Tranche B Lender shall not have so
made the amount of such Letter of Credit Advance available to the
Administrative Agent, such Tranche B Lender agrees to pay to the
Administrative Agent forthwith on demand such amount together
with interest thereon, for each day from the date of demand by
the Issuing Bank until the date such amount is paid to the
Administrative Agent, at the Federal Funds Rate for its account
or the account of the Issuing Bank, as applicable. If such
Tranche B Lender shall pay to the Administrative Agent such
amount for the account of the Issuing Bank on any Business Day,
such amount so paid in respect of principal shall constitute a
Letter of Credit Advance made by such Tranche B Lender on such
Business Day for purposes of this Agreement, and the outstanding
principal amount of the Letter of Credit Advance made by the
Issuing Bank shall be reduced by such amount on such Business
Day.
(c) Failure to Make Letter of Credit Advances. The failure
of any Tranche B Lender to make the Letter of Credit Advance to
be made by it on the date specified in Section 2.03(b) shall not
relieve any other Tranche B Lender of its obligation hereunder to
make its Letter of Credit Advance on such date, but no Tranche B
Lender shall be responsible for the failure of any other Tranche
B Lender to make the Letter of Credit Advance to be made by such
other Tranche B Lender on such date.
(d) From time to time while a Letter of Credit is
outstanding and prior to the Tranche B Termination Date, the
Issuing Bank will, upon the written request of the Borrower
received by the Issuing Bank (with a copy sent by the Borrower to
the Administrative Agent) at least three days (or such shorter
time as the Issuing Bank may agree in a particular instance in
its sole discretion) prior to the proposed date of amendment,
amend any Letter of Credit issued by it. Each such request for
amendment of a Letter of Credit shall be made by facsimile,
confirmed promptly in an original writing, made in the form of an
L/C Amendment Application and shall specify in form and detail
satisfactory to the Issuing Bank: (i) the Letter of Credit to be
amended; (ii) the proposed date of amendment of the Letter of
Credit (which shall be a Business Day); (iii) the nature of the
proposed amendment; and (iv) such other matters as the Issuing
Bank may require. The Issuing Bank shall be under no obligation
to amend any Letter of Credit if: (A) the Issuing Bank would
have no obligation at such time to issue such Letter of Credit in
its amended form under the terms of this Agreement; or (B) the
beneficiary of any such Letter of Credit does not accept the
proposed amendment to the Letter of Credit. The Administrative
Agent will promptly notify the Tranche B Lenders and the Issuing
Bank of the receipt by it of any L/C Amendment Application.
(e) The Issuing Bank and the Tranche B Lenders agree that,
while a Letter of Credit is outstanding and prior to the Tranche
B Termination Date, at the option of the Borrower and upon the
written request of the Borrower received by the Issuing Bank
(with a copy sent by the Borrower to the Administrative Agent) at
least three days (or such shorter time as the Issuing Bank may
agree in a particular instance in its sole discretion) prior to
the proposed date of notification of renewal, the Issuing Bank
shall be entitled to authorize the renewal of any Letter of
Credit issued by it. Each such request for renewal of a Letter
of Credit shall be made by facsimile, confirmed promptly in an
original writing, in the form of an L/C Amendment Application,
and shall specify in form and detail satisfactory to the Issuing
Bank: (i) the Letter of Credit to be renewed; (ii) the proposed
date of notification of renewal of the Letter of Credit (which
shall be a Business Day); (iii) the revised expiry date of the
Letter of Credit; and (iv) such other matters as the Issuing Bank
may require. The Issuing Bank shall be under no obligation so to
renew any Letter of Credit if: (A) the Issuing Bank would have
no obligation at such time to issue or amend such Letter of
Credit in its renewed form under the terms of this Agreement; or
(B) the beneficiary of such Letter of Credit does not accept the
proposed renewal of such Letter of Credit. If any outstanding
Letter of Credit shall provide that it shall be automatically
renewed unless the beneficiary thereof receives notice from the
Issuing Bank that such Letter of Credit shall not be renewed, and
if at the time of renewal the Issuing Bank would be entitled to
authorize the automatic renewal of such Letter of Credit in
accordance with this clause (f) upon the request of the Borrower
but the Issuing Bank shall not have received any L/C Amendment
Application from the Borrower with respect to such renewal or
other written direction by the Borrower with respect thereto, the
Issuing Bank shall nonetheless be permitted to allow such Letter
of Credit to renew, and the Borrower and the Tranche B Lenders
hereby authorize such renewal, and, accordingly, the Issuing Bank
shall be deemed to have received an L/C Amendment Application
from the Borrower requesting such renewal.
(f) The Issuing Bank may, at its election (or as required
by the Administrative Agent at the direction of the Required
Tranche B Lenders), deliver any notices of termination or other
communications to any Letter of Credit beneficiary or transferee,
and take any other action as necessary or appropriate, at any
time and from time to time, in order to cause the expiry date of
such Letter of Credit to be a date not later than the Tranche B
Termination Date.
(g) This Agreement shall control in the event of any
conflict with any L/C Related Document (other than any Letter of
Credit).
SECTION 2.04. Fees. (a) Facility Fees. The Borrower
agrees to pay a facility fee to the Administrative Agent (i) for
the account of each Tranche A Lender, from the Effective Date
until the Tranche A Termination Date at a rate per annum equal to
the Applicable Percentage in effect from time to time multiplied
by the Tranche A Revolving Credit Commitment of such Tranche A
Lender in effect from time to time, payable in arrears quarterly
on the fifteenth day of each January, April, July and October,
commencing January 15, 2000, and on the Tranche A Termination
Date and (ii) for the account of each Tranche B Lender, from the
Effective Date until the Tranche B Termination Date at a rate per
annum equal to the Applicable Percentage in effect from time to
time multiplied by the Tranche B Revolving Credit Commitment of
such Tranche B Lender in effect from time to time, payable in
arrears quarterly on the fifteenth day of each January, April,
July and October, commencing January 15, 2000, and on the Tranche
B Termination Date.
(b) Letter of Credit Fees, Etc. (i) The Borrower shall
pay to the Administrative Agent for the account of each Tranche B
Lender a fee, payable in arrears quarterly on the fifteenth day
of each January, April, July and October, commencing January 15,
2000, and on the Tranche B Termination Date, on such Tranche B
Lender's Pro Rata Share of the average daily aggregate Available
Amount during such quarter at a rate per annum equal to the
Applicable Margin for Eurodollar Rate Advances, in each case
determined in respect of each Letter of Credit as of the date of
issuance of such Letter of Credit.
(ii) Issuing Bank's Fees. The Borrower shall pay to
the Issuing Bank, for its own account, such commissions,
issuance fees, fronting fees, transfer fees and other fees
and charges in connection with the issuance or
administration of each Letter of Credit as agreed in a
letter between the Issuing Bank and the Borrower dated
August 20, 1999 and accepted by the Borrower as of August
24, 1999.
(c) Administrative Agent's Fees. The Borrower shall pay to
the Administrative Agent for its own account such fees as agreed
in a letter between the Administrative Agent and the Borrower
dated August 20, 1999 and accepted by the Borrower as of August
24, 1999.
SECTION 2.05. Termination or Reduction of the
Commitments; Extension of the Facilities. (a) The Borrower shall
have the right, upon at least three (3) Business Days' notice to
the Administrative Agent, to terminate in whole or reduce ratably
in part the unused portions of the respective Tranche A Revolving
Credit Commitments of the Tranche A Lenders; provided that each
partial reduction (i) shall be in the aggregate amount of
$5,000,000 or an integral multiple of $1,000,000 in excess
thereof and (ii) shall be made ratably among the Tranche A
Lenders in accordance with their Tranche A Revolving Credit
Commitments with respect to the Tranche A Revolving Credit
Facility. Any Tranche A Revolving Credit Commitments terminated
under this Section 2.05 may not be reinstated.
(b) The Borrower shall have the right, upon at least three
(3) Business Days' notice to the Administrative Agent, to
terminate in whole or reduce ratably in part the unused portions
of the respective Tranche B Revolving Credit Commitments of the
Tranche B Lenders; provided that each partial reduction (i) shall
be in the aggregate amount of $5,000,000 or an integral multiple
of $1,000,000 in excess thereof and (ii) shall be made ratably
among the Tranche B Lenders in accordance with their Tranche B
Revolving Credit Commitments with respect to the Tranche B
Revolving Credit Facility. Any Tranche B Revolving Credit
Commitments terminated under this Section 2.05 may not be
reinstated.
(c) At any time not earlier than 90 days prior to, nor
later than 45 days prior to, the Tranche A Termination Date then
in effect, the Borrower may request that the Tranche A Lenders
extend the then scheduled Tranche A Termination Date to the date
which is 364 days following such Tranche A Termination Date. If
such request is made by the Borrower, each Tranche A Lender shall
inform the Administrative Agent of its willingness to extend the
Tranche A Termination Date no later than 21 days after the date
of such request. Any Tranche A Lender's failure to respond by
such
date shall be deemed that it does not agree to such requested
extension. If all Tranche A Lenders consent to such requested
extension, the Tranche A Termination Date shall be so extended
for such 364-day period. If any Tranche A Lender (a "Declining
Tranche A Lender") does not agree to such requested extension,
then, at the election of the Borrower as notified to the
Administrative Agent no later than 15 days prior to such Tranche
A Termination Date, (i) the Tranche A Termination Date shall not
be so extended or (ii) the Tranche A Termination Date shall be so
extended for such 364-day period and either (x) the Borrower
shall substitute for such Declining Tranche A Lender another
financial institution in accordance with the terms and conditions
of Section 2.17 and 8.07 (except that such financial institution
shall only be assigned the Tranche A Revolving Credit Advances
and Tranche A Revolving Credit Commitment of such Declining
Tranche A Lender) or (y) such Declining Tranche A Lender's
Tranche A Revolving Credit Commitment shall terminate on the
Tranche A Termination Date as scheduled prior to such extension,
and on such Tranche A Termination Date the Borrower shall repay
in full the principal amount of Tranche A Revolving Credit
Advances owing to such Declining Tranche A Lender, together with
accrued interest thereon to the date of payment of such principal
amount, all fees payable to such Declining Tranche A Lender and
all other amounts payable to such Declining Tranche A Lender
hereunder (with the percentages of the Tranche A Revolving Credit
Commitments of the other Tranche A Lenders adjusted to reflect
such termination and repayment).
(d) At any time not earlier than 90 days prior to, nor
later than 45 days prior to, the Tranche B Termination Date then
in effect, the Borrower may request that the Tranche B Lenders
extend the then scheduled Tranche B Termination Date to the date
one year from such Tranche B Termination Date. If such request
is made by the Borrower, each Tranche B Lender shall inform the
Administrative Agent of its willingness to extend the Tranche B
Termination Date no later than 21 days after the date of such
request. Any Tranche B Lender's failure to respond by such date
shall be deemed that it does not agree to such requested
extension. If all Tranche B Lenders consent to such requested
extension, the Tranche B Termination Date shall be so extended
for such one year period. If any Tranche B Lender (a "Declining
Tranche B Lender") does not agree to such requested extension,
then, at the election of the Borrower as notified to the
Administrative Agent no later than 15 days prior to such Tranche
B Termination Date, (i) the Tranche B Termination Date shall not
be so extended or (ii) the Tranche B Termination Date shall be so
extended for such one year period and either (x) the Borrower
shall substitute for such Declining Tranche B Lender another
financial institution in accordance with the terms and conditions
of Section 2.17 and 8.07 (except that such financial institution
shall only be assigned the Tranche B Revolving Credit Advances
and Tranche B Revolving Credit Commitment of such Declining
Tranche B Lender) or (y) such Declining Tranche B Lender's
Tranche B Revolving Credit Commitment shall terminate on the
Tranche B Termination Date as scheduled prior to such extension,
and on such Tranche B Termination Date the Borrower shall repay
in full the principal amount of Tranche B Revolving Credit
Advances owing to such Declining Tranche B Lender, together with
accrued interest thereon to the date of payment of such principal
amount, all fees payable to such Declining Tranche B Lender and
all other amounts payable to such Declining Tranche B Lender
hereunder (with the percentages of the Tranche B Revolving Credit
Commitments of the other Tranche B Lenders adjusted to reflect
such termination and repayment).
SECTION 2.06. Repayment. (a) Tranche A Revolving
Credit Advances. The Borrower shall repay to the Administrative
Agent for the ratable account of the Tranche A Lenders on the
Tranche A Termination Date the aggregate principal amount of the
Tranche A Revolving Credit Advances then outstanding.
(b) Tranche B Revolving Credit Advances. The Borrower
shall repay to the Administrative Agent for the ratable account
of the Tranche B Lenders on the Tranche B Termination Date the
aggregate principal amount of the Tranche B Revolving Credit
Advances then outstanding.
(c) Letter of Credit Advances. (i) The Borrower shall
repay to the Administrative Agent for the account of the Issuing
Bank and each other Tranche B Lender that has made a Letter of
Credit Advance on the earlier of demand and the Tranche B
Termination Date the outstanding principal amount of each Letter
of Credit Advance made by each of them.
(ii) The obligations of the Borrower under this
Agreement, any Letter of Credit Agreement and any other
agreement or instrument relating to any Letter of Credit
shall be unconditional and irrevocable, and shall be paid
strictly in accordance with the terms of this Agreement,
such Letter of Credit Agreement and such other agreement or
instrument under all circumstances, including, without
limitation, the following circumstances (it being understood
that any such payment by the Borrower is without prejudice
to, and does not constitute a waiver of, any rights the
Borrower might have or might acquire as a result of the
payment by the Issuing Bank of any demand for payment or the
reimbursement by the Borrower thereof):
(A) any lack of validity or enforceability of any
Loan Document, any Letter of Credit Agreement, any
Letter of Credit or any other agreement or instrument
relating thereto (all of the foregoing being,
collectively, the "L/C Related Documents");
(B) any change in the time, manner or place of
payment of, or in any other term of, all or any of the
obligations of the Borrower in respect of any L/C
Related Document or any other amendment or waiver of or
any consent to departure from all or any of the L/C
Related Documents;
(C) the existence of any claim, set-off, defense
or other right that the Borrower may have at any time
against any beneficiary or any transferee of a Letter
of Credit (or any Persons for whom any such beneficiary
or any such transferee may be acting), the Issuing Bank
or any other Person, whether in connection with the
transactions contemplated by the L/C Related Documents
or any unrelated transaction;
(D) any statement or any other document presented
under a Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or
any statement therein being untrue or inaccurate in any
respect;
(E) payment by the Issuing Bank under a Letter of
Credit against presentation of a draft or certificate
that does not strictly comply with the terms of such
Letter of Credit;
(F) any exchange, release or non-perfection of
any collateral, or any release or amendment or waiver
of or consent to departure from any guaranty, for all
or any of the obligations of the Borrower in respect of
the L/C Related Documents; or
(G) any other circumstance or happening
whatsoever, whether or not similar to any of the
foregoing, including, without limitation, any other
circumstance that might otherwise constitute a defense
available to, or a discharge of, the Borrower or a
guarantor.
SECTION 2.07. Interest. (a) Scheduled Interest. The
Borrower shall pay interest on the unpaid principal amount of
each Advance owing to each Lender from the date of such Advance
until such principal amount shall be paid in full, at the
following rates per annum:
(i) Base Rate Advances. During such periods as such
Advance is a Base Rate Advance, a rate per annum equal at
all times to the sum of (x) the Base Rate in effect from
time to time plus (y) the Applicable Margin (plus
Utilization Fee, if applicable) in effect from time to time,
payable in arrears quarterly on the fifteenth day of each
January, April, July and October during such periods.
(ii) Eurodollar Rate Advances. During such periods as
such Advance is a Eurodollar Rate Advance, a rate per annum
equal at all times during each Interest Period for such
Advance to the sum of (x) the Eurodollar Rate for such
Interest Period for such Advance plus (y) the Applicable
Margin (plus Utilization Fee, if applicable) in effect from
time to time, payable in arrears on the last day of such
Interest Period and, if such Interest Period has a duration
of more than three months, on each day that occurs during
such Interest Period every three months from the first day
of such Interest Period and on the date such Eurodollar Rate
Advance shall be Converted or paid in full.
(b) Default Interest. Upon the occurrence and during the
continuance of an Event of Default under Section 6.01(a), the
Borrower shall pay interest on (i) the unpaid principal amount of
each Advance owing to each Lender, payable in arrears on the
dates referred to in clause (a)(i) or (a)(ii) above, at a rate
per annum equal at all times to 2% per annum above the rate per
annum required to be paid on such Advance pursuant to
clause (a)(i) or (a)(ii) above and (ii) to the fullest extent
permitted by law, the amount of any interest, fee or other amount
payable hereunder that is not paid when due, from the date such
amount shall be due until such amount shall be paid in full,
payable in arrears on the date such amount shall be paid in full
and on demand, at a rate per annum equal at all times to 2% per
annum above the rate per annum required to be paid on Base Rate
Advances pursuant to clause (a)(i) above.
SECTION 2.08. Interest Rate Determination. (a) Each
Reference Lender agrees to furnish to the Administrative Agent
timely information for the purpose of determining each Eurodollar
Rate when necessary to determine the Eurodollar Rate. If any one
or more of the Reference Lenders shall not furnish such timely
information to the Administrative Agent for the purpose of
determining any such interest rate, the Administrative Agent
shall determine such interest rate on the basis of timely
information furnished by the remaining Reference Lenders. The
Administrative Agent shall give prompt notice to the Borrower and
the Lenders of the applicable interest rate determined by the
Administrative Agent for purposes of Section 2.07(a)(i) or (ii),
and the rate, if any, furnished by each Reference Lender for the
purpose of determining the interest rate under Section
2.07(a)(ii).
(b) If, with respect to any Eurodollar Rate Advances, the
Required Lenders notify the Administrative Agent that the
Eurodollar Rate for any Interest Period for such Advances will
not adequately reflect the cost to each of such Required Lenders
of making, funding or maintaining their respective Eurodollar
Rate Advances for such Interest Period, the Administrative Agent
shall forthwith so notify the Borrower and the Lenders, whereupon
(i) each Eurodollar Rate Advance will automatically, on the last
day of the then existing Interest Period therefor, Convert into a
Base Rate Advance, and (ii) the obligation of the Lenders to
make, or to Convert Advances into, Eurodollar Rate Advances shall
be suspended until the Administrative Agent shall notify the
Borrower and the Lenders that the circumstances causing such
suspension no longer exist.
(c) If the Borrower shall fail to select the duration of
any Interest Period for any Eurodollar Rate Advances in
accordance with the provisions contained in the definition of
"Interest Period" in Section 1.01, the Administrative Agent will
forthwith so notify the Borrower and the Lenders and such
Advances will automatically, on the last day of the then existing
Interest Period therefor, be continued as Eurodollar Rate
Advances for an Interest Period of the same duration as the
Interest Period ending on such last day.
(d) On the date on which the aggregate unpaid principal
amount of Eurodollar Rate Advances comprising any Borrowing shall
be reduced, by payment or prepayment or otherwise, to less than
$2,000,000, such Advances shall automatically Convert into Base
Rate Advances.
(e) Upon the occurrence and during the continuance of any
Event of Default under Section 6.01(a), (i) each Eurodollar Rate
Advance will automatically, on the last day of the then existing
Interest Period therefor, Convert into a Base Rate Advance and
(ii) the obligation of the Lenders to make, or to Convert
Advances into, Eurodollar Rate Advances shall be suspended.
SECTION 2.09. Optional Conversion of Advances. The
Borrower may on any Business Day, upon notice given to the
Administrative Agent not later than 10:00 A.M. (San Francisco
time) on the third Business Day prior to the date of the proposed
Conversion and subject to the provisions of Sections 2.08 and
2.12, Convert all Advances of one Type comprising the same
Borrowing into Advances of the other Type; provided, however,
that any Conversion of Eurodollar Rate Advances into Base Rate
Advances shall be made only on the last day of an Interest Period
for such Eurodollar Rate Advances, any Conversion of Base Rate
Advances into Eurodollar Rate Advances shall be in an amount not
less than the minimum amount specified in Section 2.02(b) and no
Conversion of any Advances shall result in more separate
Borrowings than permitted under Section 2.02(b). Each such
notice of a Conversion shall, within the restrictions specified
above, specify (i) the date of such Conversion, (ii) the Advances
to be Converted, and (iii) if such Conversion is into Eurodollar
Rate Advances, the duration of the initial Interest Period for
each such Advance. Each notice of Conversion shall be
irrevocable and binding on the Borrower.
SECTION 2.10. Optional Prepayments. The Borrower may,
upon at least three Business Days' notice in the case of
Eurodollar Rate Advances and one Business Day's notice in the
case of Base Rate Advances, in each case to the Administrative
Agent by no later than 10:00 A.M. (San Francisco time) stating
the proposed date and aggregate principal amount of the
prepayment, and if such notice is given the Borrower shall,
prepay the outstanding principal amount of the Advances
comprising part of the same Borrowing in whole or ratably in
part, together with accrued interest to the date of such
prepayment on the principal amount prepaid; provided, however,
that in the event of any such prepayment of a Eurodollar Rate
Advance, the Borrower shall be obligated to reimburse the Lenders
in respect thereof pursuant to Section 8.04(d). Each such
prepayment shall be applied ratably to the principal installments
thereof.
SECTION 2.11. Increased Costs and Reduction of Return.
(a) If any Lender Party determines that, due to either (i) the
introduction of or any change in the interpretation of any law or
regulation (in each case after the date hereof) or (ii) the
compliance by that Lender Party with any guideline or request (in
each case after the date hereof) from any central bank or other
Governmental Authority (whether or not having the force of law),
there shall be any increase in the cost to such Lender Party of
agreeing to make or making, funding or maintaining any Eurodollar
Rate Advances, then the Borrower shall be liable for, and shall
from time to time, upon demand (with a copy of such demand to be
sent to the Administrative Agent), pay to the Administrative
Agent for the account of such Lender Party, additional amounts as
are sufficient to compensate such Lender Party for such increased
costs.
(b) If any Lender Party determines that (i) the
introduction of any Capital Adequacy Regulation, (ii) any change
in any Capital Adequacy Regulation, (iii) any change in the
interpretation or administration of any Capital Adequacy
Regulation by any central bank or other Governmental Authority
charged with the interpretation or administration thereof, or
(iv) compliance by the Lender Party or any corporation or other
entity controlling the Lender Party with any Capital Adequacy
Regulation (in each case after the date hereof), affects or would
affect the amount of capital required or expected to be
maintained by the Lender Party or any corporation or other entity
controlling the Lender Party and (taking into consideration such
Lender Party's or such corporation's or other entity's policies
with respect to capital adequacy and such Lender Party's desired
return on capital) determines that the amount of such capital is
increased as a consequence of its Commitments, loans, credits or
obligations hereunder, then, upon demand of such Lender Party to
the Borrower through the Administrative Agent, the Borrower shall
pay to the Lender Party, from time to time as specified by the
Lender Party, additional amounts sufficient to compensate the
Lender Party for such increase.
SECTION 2.12. Illegality. Notwithstanding any other
provision of this Agreement, if any Lender Party shall notify the
Administrative Agent that the introduction of or any change in or
in the interpretation of any law or regulation makes it unlawful,
or any central bank or other governmental authority asserts that
it is unlawful, for any Lender Party or its Eurodollar Lending
Office to perform its obligations hereunder to make Eurodollar
Rate Advances or to fund or maintain Eurodollar Rate Advances
hereunder, (i) each Eurodollar Rate Advance will automatically,
upon such demand, Convert into a Base Rate Advance and (ii) the
obligation of the Lender Parties to make, or to Convert Advances
into, Eurodollar Rate Advances shall be suspended until the
Administrative Agent shall notify the Borrower and the Lender
Parties that the circumstances causing such suspension no longer
exist.
SECTION 2.13. Payments and Computations. (a) The
Borrower shall make each payment, without setoff, counterclaim,
recoupment or other deduction, hereunder and under the Notes, if
any, not later than 11:00 A.M. (San Francisco time) on the day
when due in U.S. dollars to the Administrative Agent at the
Administrative Agent's Account in same day funds. The
Administrative Agent will promptly thereafter cause to be
distributed like funds relating to the payment of principal or
interest or facility fees or letter of credit commissions ratably
(other than amounts payable pursuant to Section 2.05(c), 2.05(d),
2.11, 2.14, 2.17, 2.19 or 8.04(d)) to the Lenders for the account
of their respective Applicable Lending Offices, and like funds
relating to the payment of any other amount payable to any Lender
Party to such Lender Party for the account of its Applicable
Lending Office, in each case to be applied in accordance with the
terms of this Agreement. Upon its acceptance of an Assignment
and Acceptance and recording of the information contained therein
in the Register pursuant to Section 8.07(d), from and after the
effective date specified in such Assignment and Acceptance, the
Administrative Agent shall make all payments hereunder and under
the Notes, if any, in respect of the interest assigned thereby to
the Lender Party assignee thereunder, and the parties to such
Assignment and Acceptance shall make all appropriate adjustments
in such payments for periods prior to such effective date
directly between themselves.
(b) The Borrower hereby authorizes each Lender Party, if
and to the extent payment owed to such Lender Party is not made
when due hereunder or under the Note, if any, held by such Lender
Party, to charge from time to time against any or all of the
Borrower's accounts with such Lender Party any amount so due.
(c) All computations of interest based on the Base Rate
shall be made by the Administrative Agent on the basis of a year
of 365 or 366 days, as the case may be, and all computations of
interest based on the Eurodollar Rate or the Federal Funds Rate
and of Letter of Credit commissions and of fees, including
facility fees under Section 2.04(a), shall be made by the
Administrative Agent on the basis of a year of 360 days, in each
case for the actual number of days (including the first day but
excluding the last day) occurring in the period for which such
interest, fees or commissions are payable. Each determination by
the Administrative Agent of an interest rate, fee or commission
hereunder shall be conclusive and binding for all purposes,
absent manifest error.
(d) Whenever any payment hereunder or under the Notes, if
any, shall be stated to be due on a day other than a Business
Day, such payment shall be made on the next succeeding Business
Day, and such extension of time shall in such case be included in
the computation of payment of interest or facility fee, as the
case may be; provided, however, that, if such extension would
cause payment of interest on or principal of Eurodollar Rate
Advances to be made in the next following calendar month, such
payment shall be made on the next preceding Business Day.
(e) Unless the Administrative Agent shall have received
notice from the Borrower prior to the date on which any payment
is due to the Lenders hereunder that the Borrower will not make
such payment in full, the Administrative Agent may assume that
the Borrower has made such payment in full to the Administrative
Agent on such date and the Administrative Agent may, in reliance
upon such assumption, cause to be distributed to each Lender on
such due date an amount equal to the amount then due such Lender.
If and to the extent the Borrower shall not have so made such
payment in full to the Administrative Agent, each Lender shall
repay to the Administrative Agent forthwith on demand such amount
distributed to such Lender together with interest thereon, for
each day from the date such amount is distributed to such Lender
until the date such Lender repays such amount to the
Administrative Agent, at the Federal Funds Rate.
SECTION 2.14. Taxes. (a) Any and all payments by the
Borrower under this Agreement and any other Loan Document shall
be made free and clear of, and without deduction or withholding
for, any Taxes. In addition, the Borrower shall pay all Other
Taxes.
(b) If the Borrower shall be required by law to deduct or
withhold any Taxes, Other Taxes or Further Taxes from or in
respect of any sum payable hereunder to any Lender Party or the
Administrative Agent, then:
(i) the sum payable shall be increased as necessary so
that, after making all required deductions and withholdings
(including deductions and withholdings applicable to
additional sums payable under this Section), such Lender
Party or the Administrative Agent, as the case may be,
receives and retains an amount equal to the sum it would
have received and retained had no such deductions or
withholdings been made;
(ii) the Borrower shall make such deductions and
withholdings; and
(iii) the Borrower shall pay the full amount
deducted or withheld to the relevant taxing authority or
other authority in accordance with applicable law.
(c) The Borrower agrees to indemnify and hold harmless each
Lender Party and the Administrative Agent for the full amount of
(i) Taxes, (ii) Other Taxes, and (iii) Further Taxes imposed on
or paid by such Lender Party or the Administrative Agent (as the
case may be) and any liability (including penalties, interest,
additions to tax and expenses) arising therefrom or with respect
thereto, whether or not such Taxes, Other Taxes or Further Taxes
were correctly or legally asserted. Payment under this
indemnification shall be made within 30 days after the date such
Lender Party or the Administrative Agent makes written demand
therefor.
(d) Within 30 days after the date of any payment by the
Borrower of Taxes, Other Taxes or Further Taxes, the Borrower
shall furnish to the Administrative Agent, at its address
referred to in Section 8.02, the original or a certified copy of
a receipt evidencing payment thereof, or other evidence of
payment satisfactory to such Administrative Agent. In the case
of any payment hereunder by or on behalf of the Borrower through
an account or branch outside the United States or by or on behalf
of the Borrower by a payor that is not a United States person, if
the Borrower determines that no Taxes are payable in respect
thereof, the Borrower shall furnish, or cause such payor to
furnish, to the Administrative Agent, at such address, an opinion
of counsel acceptable to the Administrative Agent stating that
such payment is exempt from Taxes. For purposes of this
subsection (d) and subsection (e), the terms "United States" and
"United States person" shall have the meanings specified in
Section 7701 of the Internal Revenue Code.
(e) Each Lender Party organized under the laws of a
jurisdiction outside the United States, on or prior to the date
of its execution and delivery of this Agreement in the case of
each Initial Lender or the Issuing Bank, as the case may be, and
on the date of the Assignment and Acceptance pursuant to which it
becomes a Lender Party in the case of each other Lender Party,
and from time to time thereafter as requested in writing by the
Borrower and within 60 days of such written request (but only so
long as such Lender Party remains lawfully able to do so), shall
provide each of the Administrative Agent and the Borrower with
two original Internal Revenue Service Forms 1001 or 4224, as
appropriate, or any successor or other form prescribed by the
Internal Revenue Service (including, without limitation, a Form W-
8) certifying that such Lender Party is exempt from or entitled
to a reduced rate of United States withholding tax on payments
pursuant to this Agreement or the Notes, if any. If the form
provided by a Lender Party at the time such Lender Party first
becomes a party to this Agreement indicates a United States
interest withholding tax rate in excess of zero, withholding tax
at such rate shall be considered excluded from Taxes unless and
until such Lender Party provides the appropriate forms certifying
that a lesser rate applies, whereupon withholding tax at such
lesser rate only shall be considered excluded from Taxes for
periods governed by such form; provided, however, that, if at the
date of the Assignment and Acceptance pursuant to which a Lender
Party assignee becomes a party to this Agreement, the Lender
Party assignor was entitled to payments under subsection (a) in
respect of United States withholding tax with respect to interest
paid at such date, then, to such extent, the term Taxes shall
include (in addition to withholding taxes that may be imposed in
the future or other amounts otherwise includable in Taxes) United
States withholding tax, if any, applicable with respect to the
Lender Party assignee on such date. Such Lender Party agrees to
promptly notify each of the Administrative Agent and the Borrower
of any change in circumstances which would modify or render
invalid any claimed exemption or reduction, and shall provide
each of the Administrative Agent and the Borrower with revised
versions of the appropriate forms described in this Section
2.14(e) that reflect such change in circumstance. If any form or
document referred to in this subsection (e) requires the
disclosure of information, other than information necessary to
compute the tax payable and information required on the date
hereof by Internal Revenue Service Form 1001 or 4224, that the
Lender Party reasonably considers to be confidential, the Lender
Party shall give notice thereof to the Borrower and shall not be
obligated to include in such form or document such confidential
information.
(f) For any period with respect to which a Lender Party has
failed to provide the Borrower with accurate and complete copies
of the appropriate form described in Section 2.14(e) (updated as
necessary in accordance therewith) certifying that such Lender
Party is exempt from or entitled to a reduced rate of United
States withholding tax on payments pursuant to this Agreement or
the Notes, if any (other than if such failure is due to a change
in law occurring subsequent to the date on which a form
originally was required to be provided), such Lender Party shall
not be entitled to indemnification under Section 2.14(a), (b) or
(c) with respect to Taxes imposed by the United States by reason
of such failure; provided, however, that should a Lender Party
become subject to Taxes because of its failure to deliver a form
required hereunder, the Borrower shall, at such Lender Party's
expense, take such steps as the Lender Party shall reasonably
request to assist the Lender Party to recover such Taxes.
(g) If any Lender Party claims exemption from, or reduction
of, withholding tax under a United States tax treaty by providing
IRS Form 1001, or any successor or other form prescribed by the
Internal Revenue Service, and such Lender Party sells, assigns,
grants a participation in, or otherwise transfers all or part of
the obligations of the Borrower to such Lender Party, such Lender
Party agrees to notify each of the Administrative Agent and the
Borrower of the percentage amount in which it is no longer the
beneficial owner of obligations of the Borrower to such Lender
Party. To the extent of such percentage amount the
Administrative Agent will treat such Lender Party's IRS Form 1001
as no longer valid and, in the case of a participation, such
Lender Party agrees to undertake sole responsibility for
complying with the withholding tax requirements imposed by
Sections 1441 and 1442 of the Internal Revenue Code.
(h) If any Lender Party claiming exemption from United
States withholding tax by filing IRS Form 4224, or any successor
or other form prescribed by the Internal Revenue Service, with
the Administrative Agent sells, assigns, grants a participation
in, or otherwise offers all or part of the obligations of the
Borrower to such Lender Party, such Lender Party agrees to
undertake sole responsibility for complying with the withholding
tax requirements imposed by Sections 1441 and 1442 of the
Internal Revenue Code.
(i) If the Internal Revenue Service or any other
governmental authority of the United States or other jurisdiction
asserts a claim that the Administrative Agent did not properly
withhold tax from amounts paid to or for the account of any
Lender Party (because the appropriate form was not delivered or
was not properly executed, or because such Lender Party failed to
notify the Administrative Agent of a change in circumstances
which rendered the exemption from, or reduction of, withholding
tax ineffective, or for any other reason) such Lender Party shall
indemnify the Administrative Agent fully for all amounts paid,
directly or indirectly, by the Administrative Agent as tax or
otherwise, including penalties and interest, and including any
taxes imposed by any jurisdiction on the amounts payable to the
Administrative Agent under this Section, together with all cost
and expenses (including Attorney Costs). The obligation of the
Lender Parties under this subsection shall survive the payment of
all obligations and the resignation or replacement of the
Administrative Agent.
SECTION 2.15. Sharing of Payments, Etc. If any Lender
Party shall obtain any payment (whether voluntary, involuntary,
through the exercise of any right of set-off, or otherwise) on
account of the Advances owing to it (other than pursuant to
Section 2.05(c), 2.05(d), 2.11, 2.14, 2.17, 2.19 or 8.04(d)) in
excess of its ratable share of payments on account of the
Advances obtained by all the Lender Parties, such Lender Party
shall forthwith purchase from the other Lender Parties such
participations in the Advances owing to them as shall be
necessary to cause such purchasing Lender Party to share the
excess payment ratably with each of them; provided, however, that
if all or any portion of such excess payment is thereafter
recovered from such purchasing Lender Party, such purchase from
each Lender Party shall be rescinded and such Lender Party shall
repay to the purchasing Lender Party the purchase price to the
extent of such recovery together with an amount equal to such
Lender Party's ratable share (according to the proportion of
(i) the amount of such Lender Party's required repayment to
(ii) the total amount so recovered from the purchasing Lender
Party) of any interest or other amount paid or payable by the
purchasing Lender Party in respect of the total amount so
recovered. The Borrower agrees that any Lender Party so
purchasing a participation from another Lender Party pursuant to
this Section 2.15 may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of
set-off) with respect to such participation as fully as if such
Lender Party were the direct creditor of the Borrower in the
amount of such participation.
SECTION 2.16. Use of Proceeds. The proceeds of the
Advances and issuances of Letters of Credit shall be available
(and the Borrower agrees that it shall use such proceeds) to
repay existing indebtedness, to provide working capital for the
Borrower and its Affiliates and for the general corporate
purposes of the Borrower and its Affiliates.
SECTION 2.17. Substitution of Lenders. In the event
(a) the obligation of any Lender to make or maintain Eurodollar
Rate Advances has been suspended pursuant to Section 2.08(b),
(b) any Lender has demanded compensation under Section 2.11,
2.12, 2.14 or 2.19, which compensation increases the effective
lending rate of such Lender in excess of the effective lending
rate of the other Lenders, or (c) any Lender shall be a
Defaulting Lender, then and in any such event, the Borrower may
substitute for such Lender (the "Affected Lender") another
financial institution, which financial institution shall be an
Eligible Assignee, for such Lender to assume the Commitment of
such Affected Lender and to purchase the Note, if any, of such
Affected Lender hereunder in accordance with Section 8.07. Such
assumption and purchase shall be effected by execution and
delivery by such Affected Lender and such replacement Lender of
an Assignment and Acceptance, and shall otherwise be made in the
manner described in Section 8.07, provided that the Affected
Lender's obligation to so assign and sell its Commitment and
Note, if any, shall be subject to the condition that all amounts
owing to such Affected Lender (including, without limitation,
principal, accrued and unpaid interest and fees, and all amounts
owing to such Affected Lender under Sections 2.11, 2.12, 2.14,
2.19 and 8.04) shall have been paid in full; provided that such
Affected Lender's rights under Sections 2.11, 2.14, 2.19 and
8.04, and its obligations under Section 7.07, shall survive such
assignment for such Lender Party as to matters occurring prior to
such date.
SECTION 2.18. Evidence of Debt. (a) Each Lender
Party shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Borrower
to such Lender resulting from each Advance owing to such Lender
Party from time to time, including the amounts of principal and
interest payable and paid to such Lender from time to time
hereunder. The Borrower agrees that upon notice by any Lender
Party to the Borrower (with a copy of such notice to the
Administrative Agent) to the effect that a promissory note or
other evidence of indebtedness is required or appropriate in
order for such Lender Party to evidence (whether for purposes of
pledge, enforcement or otherwise) the Advances owing to, or to be
made by, such Lender Party, the Borrower shall promptly execute
and deliver to such Lender Party, with a copy to the
Administrative Agent, a promissory note or other evidence of
indebtedness, in the form of Exhibit A hereto or in form and
substance reasonably satisfactory to the Borrower and such Lender
Party (each a "Note"), payable to the order of such Lender in a
principal amount equal to such Lender's Tranche A Revolving
Credit Commitment or Tranche B Revolving Credit Commitment, as
requested by such Lender.
(b) The Register maintained by the Administrative
Agent pursuant to Section 8.07(d) shall include a control
account, and a subsidiary account for each Lender, in which
accounts (taken together) shall be recorded (i) the date and
amount of each Borrowing made hereunder, the Type of Advances
comprising such Borrowing and, if appropriate, the Interest
Period applicable thereto, (ii) the terms of each Assignment and
Acceptance delivered to and accepted by it, (iii) the amount of
any principal or interest due and payable or to become due and
payable from the Borrower to each Lender hereunder, and (iv) the
amount of any sum received by the Administrative Agent from the
Borrower hereunder and each Lender's share thereof.
(c) Entries made in good faith by the Administrative
Agent in the Register pursuant to subsection (b) above, and by
each Lender in its account or accounts pursuant to subsection (a)
above, shall be prima facie evidence of the amount of principal
and interest due and payable or to become due and payable from
the Borrower to, in the case of the Register, each Lender and, in
the case of such account or accounts, such Lender, under this
Agreement, absent manifest error; provided, however, that the
failure of the Administrative Agent or such Lender to make an
entry, or any finding that an entry is incorrect, in the Register
or such account or accounts shall not limit or otherwise affect
the obligations of the Borrower under this Agreement.
SECTION 2.19. Additional Interest on Eurodollar Rate
Advances. The Borrower shall pay to each Lender Party, so long
as such Lender Party shall be required under regulations of the
FRB to maintain reserves with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities, additional
interest on the unpaid principal amount of each Eurodollar Rate
Advance of such Lender Party, from the date of such Advance until
such principal amount is paid in full, at an interest rate per
annum equal at all times to the remainder obtained by subtracting
(i) the Eurodollar Rate for the Interest Period for such Advance
from (ii) the rate obtained by dividing such Eurodollar Rate by a
percentage equal to 100% minus the Eurodollar Rate Reserve
Percentage of such Lender for such Interest Period, payable on
each date on which interest is payable on such Advance. Such
additional interest shall be determined by such Lender Party and
notified to the Borrower through the Administrative Agent.
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness.
Section 2.01 of this Agreement shall become effective on and as
of the first date (the "Effective Date") on which the following
conditions precedent have been satisfied:
(a) The Borrower shall have paid all accrued fees of
the Administrative Agent and the Lender Parties and the
accrued fees and expenses of counsel to the Administrative
Agent.
(b) On the Effective Date, the following statements
shall be true and the Administrative Agent shall have
received for the benefit of each Lender Party a certificate
signed by a duly authorized officer of the Borrower, dated
the Effective Date, stating that:
(i) The representations and warranties
contained in Section 4.01 are correct on and as of the
Effective Date, and
(ii) No event has occurred and is continuing
that constitutes a Default.
(c) The Administrative Agent shall have received on or
before the Effective Date the following, each dated such
day, in form and substance satisfactory to the
Administrative Agent and (except for the Notes, if any) in
sufficient copies for each of the Initial Lenders and the
Issuing Bank:
(i) The Affiliate Guaranty.
(ii) The Notes, if any, to the order of the
Initial Lenders that have requested Notes,
respectively.
(iii) Certified copies of the resolutions
of the Board of Directors of each Loan Party approving
each Loan Document to which such Loan Party is a party,
and of the certificate of incorporation and the bylaws
of each Loan Party and of all documents evidencing
other necessary corporate action and governmental
approvals, if any, with respect to the Loan Documents.
(iv) A certificate of the Secretary or an
Assistant Secretary of each Loan Party certifying the
names and true signatures of the officers of such Loan
Party authorized to sign each Loan Document to which
such Loan Party is a party and the other documents to
be delivered by such Loan Party hereunder.
(v) A favorable opinion of Brobeck, Phleger
& Harrison LLP, counsel for the Loan Parties,
substantially in the form of Exhibit D-1 hereto and a
favorable opinion of General Counsel to the Parent,
substantially in the form of Exhibit D-2 hereto and, in
each case, as to such other matters as any Initial
Lenders or the Issuing Bank through the Administrative
Agent may reasonably request.
(d) The Administrative Agent shall have received on or
before the Effective Date a pay-off letter from BABC, as
agent under the BABC Agreement, together with duly executed
UCC-3 termination statements, mortgage releases and such
other instruments, in each case in form and substance
satisfactory to the Administrative Agent, as shall be
necessary to terminate and satisfy all Liens created
pursuant to the BABC Agreement.
SECTION 3.02. Conditions Precedent to Each Borrowing
and Issuance. The obligation of each Lender Party to make an
Advance (other than a Letter of Credit Advance made by the
Issuing Bank or a Lender pursuant to Section 2.03(b)) on the
occasion of each Borrowing (including the initial Borrowing) and
the obligation of the Issuing Bank to issue a Letter of Credit
(including the initial issuance) or renew a Letter of Credit
shall be subject to the conditions precedent that the Effective
Date shall have occurred and on the date of such Borrowing or
issuance or renewal (a) the following statements shall be true
(and each of the giving of the applicable Notice of Borrowing or
Request for Letter of Credit Issuance or notice of renewal and
the acceptance by the Borrower of the proceeds of such Borrowing
or of such Letter of Credit or the renewal of such Letter of
Credit shall constitute a representation and warranty by the
Borrower that both on the date of such notice and on the date of
such Borrowing or issuance or renewal such statements are true):
(i) the representations and warranties contained in
Section 4.01 are correct on and as of such date, before and
after giving effect to such Borrowing or issuance or renewal
and to the application of the proceeds therefrom, as though
made on and as of such date (other than any such
representations or warranties that, by their terms, refer to
a specific date other than the date of the Borrowing or
issuance or renewal, in which case as though made on and as
of such specific date); and
(ii) no event has occurred and is continuing, or would
result from such Borrowing or issuance or renewal or from
the application of the proceeds therefrom, that constitutes
a Default;
and (b) the Administrative Agent shall have received such other
approvals, opinions or documents as to material matters (in the
reasonable determination of the Administrative Agent) as any
Lender Party through the Administrative Agent may reasonably
request.
SECTION 3.03. Determinations Under Section 3.01. For
purposes of determining compliance with the conditions specified
in Section 3.01, each Lender Party shall be deemed to have
consented to, approved or accepted or to be satisfied with each
document or other matter required thereunder to be consented to
or approved by or acceptable or satisfactory to the Lender
Parties unless an officer of the Administrative Agent responsible
for the transactions contemplated by this Agreement shall have
received notice from such Lender Party prior to the date that the
Borrower, by notice to the Lender Parties, designates as the
proposed Effective Date, specifying its objection thereto. The
Administrative Agent shall promptly notify the Lender Parties of
the occurrence of the Effective Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the
Borrower. The Borrower represents and warrants as follows:
(a) The Borrower is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and
authority (including, without limitation, all governmental
licenses, permits and other approvals and all intellectual
property) to own or lease and operate its properties and to
carry on its business as now conducted and as proposed to be
conducted.
(b) The execution, delivery and performance by the
Borrower of this Agreement and each other Loan Document to
which it is a party, and the consummation of the
transactions contemplated hereby, are within the Borrower's
corporate powers, have been duly authorized by all necessary
corporate action, and do not contravene (i) the Borrower's
charter or by-laws or (ii) law or any contractual
restriction binding on or affecting the Borrower.
(c) No authorization or approval or other action by,
and no notice to or filing with, any governmental authority
or regulatory body or any other third party is required for
the due execution, delivery and performance by the Borrower
of this Agreement or any other Loan Document.
(d) This Agreement has been, and each other Loan
Document to which it is a party when delivered hereunder
will have been, duly executed and delivered by the Borrower.
This Agreement is, and each other Loan Document to which it
is a party when delivered hereunder will be, the legal,
valid and binding obligation of the Borrower enforceable
against the Borrower in accordance with their respective
terms, except as enforcement thereof may be limited by
bankruptcy, insolvency or other laws affecting the
enforcement of creditors' rights generally.
(e) The Consolidated balance sheet of the Parent and
its Subsidiaries as at December 31, 1998, and the related
Consolidated statements of income and cash flows of the
Parent and its Subsidiaries for the Fiscal Year then ended,
accompanied by an opinion of Arthur Andersen LLP,
independent public accountants, duly certified by the chief
financial officer of the Parent, together with a certificate
of said officer stating that such information is accurate
and correct in all material respects, copies of which have
been furnished to each Lender Party, fairly present the
Consolidated financial condition of the Parent and its
Subsidiaries as at such date and the Consolidated results of
the operations of the Parent and its Subsidiaries for the
period ended on such date, all in accordance with generally
accepted accounting principles consistently applied. Since
June 30, 1999, there has been no Material Adverse Change.
(f) Except as disclosed on Schedule IV, there is no
pending action, suit, investigation, litigation or
proceeding against or otherwise affecting the Borrower or
any of its Subsidiaries or, to the knowledge of the
Borrower, threatened action, suit, investigation, litigation
or proceeding affecting the Borrower of any of its
Subsidiaries, including without limitation, any
Environmental Action, before any court, governmental agency
or arbitrator that (i) would be reasonably likely to have a
Material Adverse Effect or (ii) purports to affect the
legality, validity or enforceability of this Agreement or
any other Loan Document or the consummation of the
transactions contemplated hereby.
(g) The Borrower is not engaged in the business of
extending credit for the purpose of purchasing or carrying
Margin Stock, and no proceeds of any Advance will be used to
purchase or carry any Margin Stock or to extend credit to
others for the purpose of purchasing or carrying any Margin
Stock.
(h) No proceeds of any Advance will be used to acquire
any equity security of a class which is registered pursuant
to Section 12 of the Securities Exchange Act of 1934, other
than securities issued by the Parent.
(i) Neither the Borrower nor any of its Subsidiaries
is an "investment company," an "affiliated person" of an
"investment company," or a "promoter" or "principal
underwriter" for an "investment company," as such terms are
defined the Investment Company Act of 1940, as amended.
Neither the making of any Advances nor the application of
the proceeds therefrom or repayment thereof by the Borrower,
nor the consummation of the transactions contemplated
hereby, will violate any provision of such Act or any rule,
regulation or order of the Securities and Exchange
Commission thereunder.
(j) The Borrower has (i) initiated a review and
assessment of all areas within its and each of its
Subsidiaries' business and operations (including those
affected by suppliers, vendors and customers) that could
reasonably be expected to be affected in any material
respect by the "Year 2000 Problem" (that is, the risk that
computer applications used by the Borrower or any of its
Subsidiaries (or suppliers, vendors and customers) may be
unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date
after December 31, 1999), (ii) developed a plan and time
line for addressing the Year 2000 Problem on a timely basis,
and (iii) to date, implemented that plan substantially in
accordance with that timetable. Based on the foregoing, the
Borrower reasonably believes that all computer applications
(including those of its suppliers, vendors and customers)
that are material to its or any of its Subsidiaries'
business and operations are reasonably expected on a timely
basis to be able to perform properly date-sensitive
functions for all dates before and after January 1, 2000
(that is, be "Year 2000 Compliant"), except to the extent
that any failures to do so singly or in the aggregate could
not reasonably be expected to have a Material Adverse
Effect.
ARTICLE V
COVENANTS
SECTION 5.01. Affirmative Covenants. So long as any
Advance shall remain unpaid, any Letter of Credit shall be
outstanding or any Lender Party shall have any Commitment
hereunder, each Loan Party will:
(a) Compliance with Laws, Etc. Comply, and cause each
of its Subsidiaries to comply, in all material respects,
with all applicable laws, rules, regulations and orders,
such compliance to include, without limitation, paying
before the same become delinquent all taxes, assessments and
governmental charges imposed upon it or upon its property
except to the extent contested in good faith.
(b) Maintenance of Insurance. Maintain, and cause
each of its Subsidiaries to maintain, insurance with
responsible and reputable insurance companies or
associations in such amounts and covering such risks as is
usually carried by companies engaged in similar businesses
and owning similar properties in the same general areas in
which the Borrower or such Subsidiary operates.
(c) Corporate Existence and Good Standing. Maintain
its corporate existence and its qualification and good
standing in all jurisdictions in which the failure to
maintain such existence and qualification or good standing
could reasonably be expected to have a Material Adverse
Effect.
(d) Year 2000. Promptly notify the Administrative
Agent in the event the Borrower discovers or determines that
any computer application (including those of its suppliers,
vendors and customers) that is material to its or any of its
Subsidiaries' business and operations will not be Year 2000
Compliant, except to the extent that any such failures
singly or in the aggregate could not reasonably be expected
to have a Material Adverse Effect.
(e) Records and Inspections. Maintain books, records
and accounts as may be required by GAAP. At the request of
any Lender and upon reasonable prior notice, the Parent and
its officers, employees and public accountants, as
applicable, will meet with representatives of such Lender to
discuss the current and expected financial position,
business and prospects of the Parent and its Subsidiaries,
taken as a whole, and the Borrower's compliance with its
obligations under the Loan Documents. Upon reasonable prior
notice, the Borrower shall permit the Administrative Agent,
at its expense, to examine and make abstracts from the books
and records of the Borrower.
(f) Taxes and Other Obligations. (i) File when due
all tax returns and other reports which it is required to
file; (ii) pay, or provide for the payment, when due, of all
taxes, fees, assessments and other governmental charges
against it or upon its property, income and franchises, make
all required withholding and other tax deposits, and
establish adequate reserves for the payment of all such
items, and provide to the Administrative Agent and the
Lender Parties, upon request, satisfactory evidence of its
timely compliance with the foregoing; and (iii) pay when due
all Debt owed by it and all claims of materialmen,
mechanics, carriers, warehousemen, landlords and other like
Persons, and all other indebtedness owed by it and perform
and discharge in a timely manner all other obligations
undertaken by it; provided, however, so long as a Loan Party
has notified the Administrative Agent in writing, it need
not pay any Debt, tax, fee, assessment, or governmental
charge, that (x) it is contesting in good faith by
appropriate proceedings diligently pursued, and (y) for
which it has established proper reserves as provided by
GAAP; provided, further, that no Lien (other than a
Permitted Lien) results from such non-payment.
(g) Reporting Requirements. Furnish to the
Administrative Agent (with copies for each Lender Party):
(i) as soon as available and in any event
within 45 days after the end of each of the first three
quarters of each Fiscal Year, a Consolidated balance
sheet of the Parent and its Subsidiaries as of the end
of such quarter and Consolidated statements of income
and cash flows of the Parent and its Subsidiaries for
the period commencing at the end of the previous Fiscal
Year and ending with the end of such quarter, duly
certified (subject to year-end audit adjustments) by a
Responsible Officer of the Parent as having been
prepared in accordance with generally accepted
accounting principles and a certificate of the chief
financial officer of the Parent (in the form of Exhibit
E hereto) as to compliance with the terms of this
Agreement, together with confirmation of the Pricing
Index, and setting forth in reasonable detail the
calculations necessary to demonstrate compliance with
Section 5.03, provided that, in the event of any change
in GAAP used in the preparation of such financial
statements, the Borrower shall also provide, if
necessary for the determination of compliance with
Section 5.03, a statement of reconciliation conforming
such financial statements to GAAP;
(ii) as soon as available and in any event
within 90 days after the end of each Fiscal Year, a
copy of the audited annual report for such year for the
Parent and its Consolidated Subsidiaries, and a
Consolidated balance sheet of the Parent and its
Subsidiaries as of the end of such Fiscal Year and
Consolidated statements of income and cash flows of the
Parent and its Subsidiaries for such Fiscal Year, and,
in the case of the audited annual report, accompanied
by an unqualified opinion by Arthur Andersen LLP or
other independent public accountants acceptable to the
Required Lenders, together with a certificate of a
Responsible Officer of the Parent (in the form of
Exhibit E hereto) as to compliance with the terms of
this Agreement, together with confirmation of the
Pricing Index, and setting forth in reasonable detail
the calculations necessary to demonstrate compliance
with Section 5.03 provided that, in the event of any
change in GAAP used in the preparation of such
financial statements, the Borrower shall also provide,
if necessary for the determination of compliance with
Section 5.03, a statement of reconciliation conforming
such financial statements to GAAP;
(iii) not later than the end of the first
month of each Fiscal Year, annual forecasts (to include
forecasted consolidated balance sheets, statements of
income and expenses and statements of cash flow) for
the Parent, the Borrower and their Subsidiaries as at
the end of and for each quarter of such Fiscal Year;
(iv) as soon as possible and in any event
within five days after a Responsible Officer obtains
knowledge of the occurrence of each Default continuing
on the date of such statement, a statement of the chief
financial officer of the Borrower setting forth details
of such Default and the action which the Borrower has
taken and proposes to take with respect thereto;
(v) promptly after the filing thereof,
copies of all material reports and registration
statements that the Parent or any Subsidiary files with
the Securities and Exchange Commission;
(vi) promptly after the sending or filing
thereof, copies of all reports which the Parent sends
to any of its securityholders, and copies of all
reports and registration statements which the Parent or
any Subsidiary files with the Securities and Exchange
Commission or any national securities exchange;
(vii) promptly after the filing thereof,
a copy of any notice of reportable event, within the
meaning of Section 4043 of ERISA, with respect to any
Plan unless the 30-day notice requirement with respect
to such event has been waived by the PBGC;
(viii) promptly after becoming aware of
any Material Adverse Change, a description thereof;
(ix) promptly after receiving notification
thereof from the Index Reference, copies of all
notices, reports or other correspondence regarding any
change to the Pricing Index, including any change in
such Pricing Index or the "outlook" in respect of such
Pricing Index; and
(x) such other information respecting the
condition or operations, financial or otherwise, of the
Borrower or any of its Subsidiaries as any Lender Party
through the Administrative Agent may from time to time
reasonably request.
(h) Rating and Surveillance Process. Take, or cause
to be taken, all actions (including paying all fees,
providing all information, and taking all such other
actions) as may be necessary or advisable to ensure the
continuance of the rating and surveillance process conducted
by the Index Reference with respect to the Parent.
(i) Further Assurances. Execute and deliver, or cause
to be executed and delivered, to the Administrative Agent
and/or the Lender Parties such documents and agreements, and
shall take or cause to be taken such actions, as the
Administrative Agent or any Lender Party may, from time to
time, reasonably request to carry out the terms and
conditions of this Agreement and the other Loan Documents.
SECTION 5.02. Negative Covenants. So long as any
Advance shall remain unpaid, any Letter of Credit shall be
outstanding or any Lender Party shall have any Commitment
hereunder:
(a) Mergers, Consolidations or Sales. None of the
Loan Parties shall consummate any transaction of merger,
reorganization, or consolidation, or transfer, sell, assign,
lease, or otherwise dispose of all or any part of its
property, or wind up, liquidate or dissolve, or agree to do
any of the foregoing, except for (i) any merger of any Loan
Party with and into the Borrower; (ii) sales or other
dispositions of personal property in the ordinary course of
business; (iii) sales of Real Estate for fair market value
in exchange for similar property complying with Section 1031
of the Internal Revenue Code; (iv) sales of accounts
receivable and any related property by the Borrower in a
receivables securitization arrangement to a financial
institution or a special purpose vehicle of the Borrower,
provided, however, that the aggregate net unrecovered
investment in such accounts receivable and proceeds thereof
held by the purchasers thereof under such accounts
receivables securitization arrangement shall not exceed at
any time $75,000,000; and (v) sales or other transfers of
assets by the Borrower in any Fiscal Year with an aggregate
book value not in excess of five percent (5%) of the
Consolidated Total Assets of Parent as of the end of the
previous Fiscal Year.
(b) Acquisitions. No Loan Party shall acquire any
business (whether in the form of an acquisition of stock,
assets, debt, or other indebtedness or obligation or a loan,
advance, capital contribution, or subscription), or permit
any of its Subsidiaries to do any of the foregoing, if for
any such transaction the sum of: (i) cash paid by such Loan
Party or such Subsidiary in connection with such
transaction, plus (ii) the amount of obligations issued or
assumed by such Loan Party or such Subsidiary in connection
with such transaction, plus (iii) the aggregate amount of
cash paid by all Loan Parties and their Subsidiaries in
connection with all other such acquisitions that are
consummated in the same Fiscal Year as such issuance or
assumption, as the case may be, plus (iv) the aggregate
amount of obligations issued or assumed by all Loan Parties
and their Subsidiaries in connection with all other such
acquisitions that are consummated in such Fiscal Year, is
greater than $50,000,000; provided that any business so
acquired shall be engaged in the transportation business and
related businesses.
(c) Prepayment. None of the Loan Parties shall
voluntarily prepay, purchase or redeem any Subordinated
Debt.
(d) Transactions with Affiliates. Except as set forth
below, none of the Loan Parties shall, sell, transfer,
distribute, or pay any money or property, including, but not
limited to, any fees or expenses of any nature (including,
but not limited to, any fees or expenses for management
services), to any Affiliate (other than a Loan Party), or
lend or advance money or property to any Affiliate (other
than a Loan Party), or invest in (by capital contribution or
otherwise) or purchase or repurchase any stock or
indebtedness, or any property, of any Affiliate (other than
a Loan Party), or become liable on any Guaranty of the
indebtedness, dividends, or other obligations of any
Affiliate (other than a Loan Party). Notwithstanding the
foregoing, provided that no Event of Default has occurred
and is continuing or would result from such action, (i) each
Loan Party may engage in transactions with Affiliates in the
ordinary course of business, in amounts and upon terms fully
disclosed to the Administrative Agent and the Lender
Parties, and no less favorable to such Loan Party than would
be obtained in a comparable arm's-length transaction with a
third party who is not an Affiliate, (ii) each Loan Party
may engage in transactions with Affiliates in the ordinary
course of business, consistent with the Borrower's current
cash management practices and (iii) the Borrower may provide
fundings to Leland James Service Corporation and Redwood
Systems Logistics to enable them to make payments to their
employees and vendors in the ordinary course of business in
connection with services provided to the Loan Parties and
their Subsidiaries.
(e) Business Conducted. None of the Loan Parties
shall engage directly or indirectly, in any line of business
other than the transportation business and related
businesses.
(f) Liens. None of the Loan Parties shall create,
incur, assume, or permit to exist any Lien on any property
now owned or hereafter acquired by it, except Permitted
Liens.
(g) New Subsidiaries. Neither the Borrower nor any of
its Subsidiaries shall, directly or indirectly, organize,
create, acquire or permit to exist any Subsidiary other than
(a) those listed on Schedule VI hereto and (b) provided that
no Event of Default has occurred and is continuing or would
result from such action, new Subsidiaries (including
Subsidiaries established as vehicles for joint ventures) to
engage in the transportation business and related
businesses; and provided, further, that in the event the
Borrower or any of its Subsidiaries forms any domestic
Subsidiary that is not established as a vehicle for a joint
venture, the Borrower shall cause such new domestic
Subsidiary, when it satisfies the financial tests contained
in the definition of "Guarantor," to execute a Guaranty
(substantially similar to the Affiliate Guaranty) containing
representations, warranties and covenants acceptable to the
Administrative Agent, in favor of the Administrative Agent
for the benefit of the Lender Parties, in a manner and in
form and substance satisfactory to the Administrative Agent.
(h) Fiscal Year. The Borrower shall not change its
Fiscal Year.
(i) Restricted Investments. No Loan Party shall
directly or indirectly declare or make, or incur any
liability to make, any Investment in any Person, except (i)
Investments in other Loan Parties; (ii) Investments that are
otherwise permitted under Sections 5.02(b), (d) and (g);
(iii) loans and advances made in the ordinary course of
business to a Subsidiary of such Loan Party that is not
itself a Loan Party; (iv) loans and advances made to
customers, vendors or employees of such Loan Party in the
ordinary course of business and (v) Investments in one or
more Designated Entities; provided that (x) no Event of
Default has occurred and is continuing or would result from
such Investment in a Designated Entity and (y) the aggregate
net amount of Investments by all Loan Parties in Designated
Entities does not, and would not as a result of such
Investment, exceed 10% of the Consolidated Tangible Net
Worth of the Parent at the date of determination.
SECTION 5.03. Financial Covenants. So long as any
Advance shall remain unpaid, any Letter of Credit shall be
outstanding or any Lender Party shall have any Commitment
hereunder, the Borrower will maintain or cause to be maintained:
(a) Leverage Ratio. At all times a ratio of not more
than 2.50 to 1.00, determined as of the end of each fiscal
quarter, of Consolidated Funded Indebtedness as of the end
of such fiscal quarter to Consolidated EBITDAR for the four
fiscal quarters ending on such date.
(b) Tangible Net Worth. At all times a Consolidated
Tangible Net Worth of the Parent, determined as of the end
of each fiscal quarter, of not less than the sum of (i)
$205,000,000, plus (ii) 50% of Consolidated Net Income
during the period commencing June 30, 1999 and ending at the
end of such fiscal quarter (without taking into account any
losses) plus (iii) 100% of the Net Cash Proceeds of all
Equity Interests issued by the Parent during the period
commencing June 30, 1999 and ending at the end of such
fiscal quarter minus (iv) an amount, calculated on an after-
tax basis, in respect of charges not in excess of
$15,000,000 related to the Tax Sharing Agreement.
(c) Fixed Charge Coverage Ratio. At all times a
ratio, determined as of the end of each fiscal quarter for
the immediately preceding four fiscal quarters, of (a)
Consolidated EBITDAR for such fiscal quarters to (b)
Consolidated Interest and Rental Expense for such fiscal
quarters of not less than 2.00 to 1.00.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the
following events ("Events of Default") shall occur and be
continuing:
(a) The Borrower shall fail to pay any principal of
any Advance when the same becomes due and payable, or the
Borrower shall fail to pay any interest on any Advance, or
any other amount due hereunder, within three Business Days
after the same becomes due and payable; or
(b) Any representation or warranty made or deemed made
by any Loan Party herein or by any Loan Party (or any of its
officers) in connection with the Loan Documents shall prove
to have been incorrect in any material respect when made; or
(c) (i) The Borrower shall fail to perform or observe
any term, covenant or agreement contained in
Section 5.01(c), (d) or (g), 5.02 or 5.03, or (ii) any Loan
Party shall fail to perform or observe any other term,
covenant or agreement contained in the Loan Documents on its
part to be performed or observed if such failure shall
remain unremedied for 10 days after written notice thereof
shall have been given to such Loan Party by the
Administrative Agent or any Lender Party; or
(d) Any Loan Party shall fail to pay any principal of
or premium or interest on any Debt which is outstanding in a
principal amount of at least $10,000,000 in the aggregate
(but excluding Debt outstanding hereunder) of such Loan
Party, when the same becomes due and payable (whether by
scheduled maturity, required prepayment, acceleration,
demand or otherwise), and such failure shall continue after
the applicable grace period, if any, specified in the
agreement or instrument relating to such Debt; or any other
event shall occur or condition shall exist under any
agreement or instrument relating to any such Debt and shall
continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of
such event or condition is to accelerate, or to permit the
acceleration of, the maturity of such Debt; or any such Debt
shall be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled required
prepayment), redeemed, purchased or defeased, or an offer to
prepay, redeem, purchase or defease such Debt shall be
required to be made, in each case prior to the stated
maturity thereof; or
(e) Any Loan Party shall generally not pay its debts
as such debts become due, or shall admit in writing its
inability to pay its debts generally, or shall make a
general assignment for the benefit of creditors; or any
proceeding shall be instituted by or against any Loan Party
seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its
debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of
an order for relief or the appointment of a receiver,
trustee, custodian or other similar official for it or for
any substantial part of its property and, in the case of any
such proceeding instituted against it (but not instituted by
it), either such proceeding shall remain undismissed or
unstayed for a period of 30 days, or any of the actions
sought in such proceeding (including, without limitation,
the entry of an order for relief against, or the appointment
of a receiver, trustee, custodian or other similar official
for, it or for any substantial part of its property) shall
occur; or any Loan Party shall take any corporate action to
authorize any of the actions set forth above in this
subsection (e); or
(f) Any judgment or order for the payment of money in
excess of $10,000,000, over the amount provided by insurance
in respect of such judgment or order, shall be rendered
against any Loan Party and either (i) enforcement
proceedings shall have been commenced by any creditor upon
such judgment or order and such proceedings shall not have
been stayed within 30 days of such commencement or
(ii) there shall be any period of 30 consecutive days during
which a stay of enforcement of such judgment or order, by
reason of a pending appeal or otherwise, shall not be in
effect; or
(g) (i) Any ERISA Event shall have occurred with
respect to a Plan which has resulted or could reasonably be
expected to result in liability of the Borrower under Title
IV of ERISA to the Plan or the PBGC in an aggregate amount
in excess of $25,000,000; or (ii) any Loan Party or any
ERISA Affiliate shall fail to pay when due, after the
expiration of any applicable grace period, any installment
payment with respect to its withdrawal liability under
Section 4201 of ERISA under a Multiemployer Plan in an
aggregate amount in excess of $25,000,000; or
(h) Any Loan Party or any ERISA Affiliate shall have
been notified by the sponsor of a Multiemployer Plan that it
has incurred Withdrawal Liability to such Multiemployer Plan
in an amount that, when aggregated with all other amounts
required to be paid to Multiemployer Plans by the Loan Party
and the ERISA Affiliates as Withdrawal Liability (determined
as of the date of such notification), exceeds $25,000,000 or
requires payments exceeding $25,000,000 per annum; or
(i) Any Loan Party or any ERISA Affiliate shall have
been notified by the sponsor of a Multiemployer Plan that
such Multiemployer Plan is in reorganization or is being
terminated, within the meaning of Title IV of ERISA, and as
a result of such reorganization or termination the aggregate
annual contributions of the Loan Party and the ERISA
Affiliates to all Multiemployer Plans that are then in
reorganization or being terminated have been or will be
increased over the amounts contributed to such Multiemployer
Plans for the plan years of such Multiemployer Plans
immediately preceding the plan year in which such
reorganization or termination occurs by an amount exceeding
$25,000,000; or
(j) any provision of any Loan Document after delivery
thereof pursuant to Section 3.01 shall for any reason cease
to be valid and binding on or enforceable against any Loan
Party, or any Loan Party shall so state in writing; or
(k) a Change of Control shall occur; or
(l) there occurs a Material Adverse Effect;
then, and in any such event, the Administrative Agent (i) shall
at the request, or may with the consent, of the Required Lenders,
by notice to the Borrower, declare the obligation of each Lender
Party to make Advances (other than Letters of Credit Advances by
the Issuing Bank or a Lender pursuant to Section 2.03(b)) and of
the Issuing Bank to issue Letters of Credit to be terminated,
whereupon the same shall forthwith terminate, and (ii) shall at
the request, or may with the consent, of the Required Lenders, by
notice to the Borrower, declare the Advances, the Notes, if any,
all interest thereon and all other amounts payable under this
Agreement to be forthwith due and payable, whereupon the
Advances, the Notes, if any, all such interest and all such
amounts shall become and be forthwith due and payable, without
presentment, demand, protest or further notice of any kind, all
of which are hereby expressly waived by each Loan Party and by
notice to each party required under the terms of any agreement in
support of which a Letter of Credit is issued, request that all
obligations under such agreement be declared to be due and
payable; provided, however, that in the event of an actual or
deemed entry of an order for relief with respect to any Loan
Party under the Federal Bankruptcy Code, (A) the obligation of
each Lender Party to make Advances (other than Letters of Credit
Advances by the Issuing Bank or a Lender pursuant to Section
2.03(b)) and of the Issuing Bank to issue Letters of Credit shall
automatically be terminated and (B) the Advances, the Notes, if
any, all such interest and all such amounts shall automatically
become and be due and payable, without presentment, demand,
protest or any notice of any kind, all of which are hereby
expressly waived by each Loan Party.
SECTION 6.02. Actions in Respect of the Letters of
Credit upon Default. If any Event of Default shall have occurred
and be continuing, the Administrative Agent may, or shall at the
request of the Required Tranche B Lenders, irrespective of
whether they are taking any of the actions described in
Section 6.01 or otherwise, make demand upon the Borrower to, and
forthwith upon such demand the Borrower will, pay to the
Administrative Agent on behalf of the Issuing Bank and the
Tranche B Lenders in same day funds at the Administrative Agent's
office designated in such demand, for deposit in the L/C Cash
Collateral Account, an amount equal to the aggregate Available
Amount of all Letters of Credit then outstanding. If at any time
the Administrative Agent determines that any funds held in the
L/C Cash Collateral Account are subject to any right or claim of
any Person other than the Administrative Agent, the Issuing Bank
and the Tranche B Lenders or that the total amount of such funds
is less than the aggregate Available Amount of all Letters of
Credit, the Borrower will, forthwith upon demand by the
Administrative Agent, pay to the Administrative Agent, as
additional funds to be deposited and held in the L/C Cash
Collateral Account, an amount equal to the excess of (a) such
aggregate Available Amount over (b) the total amount of funds, if
any, then held in the L/C Cash Collateral Account that the
Administrative Agent determines to be free and clear of any such
right and claim.
ARTICLE VII
The Administrative Agent
SECTION 7.01 Appointment and Authorization. (a) Each
Lender Party hereby irrevocably (subject to Section 7.09)
appoints, designates and authorizes the Administrative Agent to
take such action on its behalf under the provisions of this
Agreement and each other Loan Document and to exercise such
powers and perform such duties as are expressly delegated to it
by the terms of this Agreement or any other Loan Document,
together with this Agreement and each other Loan Document and to
exercise such powers and perform such duties as are expressly
delegated to it by the terms of this Agreement or any other Loan
Document, together with such powers as are reasonably incidental
thereto; provided, however, that the Administrative Agent shall
not be required to take any action that exposes it to personal
liability or that is contrary to this Agreement or applicable
law. Notwithstanding any provision to the contrary contained
elsewhere in this Agreement or in any other Loan Document, the
Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth herein, nor
shall the Administrative Agent have or be deemed to have any
fiduciary relationship with any Lender Party, and no implied
covenants, functions. responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against the Administrative Agent.
Without limiting the generality of the foregoing sentence, the
use of the term "agent" in this Agreement with reference to the
Administrative Agent is not intended to connote any fiduciary or
other implied (or express) obligations arising under agency
doctrine of any applicable law. Instead, such, term is used
merely as a matter of market custom, and is intended to create or
reflect only an administrative relationship between independent
contracting parties.
(b) The Issuing Bank shall act on behalf of the Tranche B
Lenders with respect to any Letters of Credit issued by it and
the documents associated therewith until such time and except for
so long as the Administrative Agent may agree at the request of
the Required Tranche B Lenders to act for the Issuing Bank with
respect thereto; provided, however, that the Issuing Bank shall
have all of the benefits and immunities (i) provided to the
Administrative Agent in this Article VII with respect to any acts
taken or omissions suffered by the Issuing Bank in connection
with Letters of Credit issued by it or proposed to be issued by
it and the application and agreements for letters of credit
pertaining to the Letters of Credit as fully as if the term
"Administrative Agent," as used in this Article VII, included the
Issuing Bank with respect to such acts or omissions and (ii) as
additionally provided in this Agreement with respect to the
Issuing Bank.
SECTION 7.02 Delegation of Duties. The
Administrative Agent may execute any of its duties under this
Agreement or any other Loan Document by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties.
SECTION 7.03 Liability of the Administrative Agent.
None of the Agent-Related Persons shall (i) be liable for any
action taken or to be taken by any of them under or in connection
with this Agreement or any other Loan Document or the
transactions contemplated hereby (except for its own gross
negligence or willful misconduct), or (ii) be responsible in any
manner to any of the Lender Parties for any recital, statement,
representation or warranty made by the Borrower or any Subsidiary
or Affiliate of the Borrower, or any officer thereof, contained
in this Agreement or in any other Loan Document, or in any
certificate, report, statement or other document referred to or
provided for in, or received by the Administrative Agent under or
in connection with, this Agreement or any other Loan Document, or
the validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Loan Document, or for
any failure of the Borrower or any other party to any Loan
Document to perform its obligations hereunder or thereunder. No
Agent-Related Person shall be under any obligation to any Lender
Party to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the
properties, books or records or the Borrower or any of the
Borrower's Subsidiaries or Affiliates.
SECTION 7.04 Reliance by the Administrative Agent and
the Issuing Bank. (a) Each of the Administrative Agent and the
Issuing Bank shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, instrument, telegram,
facsimile, telex, telecopier or telephone message, statement or
other document or writing or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the
proper Person or Persons, and upon advice and statements of legal
counsel (including counsel to the Borrower), independent
accountants and other experts selected by the Administrative
Agent or the Issuing Bank, as the case may be. Each of the
Administrative Agent and the Issuing Bank shall be fully
justified in failing or refusing to take any action under this
Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Required Lenders or the
Required Tranche B Lenders, as the case may be, as it deems
appropriate and, if it so requests, it shall first be indemnified
to its satisfaction by the Lender Parties against any and all
liability and expense which may be incurred by it by reason of
taking or continuing to take any such action. Each of the
Administrative Agent and the Issuing Bank shall in all cases be
fully protected in acting, or in refraining from acting, under
this Agreement or any other Loan Document in accordance with a
request or consent of the Required Lenders or the Required
Tranche B Lenders, as the case may be, and such request and any
action taken or failure to act pursuant thereto shall be binding
upon all of the Lender Parties.
(b) Without limiting the generality of the foregoing, each
of the Administrative Agent and the Issuing Bank (i) may treat
the payee of any Note, if any, as the holder thereof until the
Administrative Agent receives and accepts an Assignment and
Acceptance entered into by the Lender Party that is the payee of
such Note, if any, as assignor, and an Eligible Assignee, as
assignee; (ii) makes no warranty or representation to any Lender
Party and shall not be responsible to any Lender Party for any
statements, warranties or representations (whether written or
oral) made in or in connection with any Loan Document; (iii)
shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or
conditions of this Agreement on the part of the Borrower or to
inspect the property (including the books and records) of the
Borrower; and (iv) shall not be responsible to any Lender Party
for the due execution, legality, validity, enforceability,
genuineness, sufficiency or value of any Loan Document or any
other instrument or document furnished pursuant hereto.
SECTION 7.05 Notice of Default. The Administrative
Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default, except with respect to defaults in the
payment of principal, interest and fees required to be paid to
the Administrative Agent for the account of the Lenders, unless
the Administrative Agent shall have received written notice from
a Lender Party or the Borrower referring to this Agreement,
describing such Default and stating that such notice is a "notice
of default." The Administrative Agent will notify the Lenders of
its receipt of any such notice. The Administrative Agent shall
take such action with respect to such Default as may be requested
by the Required Lenders in accordance with Article VI; provided,
however, that unless and until the Administrative Agent has
received any such request, the Administrative Agent may (but
shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default as it shall deem
advisable or in the best interest of the Lender Parties.
SECTION 7.06 Lender Party Credit Decision. Each
Lender Party acknowledges that none of the Agent-Related Persons
has made any representation or warranty to it, and that no act by
the Administrative Agent hereinafter taken, including any review
of the affairs of the Borrower and its Subsidiaries, shall be
deemed to constitute any representation or warranty by any
Agent-Related Person to any Lender Party. Each Lender Party
represents to the Administrative Agent that it has, independently
and without reliance upon any Agent-Related Person and based on
the financial statements referred to in Section 4.01 and such
other documents, and information as it has deemed appropriate,
made its own appraisal of and investigation into the business,
prospects, operations, property, financial and other condition
and creditworthiness of the Borrower and its Subsidiaries, and
all applicable bank regulatory laws relating to the transactions
contemplated hereby, and made its own decision to enter into this
Agreement and to extend credit to the Borrower hereunder. Each
Lender Party also represents that it will, independently and
without reliance upon any Agent-Related Person and based on such
documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and
decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigations as it
deems necessary to inform itself as to the business, prospects,
operations, property, financial and other condition and
creditworthiness of the Borrower. Except for notices, reports
and other documents expressly herein required to be furnished to
the Lender Parties by the Administrative Agent, the
Administrative Agent shall have no duty or responsibility to
provide any Lender Party with any credit or other information
concerning the business, prospects, operations, property,
financial and other condition or creditworthiness of the Borrower
which may come into the possession of any of the Agent-Related
Persons.
SECTION 7.07 Indemnification of the Administrative
Agent. (a) Whether or not the transactions contemplated hereby
are consummated, each Lender Party shall indemnify upon demand
the Agent-Related Persons (to the extent not reimbursed by or on
behalf of the Borrower and without limiting the obligation of the
Borrower to do so), pro rata, from and against any and all
Indemnified Liabilities; provided, however, that no Lender Party
shall be liable for the payment to any Agent-Related Person of
any portion of such Indemnified Liabilities resulting solely from
such Person's gross negligence or willful misconduct as found in
a final, non-appealable judgment by a court of competent
jurisdiction. Without limitation of the foregoing, each Lender
Party shall reimburse the Administrative Agent upon demand for
its ratable share of any costs or out-of-pocket expenses
(including Attorney Costs) incurred by the Administrative Agent
in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or
legal advice in respect of rights or responsibilities under, this
Agreement, any other Loan Document, or any document contemplated
by or referred to herein, to the extent that the Administrative
Agent is not reimbursed for such expenses by or on behalf of the
Borrower.
(b) Each Tranche B Lender severally agrees to indemnify the
Issuing Bank (to the extent not reimbursed by the Borrower),
ratably according to the respective principal amounts of the
Notes in respect of the Tranche B Revolving Credit Facility, if
any, then held by each of them (or if no such Notes are at the
time outstanding or if any such Notes are held by Persons that
are not Tranche B Lenders, ratably according to the respective
amounts of their Tranche B Revolving Credit Commitments), from
and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever that may be
imposed on, incurred by, or asserted against the Issuing Bank in
any way relating to or arising out of this Agreement or any
action taken or omitted by the Issuing Bank under this Agreement
(collectively, the "Issuing Bank Indemnified Costs"), provided
that no Tranche B Lender shall be liable for any portion of the
Issuing Bank Indemnified Costs resulting from the Issuing Bank's
gross negligence or willful misconduct as found in a final, non-
appealable judgment by a court of competent jurisdiction.
Without limitation of the foregoing, each Tranche B Lender agrees
to reimburse the Issuing Bank promptly upon demand for its
ratable share of any out-of-pocket expenses (including counsel
fees) incurred by the Issuing Bank in connection with the
preparation, execution, delivery, administration, modification,
amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement, to the extent
that the Issuing Bank is not reimbursed for such expenses by the
Borrower.
(c) In the case of any investigation, litigation or
proceeding giving rise to the Administrative Agent's Indemnified
Liabilities or the Issuing Bank's Indemnified Costs, this
Section 7.07 applies whether any such investigation, litigation
or proceeding is brought by the Administrative Agent, any Lender
Party or a third party. Without prejudice to the survival of any
other agreement of any Lender Party hereunder, the agreement,
obligations and undertaking of each Lender Party contained in
this Section 7.07 shall survive the payment in full of principal,
interest and all other amounts payable hereunder and under the
other Loan Documents and the resignation or replacement of the
Administrative Agent.
SECTION 7.08 Administrative Agent in Individual
Capacity. ABN AMRO and its Affiliates may make loans to, issue
letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of
banking, trust, financial advisory, underwriting or other
business with the Borrower and its Affiliates as though ABN AMRO
were not the Administrative Agent or the Issuing Bank hereunder
and without notice to or consent of the other Lenders. The
Lender Parties acknowledge that, pursuant to such activities, ABN
AMRO or its Affiliates may receive information regarding the
Borrower and its Affiliates (including information that may be
subject to confidentiality obligations in favor of the Borrower
or such Affiliates) and acknowledge that the Administrative Agent
shall not be under any obligation to provide such information to
them. With respect to its Commitment, the Advances made by it
and the Note, if any, issued to it, ABN AMRO shall have the same
rights and powers under this Agreement as any other Lender Party
and may exercise the same as though it were not the
Administrative Agent or the Issuing Bank.
SECTION 7.09 Successor Administrative Agent. The
Administrative Agent may, and at the request of the Required
Lenders shall, resign as the Administrative Agent upon 30 days'
notice to the Lenders. If the Administrative Agent resigns under
this Agreement, the Required Lenders shall appoint from among the
Lenders a successor Administrative Agent for the Lender Parties
which successor Administrative Agent shall be approved by the
Borrower. If no successor Administrative Agent is appointed
prior to the effective date of the resignation of the
Administrative Agent, the Administrative Agent may appoint, after
consulting with the Lenders and the Borrower, a successor
Administrative Agent from among the Lender Parties. Upon the
acceptance of its appointment as successor Administrative Agent
hereunder, such successor Administrative Agent shall succeed to
all the rights, powers, discretion, privileges and duties of the
retiring Administrative Agent and the term "Administrative Agent"
shall mean such successor Administrative Agent and the retiring
Administrative Agent's appointment, powers and duties as the
Administrative Agent shall be terminated. After any retiring
Administrative Agent's resignation hereunder as Administrative
Agent, the provisions of this Article VII and Section 8.04 shall
inure to its benefit as to any actions taken or omitted to be
taken by it while it was the Administrative Agent under this
Agreement. If no successor Administrative Agent has accepted
appointment as the successor Administrative Agent by the date
which is 30 days following the retiring Administrative Agent's
notice of resignation, the retiring Administrative Agent's
resignation shall nevertheless thereupon become effective and the
Lender Parties shall perform all of the duties of the
Administrative Agent hereunder until such time, if any, as the
Required Lenders appoint a successor Administrative Agent as
provided for above. Notwithstanding the foregoing, however, ABN
AMRO may not be removed as the Administrative Agent at the
request of the Required Lenders unless ABN AMRO shall also
simultaneously be replaced as "Issuing Bank" hereunder pursuant
to documentation in form and substance reasonably satisfactory to
ABN AMRO.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver
of any provision of this Agreement or the Notes, if any, nor
consent to any departure by the Borrower therefrom, shall in any
event be effective unless the same shall be in writing and signed
by the Required Lenders and the Borrower with receipt
acknowledged by the Administrative Agent, and then such waiver or
consent shall be effective only in the specific instance and for
the specific purpose for which given; provided, however, that no
amendment, waiver or consent shall:
(a) unless in writing and signed by all the Lender Parties
and the Borrower with receipt acknowledged by the
Administrative Agent, do any of the following: (i) waive
any of the conditions specified in Section 3.01, (ii) amend
this Section 8.01(a), (iii) release or limit the liability
of any Guarantor under the Affiliate Guaranty other than in
accordance with the terms of the Affiliate Guaranty or (iv)
change the voting requirements for the Lenders or any of
them to take any action under this Section 8.01(a);
(b) unless in writing and signed by all the Tranche A
Lenders and the Borrower with receipt acknowledged by the
Administrative Agent, do any of the following: (i) increase
the Tranche A Revolving Credit Commitments of the Tranche A
Lenders or subject the Tranche A Lenders to any additional
financial obligations, (ii) change the aggregate principal
amount of the Tranche A Revolving Credit Facility, or reduce
the principal of, or interest on, such Facility, or any fees
or other amounts payable hereunder in respect thereof,
(iii) postpone any date fixed for any payment of principal
of, or interest on, the Tranche A Revolving Credit Facility,
or any fees or other amounts payable hereunder in respect
thereof, (iv) change the percentage of the Tranche A
Revolving Credit Commitments, (v) amend this Section 8.01(b)
or (vi) change the voting requirements for the Tranche A
Lenders or any of them to take any action under this Section
8.01(b); or
(c) unless in writing and signed by all the Tranche B
Lenders and the Borrower with receipt acknowledged by the
Administrative Agent, do any of the following: (i) increase
the Tranche B Revolving Credit Commitments of the Tranche B
Lenders or subject the Tranche B Lenders to any additional
financial obligations, (ii) change the aggregate principal
amount of the Tranche B Revolving Credit Facility, or reduce
the principal of, or interest on, such Facility, or any fees
or other amounts payable hereunder in respect thereof,
(iii) postpone any date fixed for any payment of principal
of, or interest on, the Tranche B Revolving Credit Facility,
or any fees or other amounts payable hereunder in respect
thereof, (iv) change the percentage of the Tranche B
Revolving Credit Commitments, (v) amend this
Section 8.01(c), (vi) change the voting requirements for the
Tranche B Lenders or any of them to take any action under
this Section 8.01(c) or (vii) change the aggregate Available
Amount of outstanding Letters of Credit;
provided further that no amendment, waiver or consent shall,
unless in writing and signed by the Issuing Bank, as the case may
be, in addition to the Lender Parties required above to take such
action, and the Borrower, affect the rights or obligations of the
Issuing Bank under this Agreement; and provided further that no
amendment, waiver or consent shall, unless in writing and signed
by the Administrative Agent in addition to the Lenders required
above to take such action, and the Borrower, affect the rights or
duties of the Administrative Agent under this Agreement or any
Note, if any.
SECTION 8.02. Notices, Etc. All notices and other
communications provided for hereunder shall be in writing
(including telecopier communication) and mailed, telecopied, or
delivered, if to the Borrower, at its address at 175 Linfield
Drive, Menlo Park, California 94025-3799, Attention: Treasurer;
if to any Initial Lender or the Issuing Bank, at its Domestic
Lending Office specified opposite its name on Schedule I hereto;
if to any other Lender Party, at its Domestic Lending Office
specified in the Assignment and Acceptance pursuant to which it
became a Lender Party; if to the Administrative Agent, at its
address at 101 California Street, Suite 4550, San Francisco,
California 94111, or, as to the Borrower or the Administrative
Agent, at such other address as shall be designated by such party
in a written notice to the other parties and, as to each other
party, at such other address as shall be designated by such party
in a written notice to the Borrower and the Administrative Agent.
All such notices and communications shall, when delivered by
overnight courier or telecopied, be effective when delivered to
the overnight courier or telecopied, respectively, except that
notices and communications to the Administrative Agent pursuant
to Article II, III or VII shall not be effective until received
by the Administrative Agent. Delivery by telecopier of an
executed counterpart of any amendment or waiver of any provision
of this Agreement or the Notes, if any, or of any Exhibit hereto
to be executed and delivered hereunder shall be effective as
delivery of a manually executed counterpart thereof.
SECTION 8.03. No Waiver; Remedies. No failure on the
part of any Lender Party or the Administrative Agent to exercise,
and no delay in exercising, any right hereunder or under any
Note, if any, shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other
or further exercise thereof or the exercise of any other right.
The remedies herein provided are cumulative and not exclusive of
any remedies provided by law.
SECTION 8.04. Costs and Expenses. (a) The Borrower
shall, whether or not the transactions contemplated hereby are
consummated, pay or reimburse all reasonable fees and expenses of
counsel for the Administrative Agent (including in its capacity
as the Administrative Agent and the Issuing Bank) promptly after
demand in connection with the development, preparation, delivery,
administration and execution of, and any amendment, supplement,
waiver or modification to (in each case, whether or not
consummated), this Agreement, any Notes, if any, any other Loan
Document and any other documents prepared in connection herewith
or therewith, and the consummation of the transactions
contemplated hereby and thereby, including reasonable Attorney
Costs incurred by ABN AMRO (including in its capacity as the
Administrative Agent and the Issuing Bank) with respect thereto;
and
(b) The Borrower shall pay or reimburse the Administrative
Agent and each Lender Party within five Business Days after
demand for all costs and expenses (including Attorney Costs)
incurred by them in connection with the enforcement, attempted
enforcement, or preservation of any rights or remedies under this
Agreement or any other Loan Document during the existence of an
Event of Default or after acceleration of the Loans (including in
connection with any "workout" or restructuring regarding the
Loans, and including in any insolvency proceeding, bankruptcy
proceeding, liquidation, winding up, reorganization,
receivership, arrangement, adjustment, protection, relief of
debtors or appellate proceeding (collectively, an "Insolvency
Proceeding")).
(c) Whether or not the transactions contemplated hereby are
consummated, the Borrower shall indemnify, defend and hold the
Agent-Related Persons, each Lender Party and each of its
Affiliates and each of their respective officers, directors,
employees, counsel, agents, advisors and attorneys-in-fact (each,
an "Indemnified Party") harmless from and against any and all
liabilities, obligations, losses, claims, damages, penalties,
actions, judgments, suits, costs, charges, expenses and
disbursements (including Attorney Costs) of any kind or nature
whatsoever which may at any time (including at any time following
repayment of the Advances, the termination of the Letters of
Credit and the termination, resignation or replacement of the
Administrative Agent or replacement of any Lender Party) be
imposed on, incurred by or asserted against any such Person as a
result of a claim by a third party in any way relating to or
arising out of or in connection with or by reason of (including,
without limitation, in connection with any investigation,
litigation or proceeding or preparation of a defense in
connection with) (i) this Agreement, any Loan Document or any
document contemplated by or referred to herein, or the
transactions contemplated hereby or the actual or proposed use of
proceeds of the Advances or Letters of Credit, or (ii) the actual
or alleged presence of Hazardous Materials on any property of the
Borrower or any of its Subsidiaries or any Environmental Action
relating in any way to the Borrower or any of its Subsidiaries,
or in the case of each of clauses (i) and (ii) above, any action
taken or omitted by any such Person under or in connection with
any of the foregoing, including with respect to any
investigation, litigation or proceeding (including any Insolvency
Proceeding or appellate proceeding) related to or arising out of
this Agreement or the Advances or Letters of Credit or the use of
the proceeds thereof, whether or not any Indemnified Party is a
party thereto and whether or not any such investigation,
litigation or proceeding is brought by any creditor of any Loan
Party, an Indemnified Party or any other Person, (all the
foregoing in clauses (i) and (ii) above, collectively, being the
"Indemnified Liabilities"); provided, that the Borrower shall
have no obligation hereunder to any Indemnified Party with
respect to Indemnified Liabilities resulting solely from the
gross negligence or willful misconduct of such Indemnified Party
as found in a final, non-appealable judgment by a court of
competent jurisdiction. The Borrower also agrees not to assert
any claim against the Administrative Agent, any Lender Party, any
of their Affiliates, or any of their respective directors,
officers, employees, attorneys and agents, on any theory of
liability, for special indirect, consequential or punitive
damages arising out of or otherwise relating to the Notes, if
any, this Agreement, any of the transactions contemplated herein
or the actual or proposed use of the proceeds of the Advances.
(d) If any payment of principal of, or Conversion of, any
Eurodollar Rate Advance is made by the Borrower to or for the
account of a Lender Party other than on the last day of the
Interest Period for such Advance, as a result of a payment or
Conversion pursuant to Section 2.08(d) or (e), 2.10 or 2.12,
acceleration of the Advances or maturity of the Notes, if any,
pursuant to Section 6.01 or for any other reason, or by an
Eligible Assignee to a Lender Party other than on the last day of
the Interest Period for such Advance upon an assignment of rights
and obligations under this Agreement pursuant to Section 8.07 as
a result of a demand by the Borrower pursuant to Section 8.07(a),
the Borrower shall, upon demand by such Lender Party (with a copy
of such demand to the Administrative Agent), pay to the
Administrative Agent for the account of such Lender Party any
amounts required to compensate such Lender Party for any
additional losses, costs or expenses that it may reasonably incur
as a result of such payment or Conversion, including, without
limitation, any loss (including loss of anticipated profits),
cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by any Lender
Party to fund or maintain such Advance.
(e) Without prejudice to the survival of any other
agreement of the Borrower hereunder, the agreements and
obligations of the Borrower contained in Sections 2.11, 2.14,
2.17, 2.19 and 8.04 shall survive the payment in full of
principal, interest and all other amounts payable hereunder and
under the Notes, if any.
SECTION 8.05. Right of Set-off. Upon (i) the
occurrence and during the continuance of any Event of Default and
(ii) the making of the request or the granting of the consent
specified by Section 6.01 to authorize the Administrative Agent
to declare the Advances and the Notes, if any, due and payable
pursuant to the provisions of Section 6.01, each Lender Party and
each of its Affiliates is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other
indebtedness at any time owing by such Lender Party or such
Affiliate to or for the credit or the account of the Borrower
against any and all of the obligations of the Borrower now or
hereafter existing under this Agreement and the Note, if any,
held by such Lender Party, whether or not such Lender Party shall
have made any demand under this Agreement or such Note, if any,
and although such obligations may be unmatured. Each Lender
Party agrees promptly to notify the Borrower after any such
set-off and application, provided that the failure to give such
notice shall not affect the validity of such set-off and
application. The rights of each Lender Party and its Affiliates
under this Section are in addition to other rights and remedies
(including, without limitation, other rights of set-off) that
such Lender Party and its Affiliates may have.
SECTION 8.06. Binding Effect; Entire Agreement. This
Agreement shall become effective (other than Section 2.01, which
shall only become effective upon satisfaction of the conditions
precedent set forth in Section 3.01) when it shall have been
executed by the Borrower and the Administrative Agent and when
the Administrative Agent shall have been notified by each Initial
Lender and the Issuing Bank that such Initial Lender or the
Issuing Bank, as the case may be, has executed it and thereafter
shall be binding upon and inure to the benefit of the Borrower,
the Administrative Agent and each Lender Party and their
respective successors and assigns, except that the Borrower shall
not have the right to assign its rights hereunder or any interest
herein without the prior written consent of the Lender Parties.
This Agreement, together with the other Loan Documents,
constitutes the entire agreement between the parties with respect
to the subject matter hereof and supersedes all previous
proposals, negotiations, representations, commitments and other
communications between or among the parties, both oral and
written, with respect thereto.
SECTION 8.07. Assignments and Participations. (a)
Each Lender may and, if demanded by the Borrower pursuant to
Section 2.17, will assign to one or more Persons all or a portion
of its rights and obligations under this Agreement (including,
without limitation, all or a portion of its Commitment, the
Advances owing to it and the Note or Notes, if any, held by it);
provided, however, that (i) each such assignment shall be of a
constant, and not a varying, percentage of all rights and
obligations under this Agreement, and each such assignment shall
be of the same ratable amount of the Tranche A Revolving Credit
Advances, Tranche B Revolving Credit Advances, Tranche A
Revolving Credit Commitment and Tranche B Revolving Credit
Commitment of the assigning Lender to the same assignee,
(ii) except in the case of an assignment to a Person that,
immediately prior to such assignment, was a Lender or an
assignment of all of a Lender's rights and obligations under this
Agreement, the amount of the Commitment of the assigning Lender
being assigned pursuant to each such assignment (determined as of
the date of the Assignment and Acceptance with respect to such
assignment) shall in no event be less than $10,000,000 or an
integral multiple of $1,000,000 in excess thereof, (iii) each
such assignment shall be to an Eligible Assignee, and (iv) the
parties to each such assignment shall execute and deliver to the
Borrower for its approval (unless an Event of Default shall have
occurred and be continuing), such approval not to be unreasonably
withheld or delayed, and to the Administrative Agent for its
acceptance and recording in the Register, an Assignment and
Acceptance, together with any Note, if any, subject to such
assignment and a processing and recordation fee of $3,000.
(b) Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in each
Assignment and Acceptance, (x) the assignee thereunder shall be a
party hereto and, to the extent that rights and obligations
hereunder have been assigned to it pursuant to such Assignment
and Acceptance, have the rights and obligations of a Lender Party
hereunder and (y) the Lender Party assignor thereunder shall, to
the extent that rights and obligations hereunder have been
assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under
this Agreement (and, in the case of an Assignment and Acceptance
covering all or the remaining portion of an assigning Lender
Party's rights and obligations under this Agreement, such Lender
Party shall cease to be a party hereto).
(c) By executing and delivering an Assignment and
Acceptance, the Lender Party assignor thereunder and the assignee
thereunder confirm to and agree with each other and the other
parties hereto as follows: (i) other than as provided in such
Assignment and Acceptance, such assigning Lender Party makes no
representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in
or in connection with any Loan Document or the execution,
legality, validity, enforceability, genuineness, sufficiency or
value of any Loan Document or any other instrument or document
furnished pursuant hereto; (ii) such assigning Lender Party makes
no representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrower or the
performance or observance by the Borrower of any of its
obligations under any Loan Document or any other instrument or
document furnished pursuant hereto; (iii) such assignee confirms
that it has received a copy of this Agreement, together with
copies of the financial statements referred to in Section 4.01
and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter
into such Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon the Administrative Agent,
such assigning Lender Party or any other Lender Party and based
on such documents and information as it shall deem appropriate at
the time, continue to make its own credit decisions in taking or
not taking action under this Agreement; (v) such assignee
confirms that it is an Eligible Assignee; (vi) such assignee
appoints and authorizes the Administrative Agent to take such
action as agent on its behalf and to exercise such powers and
discretion under this Agreement as are delegated to the
Administrative Agent by the terms hereof, together with such
powers and discretion as are reasonably incidental thereto; and
(vii) such assignee agrees that it will perform in accordance
with their terms all of the obligations that by the terms of this
Agreement are required to be performed by it as a Lender or the
Issuing Bank, as the case may be.
(d) The Administrative Agent shall maintain at its address
referred to in Section 8.02 a copy of each Assignment and
Acceptance delivered to and accepted by it and a register for the
recordation of the names and addresses of the Lender Parties and
the Commitment of, and principal amount of the Advances owing to,
each Lender Party from time to time (the "Register"). The
entries in the Register shall be conclusive and binding for all
purposes, absent manifest error, and the Borrower, the
Administrative Agent and the Lender Parties may treat each Person
whose name is recorded in the Register as a Lender Party
hereunder for all purposes of this Agreement. The Register shall
be available for inspection by the Borrower or any Lender Party
at any reasonable time and from time to time upon reasonable
prior notice.
(e) Upon its receipt of an Assignment and Acceptance
executed by an assigning Lender Party and an assignee
representing that it is an Eligible Assignee, (and subject to the
Borrower's approval, such approval not to be unreasonably
withheld) together with any Note or Notes, if any, subject to
such assignment, the Administrative Agent shall, if such
Assignment and Acceptance has been completed and is in
substantially the form of Exhibit F hereto, (i) accept such
Assignment and Acceptance, (ii) record the information contained
therein in the Register and (iii) give prompt notice thereof to
the Borrower. In the case of any assignment by a Lender, within
five Business Days after its receipt of such notice, the
Borrower, at its own expense, shall execute and deliver to the
Administrative Agent in exchange for the surrendered Note, if
any, a new Note, if any, to the order of such Eligible Assignee
in an amount equal to the Commitment assumed by it pursuant to
such Assignment and Acceptance and, if the assigning Lender has
retained a Commitment hereunder, a new Note to the order of the
assigning Lender in an amount equal to the Commitment retained by
it hereunder. Such new Note or Notes, if any, shall be in an
aggregate principal amount equal to the aggregate principal
amount of such surrendered Note or Notes, if any, shall be dated
the effective date of such Assignment and Acceptance and shall
otherwise be in substantially the form of Exhibit A hereto.
(f) Each Lender Party may sell participations to one or
more banks or other entities that qualify as an Eligible Assignee
(other than the Borrower or any of its Affiliates) in or to all
or a portion of its rights and obligations under this Agreement
(including, without limitation, all or a portion of its
Commitment, the Advances owing to it and the Note, if any, or
Notes, if any, held by it); provided, however, that (i) such
Lender Party's obligations under this Agreement (including,
without limitation, its Commitment to the Borrower hereunder)
shall remain unchanged, (ii) such Lender Party shall remain
solely responsible to the other parties hereto for the
performance of such obligations, (iii) such Lender Party shall
remain the holder of any such Note, if any, for all purposes of
this Agreement, (iv) the Borrower, the Administrative Agent and
the other Lender Parties shall continue to deal solely and
directly with such Lender Party in connection with such Lender
Party's rights and obligations under this Agreement, (v) no
participant under any such participation shall have any right to
approve any amendment or waiver of any provision of this
Agreement or any Note, if any, or any consent to any departure by
the Borrower therefrom, except to the extent that such amendment,
waiver or consent would reduce the principal of, or interest on,
the Advances and the Notes, if any, or any fees or other amounts
payable hereunder, in each case to the extent subject to such
participation, or postpone any date fixed for any payment of
principal of, or interest on, the Advances and the Notes, if any,
or any fees or other amounts payable hereunder, in each case to
the extent subject to such participation and (vi) such Lender
Party shall give prompt notice to the Borrower of such
participations.
(g) Any Lender Party may, in connection with any assignment
or participation or proposed assignment or participation pursuant
to this Section 8.07, disclose to the assignee or participant or
proposed assignee or participant, any information relating to the
Borrower furnished to such Lender Party by or on behalf of the
Borrower; provided that, prior to any such disclosure, the
assignee or participant or proposed assignee or participant shall
agree to preserve the confidentiality of any Confidential
Information relating to the Borrower received by it from such
Lender Party.
(h) Notwithstanding any other provision set forth in this
Agreement, any Lender Party may at any time create a security
interest in all or any portion of its rights under this Agreement
(including, without limitation, the Advances owing to it and the
Note, if any, held by it) in favor of any Federal Reserve Bank in
accordance with Regulation A of the Board of Governors of the
Federal Reserve System.
SECTION 8.08. Confidentiality. Neither the
Administrative Agent nor any Lender Party shall disclose any
Confidential Information to any other Person without the consent
of the Borrower, other than (a) to the Administrative Agent's or
such Lender Party's Affiliates and their officers, directors,
employees, agents, auditors, attorneys and advisors and, as
contemplated by Section 8.07(f), to actual or prospective
assignees and participants, and then only on a confidential
basis, (b) as required by any law, rule or regulation or judicial
process and (c) as requested or required by any state, federal or
foreign authority or examiner regulating banks or banking. In
the event any Lender Party is contemplating assigning or selling
a participation in all or a portion of its rights and obligations
under this Agreement to one or more Persons, prior to disclosing
any Confidential Information to such Person, such Person shall be
required to execute a confidentiality agreement in form and
substance satisfactory to the Borrower and such Person.
SECTION 8.09. No Liability of the Issuing Bank. The
Borrower assumes all risks of the acts or omissions of any
beneficiary or transferee of any Letter of Credit with respect to
its use of such Letter of Credit. Without limiting the
generality of Section 2.06(c)(ii) hereof, neither the Issuing
Bank nor any of its officers or directors shall be liable or
responsible for any act or circumstance set forth in clauses (A)
through (G) of such Section; except that the Borrower shall have
a claim against the Issuing Bank, and the Issuing Bank shall be
liable to the Borrower, to the extent of any direct, but not
consequential, damages suffered by the Borrower that the Borrower
proves were caused by (i) the Issuing Bank's willful misconduct
or gross negligence in determining whether documents presented
under any Letter of Credit comply with the terms of the Letter of
Credit or (ii) the Issuing Bank's willful failure to make lawful
payment under a Letter of Credit after the presentation to it of
a draft and certificates strictly complying with the terms and
conditions of the Letter of Credit. In furtherance and not in
limitation of the foregoing, the Issuing Bank may accept
documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any
notice or information to the contrary.
SECTION 8.10. Governing Law. This Agreement and the
Notes, if any, shall be governed by, and construed in accordance
with, the laws of the State of California.
SECTION 8.11. Execution in Counterparts. This
Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a
manually executed counterpart of this Agreement.
SECTION 8.12. Jurisdiction, Etc. (a) Each of the
parties hereto hereby irrevocably and unconditionally submits,
for itself and its property, to the nonexclusive jurisdictions of
any California State court or federal court of the United States
of America sitting in San Francisco, and any appellate court from
any thereof, in any action or proceeding arising out of or
relating to this Agreement or the Notes, if any, or for
recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that
all claims in respect of any such action or proceeding may be
heard and determined in any such California State court or, to
the extent permitted by law, in such federal court. Each of the
parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any
right that any party may otherwise have to bring any action or
proceeding relating to this Agreement or the Notes in the courts
of any jurisdiction.
(b) Each of the parties hereto irrevocably and
unconditionally waives, to the fullest extent it may legally and
effectively do so, any objection that it may now or hereafter
have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the Notes in any
California State or federal court sitting in San Francisco. Each
of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to
the maintenance of such action or proceeding in any such court.
SECTION 8.13. WAIVER OF JURY TRIAL. EACH OF THE
BORROWER, THE ADMINISTRATIVE AGENT AND THE LENDER PARTIES HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
NOTES, IF ANY, OR THE ACTIONS OF THE ADMINISTRATIVE AGENT OR ANY
LENDER PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR
ENFORCEMENT THEREOF.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto
duly authorized, as of the date first above written.
THE BORROWER
CONSOLIDATED FREIGHTWAYS
CORPORATION
OF DELAWARE
By
Name:
Title:
THE ADMINISTRATIVE AGENT
ABN AMRO BANK N.V.
By
Name:
Title:
By
Name:
Title:
THE LENDER PARTIES
ABN AMRO BANK N.V.,
as the Issuing Bank, a Tranche A
Lender
and a Tranche B Lender
By
Name:
Title:
By
Name:
Title:
BANK ONE, NA (Main Office Chicago),
as a Tranche A Lender and a Tranche
B Lender
By
Name:
Title:
UNION BANK OF CALIFORNIA, N.A.,
as a Tranche A Lender and a Tranche
B Lender
By
Name:
Title:
CREDIT AGRICOLE INDOSUEZ,
as a Tranche A Lender and a Tranche
B Lender
By
Name:
Title:
FIRST UNION NATIONAL BANK,
as a Tranche A Lender and a Tranche
B Lender
By
Name:
Title:
U.S. BANK NATIONAL ASSOCIATION,
as a Tranche A Lender and a Tranche
B Lender
By
Name:
Title:
BANKBOSTON, N.A.,
as a Tranche A Lender and a Tranche
B Lender
By
Name:
Title:
KEYBANK NATIONAL ASSOCIATION,
as a Tranche A Lender and a Tranche
B Lender
By
Name:
Title:
PNC BANK, NATIONAL ASSOCIATION,
as a Tranche A Lender and a Tranche
B Lender
By
Name:
Title:
Exhibit 10.17
PARTICIPATION AGREEMENT
Dated as of October 12, 1999
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 -2-
Section 2.1 Fundings; Payment of Purchase Price -2-
Section 2.2 Application of Funds; Sale and Lease of
Vehicles -2-
Section 2.3 Time and Place of Funding -3-
Section 2.4 Assignment Agreement -3-
ARTICLE III Conditions to Effective Date -3-
Section 3.1 Effective Date Notice -3-
Section 3.2 Appraisal -3-
Section 3.3 Participation Agreement -4-
Section 3.4 Assignment Agreement -4-
Section 3.5 Lease -4-
Section 3.6 Financial Reports -5-
Section 3.7 Financing Statements -5-
Section 3.8 Certificates of Title -5-
Section 3.9 Transaction Costs; Fees -5-
Section 3.10 Opinions of Counsel -5-
Section 3.11 Corporate Status and Proceedings -5-
Section 3.12 Consents and Approvals -6-
Section 3.13 Payment of Impositions -6-
Section 3.14 Search Reports -6-
Section 3.15 Insurance -6-
Section 3.16 Proceedings Satisfactory, Etc. -6-
Section 3.17 Absence of Material Adverse Effect. -7-
Section 3.18 Representations and Warranties True;
Absence of Defaults -7-
ARTICLE IV General Provisions -7-
Section 4.1 Nature of Transaction -7-
Section 4.2 Replacements -7-
ARTICLE V Representations and Warranties -8-
Section 5.1 Representations and Warranties of Lessee -8-
Section 5.2 Representations and Warranties of Lessors -13-
Section 5.3 Representations and Warranties of Agent -14-
ARTICLE VI Covenants -15-
Section 6.1 Covenants of Lessee -15-
Section 6.2 Covenants of Agent and Lessors -21-
ARTICLE VII General Indemnities -22-
Section 7.1 Indemnity -22-
Section 7.2 Excessive Use Indemnity -23-
Section 7.3 Increased Capital Costs -23-
Section 7.4 Eurodollar Rate Unlawful -24-
Section 7.5 Funding Losses -24-
Section 7.6 Actions of Affected Lessors -25-
ARTICLE VIII General Tax Indemnity -25-
Section 8.1 General Tax Indemnity -25-
Section 8.2 Contest -26-
Section 8.3 Gross Up -27-
Section 8.4 Tax Returns -27-
Section 8.5 Withholding Tax Exemption -28-
ARTICLE IX Agent -29-
Section 9.1 Appointment and Authorization -29-
Section 9.2 Delegation of Duties -30-
Section 9.3 Liability of the Agent -30-
Section 9.4 Reliance by the Agent -30-
Section 9.5 Notice of Default -31-
Section 9.6 Lessor Credit Decision -31-
Section 9.7 Indemnification of the Agent -32-
Section 9.8 Agent in Individual Capacity -32-
Section 9.9 Successor Agent -32-
ARTICLE X Amendments to Operative Agreements -33-
Section 10.1 Amendments to Operative Agreements With
Consent of Lessors -33-
Section 10.2 Amendments to Operative Agreements Affecting
Agent -34-
ARTICLE XI Miscellaneous -34-
Section 11.1 Survival of Covenants -34-
Section 11.2 Applicable Law -34-
Section 11.3 Distribution and Application of Rents and
Other Payments -34-
Section 11.4 Notices -35-
Section 11.5 Transaction Costs; Other Expenses -36-
Section 11.6 Counterparts -36-
Section 11.7 Severability -37-
Section 11.8 Successors and Assigns; Transfers -37-
Section 11.9 JURY TRIAL -38-
Section 11.10 Captions; Table of Contents -39-
Section 11.11 FINAL AGREEMENT -39-
Section 11.12 No Third-Party Beneficiaries -39-
Section 11.13 Further Assurances -39-
Section 11.14 Reproduction of Documents -39-
Section 11.15 Consideration for Consents to Waivers and
Amendments -40-
Section 11.16 Submission to Jurisdiction -40-
PARTICIPATION AGREEMENT, dated as of October 12, 1999
(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, the Agent, on behalf of certain financial
institutions, acquired an interest in the Vehicles described on
Schedule I to the Lease pursuant to a Participation Agreement,
dated as of December 22, 1995, as amended, among the Lessee, the
Agent and such financial institutions as Lessors (the Existing
Lessors); and
WHEREAS, on the Effective Date, pursuant to an
assignment agreement (the Assignment Agreement), the Existing
Lessors will assign to the Agent, for the benefit of the Lessors,
and the Agent, on behalf of the Lessors, will purchase and
receive from the Existing Lessors, an interest in the Vehicles
described on Schedule I to the Lease; and
WHEREAS, on the Effective Date, the Agent, on behalf of
the Lessors, will lease such Vehicles to the Lessee and the
Lessee will lease such Vehicles from the Agent, for the benefit
of the Lessors, pursuant to the terms of the Lease substantially
in the form of Exhibit A hereto;
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 2.1 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 the
Effective Date Notice, each Lessor shall transfer to Agent on the
Effective Date an amount equal to the product of the aggregate
Purchase Price of the Vehicles as provided in the Assignment
Agreement, multiplied by such Lessor's Commitment Percentage
(such transfer being referred to herein as the 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 12:00 noon, New York time on the
Effective Date:
Bank: ABN AMRO Bank N.V.
Section 2.2 Application of Funds; Sale and Lease of
Vehicles. On the Effective 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 the
Effective Date pursuant to the Assignment Agreement, (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 ratable portion of the
Purchase Price for the Vehicles being so sold and purchased in
immediately available federal funds remitted by wire transfer to
the respective account of each respective Existing Lessor as
provided in the Assignment Agreement, and (iii) Agent, on behalf
of the Lessors, shall lease to Lessee the Vehicles so purchased
by Agent and Lessee shall lease from Agent, on behalf of the
Lessors, such Vehicles pursuant to the Lease. Each Lessor shall
hold an undivided interest in the Vehicles equal to such Lessor's
Commitment Percentage.
Section 2.3 Time and Place of Funding. The closing of
the purchase by the Agent, on behalf of the Lessors, of the
Vehicles and the lease by the Agent, on behalf of the Lessors, of
the Vehicles to the Lessee shall take place on the Effective
Date, commencing at 10:00 a.m. San Francisco time, at Shearman &
Sterling, or such other time and place as the parties may agree.
Section 2.4 Assignment Agreement. Each Lessor has
reviewed the Assignment Agreement and authorizes the Agent to
enter into the Assignment Agreement on behalf of such Lessor and,
upon receipt of the Purchase Price from the Lessors, to pay the
Existing Lessors the aggregate Purchase Price for the Vehicles as
provided therein.
ARTICLE III
.
Conditions to Effective Date
The obligation of each Lessor and Agent to perform its
obligations on the Effective Date, and of each Lessor to make its
portion of the 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 the Effective 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 3.1 Effective Date Notice. Lessee shall have
delivered to Agent and each Lessor, not later than 10:00 a.m. San
Francisco time not earlier than the tenth (10th) and not later
than the third (3rd) Business Day prior to the proposed Effective
Date, an irrevocable notice (an Effective Date Notice)
substantially in the form of Exhibit B, specifying (i) the
proposed Effective Date and (ii) a representation and warranty
that as of the Effective Date and at all times thereafter, each
Vehicle subject to the Lease will either be (a) used in
interstate commerce, titled in a State with respect to which
Agent and Lessors have a perfected security interest in such
Vehicle 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 a
perfected security interest in such Vehicle.
Section 3.2 Appraisal. At least one (1) Business Day
prior to the Effective 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 Effective Date $32,500,000
Vehicles at end of Base Term $24,262,300
Vehicles at end of First Renewal Term $16,014,100
Vehicles at end of Second Renewal Term $11,572,800
(b) that the remaining economic useful life of each
Vehicle is not less than four (4) years;
(c) that the values set forth in clause (a) above
assume an increase for inflation of 2% per annum, and that such
inflation assumption is reasonable.
Section 3.3 Participation Agreement. On or prior to
the Effective Date, each of the Participants shall have received
a fully executed counterpart of this Participation Agreement.
Section 3.4 Assignment Agreement. On the Effective
Date, the Assignment Agreement shall have been executed by the
parties thereto and the Purchase Price paid thereunder by each
other Lessor.
Section 3.5 Lease. On or prior to the Effective Date,
each Participant shall have received a fully executed counterpart
of the Lease, which Lease shall set forth:
(a) in Schedule I thereto, a description of the
Vehicles; and
(b) in Schedule II thereto, (i) a schedule of the
installments of Fixed Rent and the Payment Dates therefor during
the Base Term and each Renewal Term, and the Lease Balance as of
the Effective Date and as of each Payment Date during 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 Termination
Percentages, (iv) the Lessee Risk Percentages and (v) the Lessor
Risk Percentages.
An amortization schedule providing for equal monthly installments
of Fixed Rent and Variable Rent over the full three years of the
Lease Term (that is, the Base Term and the two Renewal Terms)
will be prepared using the Interest Rate as determined on the
date of the Effective Date Notice, such that at the end of the
Lease Term the Lease Balance shall be equal to the expected
Appraised Value at such date of the Vehicles subject to the
Lease. The installments of Fixed Rent so determined shall be set
forth in Schedule II to the Lease 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 the Lease 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.
Section 3.6 Financial Reports. At least three (3)
Business Days prior to the Effective Date, Parent 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 3.7 Financing Statements. On or prior to the
Effective 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 financing
statements shall have been filed in (a) the jurisdiction in which
Lessee has its principal office, (b) each jurisdiction in which
any Vehicle being delivered on the Effective Date is to be titled
and (c) the jurisdiction in which Lessee is incorporated.
Section 3.8 Certificates of Title. On or prior to the
Effective Date, Agent and each Lessor shall have received a duly
executed certificate from a Responsible Officer of 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 subject to the Lease and, to the
extent not previously effected, 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 3.9 Transaction Costs; Fees. On or prior to
the Effective 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 in Schedule I.
Section 3.10 Opinions of Counsel. On or prior to the
Effective Date, each Lessor and Agent shall have received the
opinions of (a) Brobeck, Phleger & Harrison LLP, as counsel to
Lessee substantially to the effect of the matters set forth in
Exhibit C-1, (b) general counsel to Consolidated Freightways
Corporation, the parent corporation of Lessee, substantially to
the effect of the matters set forth in Exhibit C-2 and (c) Stoel
Rives LLP, as counsel to Lessee substantially to the effect of
the matters set forth in Exhibit C-3. By their execution hereof,
Lessee expressly instructs each such general counsel to execute
and deliver such opinions to Agent and the Lessors.
Section 3.11 Corporate Status and Proceedings. On or
prior to the Effective 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
Effective Date; and
(b) with respect to Lessee, a certificate from a
Responsible Officer substantially in the form of Exhibit D, dated
the Effective Date, with respect to the Lessees governing
documents, resolutions and incumbent officers, representations
and warranties and absence of defaults.
Section 3.12 Consents and Approvals. On or prior to
the Effective 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 Lessee and shall be in full force and effect.
Section 3.13 Payment of Impositions. All Impositions
payable on or prior to the Effective 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 3.14 Search Reports. Prior to the Effective
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 Effective
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 3.15 Insurance. On or prior to the Effective
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 3.16 Proceedings Satisfactory, Etc. All
proceedings taken in connection with the Effective 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.
Section 3.17 Absence of Material Adverse Effect.
Except as disclosed in writing to Agent, since June 30, 1999, no
Material Adverse Effect shall have occurred and be continuing.
Section 3.18 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 the Effective Date, and no Default
shall have occurred and be continuing on and as of the Effective
Date.
ARTICLE IV
General Provisions
Section 4.1 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 the Lessees financial reporting, (b) the
transaction 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 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, no Person shall be
named on the Certificate of Title of any Vehicle as having a
security interest in such Vehicle.
Section 4.2 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 5.1 Representations and Warranties of Lessee.
As of the Effective 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 or has beneficial title to each 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
Illinois, New Jersey, Minnesota, Oregon, Texas and California
(the Original States), and the recordation 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 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
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
necessary 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
applicability 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
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
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 bankruptcy, 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. Except as disclosed
on Schedule II, 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 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 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 175 Linfield Drive,
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 Lessee will not involve
any prohibited transaction within the meaning of ERISA or Section
4975 of the Code.
(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 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 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 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 as of the time furnished.
(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 the Effective
Date, except such taxes, fees or impositions that have been paid
in full on or prior to the Effective 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 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
the Effective 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 Ainventory
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 will be, when Lessee takes
possession thereof on the Effective Date and at all times
thereafter or when thereafter subject to the Lease, either
(i) used in interstate commerce, titled in a State with respect
to which Agent and the Lessors have a perfected security interest
in such Vehicle 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 a
perfected security interest in such Vehicle.
(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, an affiliated person of an investment
company, or a promoter or principal underwriter for an investment
company, as such terms are defined the Investment Company Act of
1940, as amended. The consummation of the transactions
contemplated hereby will not violate any provision of such Act or
any rule, regulation or order of the Securities and Exchange
Commission thereunder.
(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
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 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 Securities
Exchange Act of 1934, as amended, or any regulations issued
pursuant thereto, including, without limitation, Regulations T, U
and X of the Board of Governors of the Federal Reserve System.
(w) Absence of Defaults. No Default has occurred and
is continuing, and since June 30, 1999 there has occurred no
Material Adverse Effect.
(x) Absence of Casualty. No Casualty has occurred with
respect to the Vehicles.
(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 Parent to Agent pursuant to Section 3.6 will fairly
present the Consolidated financial condition of the Parent and
its Subsidiaries as at such date and the Consolidated results of
the operations of the Parent and its Subsidiaries for the period
ended on such date, all in accordance with generally accepted
accounting principles consistently applied. Since June 30, 1999,
there has been no Material Adverse Change.
(aa) Private Offering. Neither Lessee, nor anyone
acting on behalf of it, has taken or will take any action which
will subject any interest being acquired by the Lessors under the
Operative Agreements to the requirements of Section 5 of 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.
(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
connection 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 brokers, finders, investment bankers, arrangers or
agents 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)).
(cc) Year 2000 Compliance. Lessee has (i) initiated a
review and assessment of all areas within its and each of its
Subsidiaries business and operations (including those affected by
suppliers, vendors and customers) that could reasonably be
expected to be affected in any material respect by the AYear 2000
Problem (that is, the risk that computer applications used by the
Company or any of its Subsidiaries (or suppliers, vendors and
customers) may be unable to recognize and perform properly date-
sensitive functions involving certain dates prior to and any date
after December 31, 1999), (ii) developed a plan and time line for
addressing the Year 2000 Problem on a timely basis, and (iii) to
date, implemented that plan substantially in accordance with that
timetable. Based on the foregoing, Lessee reasonably believes
that all computer applications (including those of its suppliers,
vendors and customers) that are material to its or any of its
Subsidiaries business and operations are reasonably expected on a
timely basis to be able to perform properly date-sensitive
functions for all dates before and after January 1, 2000 (that
is, Year 2000 Compliant), except to the extent that any failures
to do so singly or in the aggregate could not reasonably be
expected to have a Material Adverse Effect.
Section 5.2 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 5.3 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 5.3.
(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
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, 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
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 Agents 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 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 6.1 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. Lessee shall maintain
its corporate existence and its qualification and good standing
in all jurisdictions in which the failure to maintain such
existence and qualification or good standing could reasonably be
expected to have a Material Adverse Effect.
(b) Compliance With Laws. Lessee shall comply , and
cause each of its Subsidiaries to comply, in all material
respects, with all applicable laws, rules, regulations and
orders, such compliance to include, without limitation, paying
before the same become delinquent all taxes, assessments and
governmental charges imposed upon it or upon its property except
to the extent contested in good faith. Without limiting the
foregoing, Lessee 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 or Sales. Lessee shall
not consummate any transaction of merger, reorganization, or
consolidation, or transfer, sell, assign, lease, or otherwise
dispose of all or any part of its property, or wind up, liquidate
or dissolve, or agree to do any of the foregoing, except for (i)
any merger of the Parent or any Subsidiary of the Lessee with and
into the Lessee; (ii) sales or other dispositions of personal
property in the ordinary course of business; (iii) sales of Real
Estate for fair market value in exchange for similar property
complying with Section 1031 of the Code; (iii) sales of accounts
receivable and any related property by Lessee in a receivables
securitization arrangement to a financial institution or a
special purpose vehicle of Lessee, provided, however, that the
aggregate net unrecovered investment in such accounts receivable
and proceeds thereof held by the purchasers thereof under such
accounts receivables securitization arrangement shall not exceed
at any time $75,000,000; and (v) sales or other transfers of
assets by Lessee in any fiscal year with an aggregate book value
not in excess of five percent (5%) of the Consolidated Total
Assets of Parent as of the end of the previous fiscal year.
(d) Liens. Lessee shall not incur or suffer to exist
any Lien on any of the Collateral other than Permitted Liens.
Without 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
the office where it maintains its records concerning the
Collateral, or change of its name, and shall take all actions
contemplated by Section 6.1(f) in connection with any such
relocation.
(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
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) All Certificates of Title relating to
Vehicles shall indicate the address of Agent, P.O. Box
6046, Portland, Oregon 97228, as the address of the
lienholder thereon, for the benefit of the Lessors.
(iii) Lessee shall, no later than the
Effective Date, have delivered to Agent and each Lessor
a certificate of a Responsible Officer of Lessee
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
Certificates of Title so held by Lessee shall be
available for inspection by Agent during normal
business hours, and Lessee shall deliver possession of
such Certificates of Title to Agent immediately upon
Agents 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 Agents 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
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, 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. Following receipt
by Lessee of any Certificate of Title as contemplated 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 Lessees satisfaction of
the provisions of this Section 6.1(f) with respect to the
perfection of Agents 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. 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) Periodic Reporting. Lessee shall deliver to Agent
(with copies for each Lessor):
(i) as soon as available and in any event within
45 days after the end of each of the first three
quarters of each fiscal year of the Parent, a
Consolidated balance sheet of the Parent and its
Subsidiaries as of the end of such quarter and
Consolidated statements of income and cash flows of the
Parent and its Subsidiaries for the period commencing
at the end of the previous fiscal year of the Parent
and ending with the end of such quarter, duly certified
(subject to year-end audit adjustments) by a
Responsible Officer of the Parent as having been
prepared in accordance with generally accepted
accounting principles and a certificate of the chief
financial officer of the Parent (in the form of Exhibit
F hereto) as to compliance with the terms of this
Agreement, together with confirmation of the Pricing
Index, and setting forth in reasonable detail the
calculations necessary to demonstrate compliance with
Section 6.1(h), provided that, in the event of any
change in GAAP used in the preparation of such
financial statements, the Lessee shall also provide, if
necessary for the determination of compliance with
Section 6.1(h), a statement of reconciliation
conforming such financial statements to GAAP;
(ii) as soon as available and in any event within
90 days after the end of each fiscal year of the
Parent, a copy of the audited annual report for such
year for the Parent and its Consolidated Subsidiaries,
and a Consolidated balance sheet of the Parent and its
Subsidiaries as of the end of such fiscal year and
Consolidated statements of income and cash flows of the
Parent and its Subsidiaries for such fiscal year, and,
in the case of the audited annual report, accompanied
by an unqualified opinion by Arthur Andersen LLP or
other independent public accountants acceptable to the
Required Lessors, together with a certificate of a
Responsible Officer of the Parent (in the form of
Exhibit F hereto) as to compliance with the terms of
this Agreement, together with confirmation of the
Pricing Index, and setting forth in reasonable detail
the calculations necessary to demonstrate compliance
with Section 6.1(h) provided that, in the event of any
change in GAAP used in the preparation of such
financial statements, the Lessee shall also provide, if
necessary for the determination of compliance with
Section 6.1(h), a statement of reconciliation
conforming such financial statements to GAAP; and
(iii) not later than the end of the first
month of each fiscal year of the Parent, annual
forecasts (to include forecasted consolidated balance
sheets, statements of income and expenses and
statements of cash flow) for the Parent, Lessee and
their Subsidiaries as at the end of and for each
quarter of such fiscal year;
(iv) as soon as possible and in any event within
five days after a Responsible Officer obtains knowledge
of the occurrence of each Default continuing on the
date of such statement, a statement of the chief
financial officer of Lessee setting forth details of
such Default and the action which Lessee has taken and
proposes to take with respect thereto;
(v) promptly after the filing thereof, copies of
all material reports and registration statements that
the Parent or any Subsidiary files with the Securities
and Exchange Commission;
(vi) promptly after the sending or filing thereof,
copies of all reports which the Parent sends to any of
its securityholders, and copies of all reports and
registration statements which the Parent or any
Subsidiary files with the Securities and Exchange
Commission or any national securities exchange;
(vii) promptly after the filing thereof, a
copy of any notice of reportable event, within the
meaning of Section 4043 of ERISA, with respect to any
Plan of the Lessee or any Subsidiary unless the 30-day
notice requirement with respect to such event has been
waived by the PBGC;
(viii) promptly after becoming aware of any
Material Adverse Change, a description thereof;
(ix) promptly after receiving notification thereof
from the Index Reference, copies of all notices,
reports or other correspondence regarding any change to
the Pricing Index, including any change in such Pricing
Index or the outlook in respect of such Pricing Index;
and
(x) such other information respecting the
condition or operations, financial or otherwise, of
Lessee or any of its Subsidiaries as any Lessor through
the Agent may from time to time reasonably request.
(h) Financial Tests. Lessee shall:
(i) Leverage Ratio. Maintain, or cause to be
maintained, at all times a ratio of not more than 2.50 to
1.00, determined as of the end of each fiscal quarter, of
Consolidated Funded Indebtedness as of the end of such
fiscal quarter to Consolidated EBITDAR for the four fiscal
quarters ending on such date.
(ii) Tangible Net Worth. Maintain, or cause to be
maintained, at all times a Consolidated Tangible Net Worth
of the Parent, determined as of the end of each fiscal
quarter, of not less than the sum of (i) $205,000,000, plus
(ii) 50% of Consolidated Net Income during the period
commencing June 30, 1999 and ending at the end of such
fiscal quarter (without taking into account any losses) plus
(iii) 100% of the Net Cash Proceeds of all Equity Interests
issued by the Parent during the period commencing June 30,
1999 and ending at the end of such fiscal quarter minus (iv)
an amount, calculated on an after-tax basis, in respect of
charges not in excess of $15,000,000 related to the Tax
Sharing Agreement.
(iii) Fixed Charge Coverage Ratio. Maintain,
or cause to be maintained, at all times a ratio, determined
as at the end of each fiscal quarter for the immediately
preceding four fiscal quarters, of (a) Consolidated EBITDAR
for such fiscal quarters to (b) Consolidated Interest and
Rental Expense for such fiscal quarters of not less than
2.00 to 1.00.
(i) Acceleration of Material Debt. Lessee agrees that
if a Default shall occur, or if an event or condition shall occur
that results in the acceleration of the maturity of Debt of
Lessee or of any Affiliate of Lessee, in either case in amounts
exceeding ten million dollars ($10,000,000), Lessee shall
promptly notify Agent thereof and upon Agents request, Lessee
shall immediately deliver to Agent, Certificates of Title for all
of the Vehicles, duly endorsed by Lessee in blank.
(j) ERISA Events. Promptly upon Lessees 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, $25,000,000, 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 unless the 30-day notice requirement
with respect to such event has been waived by the PBGC, (ii) an
Accumulated Funding Deficiency as such term is defined in Section
302 of ERISA, or (iii) a non-exempt 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).
(k) 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.
(l) 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.
(m) Acquisitions. Lessee shall not acquire any
business (whether in the form of an acquisition of stock, assets,
debt, or other indebtedness or obligation or a loan, advance,
capital contribution, or subscription), or permit any of its
Subsidiaries to do any of the foregoing, if for any such
transaction the sum of: (i) cash paid by Lessee or such
Subsidiary in connection with such transaction plus (ii) the
amount of obligations issued or assumed by Lessee or such
Subsidiary in connection with such transaction plus (iii) the
aggregate amount of cash paid by Lessee and its Subsidiaries in
connection with all other such acquisitions that are consummated
in the same Fiscal Year as such issuance or assumption, as the
case may be, plus (iv) the aggregate amount of obligations issued
or assumed by Lessee and its Subsidiaries in connection with all
other such acquisitions that are consummated in such Fiscal Year,
is greater than $50,000,000; provided that any business so
acquired shall be engaged in the transportation business and
related businesses.
(n) Year 2000 Compliance. Lessee will promptly notify
the Agent in the event Lessee discovers or determines that any
computer application (including those of its suppliers, vendors
and customers) that is material to its or any of its Subsidiaries
business and operations will not be Year 2000 Compliant (as
defined in Section 5.1(cc)), except to the extent that any such
failures singly or in the aggregate could not reasonably be
expected to have a Material Adverse Effect.
(o) Restricted Investments. Lessee shall not directly
or indirectly declare or make, or incur any liability to make,
any Investment in any Person, except (i) Investments in the
Parent; (ii) Investments that are otherwise permitted under
Section 6.1(m) hereof or Sections 5.02(d) or (g) of the Credit
Agreement; (iii) loans and advances made in the ordinary course
of business to a Subsidiary of Lessee; (iv) loans and advances
made to customers, vendors or employees of Lessee in the ordinary
course of business and (v) Investments in one or more Designated
Entities; provided that (x) no Event of Default has occurred and
is continuing or would result from such Investment in a
Designated Entity and (y) the aggregate net amount of Investments
by Lessee in Designated Entities does not, and would not as a
result of such Investment, exceed 10% of the Consolidated
Tangible Net Worth of the Parent at the date of determination.
Section 6.2 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 7.1 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 the 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 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 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;
(c) the actual or alleged presence of Hazardous
Materials on any property of the Lessee or any of its
Subsidiaries or any Environmental Action relating in any way to
the Lessee or any of its Subsidiaries;
or in the case of each of clauses (a), (b) and (c) above, any
action taken or omitted by any such Indemnitee under or in
connection with any of the foregoing, including with respect to
any investigation, litigation or proceeding (including any
Insolvency Proceeding or appellate proceeding) related to or
arising out of this Agreement or any other Operative Agreement,
whether or not any Indemnitee is a party thereto and whether or
not any such investigation, litigation or proceeding is brought
by any creditor of the Lessee, an Indemnitee or any other Person,
(all of the foregoing, collectively, being the Indemnified
Liabilities); provided that Lessee 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:
(i) the willful misconduct or gross negligence of such
Indemnitee;
(ii) the incorrectness in any material respect of any
representation or warranty made by such Indemnitee in the
Operative Agreements;
(iii) the creation or existence of a Lessor Lien
attributable to such Indemnitee;
(iv) 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
(v) 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 7.2 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 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 7.3 Increased Capital Costs. (a) If any
Lessor determines that, due to either (i) the introduction of or
any change in the interpretation of any law or regulation (in
each case after the date hereof) or (ii) the compliance by that
Lessor with any guideline or request (in each case after the date
hereof) from any central bank or other Authority (whether or not
having the force of law), there shall be any reduction in 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, then the Lessee shall be liable for, and shall
from time to time, upon demand (with a copy of such demand to be
sent to the Agent), pay to the Agent for the account of such
Lessor, additional amounts as are sufficient to compensate such
Lessor for such increased costs.
(b) If any Lessor determines that (i) the introduction of
any Capital Adequacy Regulation, (ii) any change in any Capital
Adequacy Regulation, (iii) any change in the interpretation or
administration of any Capital Adequacy Regulation by any central
bank or other Authority charged with the interpretation or
administration thereof, or (iv) compliance by the Lessor or any
corporation or other entity controlling the Lessor with any
Capital Adequacy Regulation (in each case after the date hereof),
affects or would affect the amount of capital required or
expected to be maintained by the Lessor or any corporation or
other entity controlling the Lessor and (taking into
consideration such Lessor's or such corporation's or other
entity's policies with respect to capital adequacy and such
Lessor's desired return on capital) determines that the amount of
such capital is increased as a consequence of its obligations
hereunder, then, upon demand of such Lessor to the Lessee through
the Agent, the Lessee shall pay to the Lessor, from time to time
as specified by the Lessor, amounts sufficient to yield the
Lessor the same return as if the amount of such capital had not
been increased.
Section 7.4 Eurodollar 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 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 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 Lessors Funding on
a Eurodollar 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 Lessee 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.
Section 7.5 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 Eurodollar Rate financing) as a result of (i) the
failure of the transaction contemplated by Article 1 of the Lease
to occur on or before the Effective Date specified in the
Effective 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 7.6 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
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 Lessee (which itself is not then an Affected
Lessor) its rights and obligations hereunder. In the event that
the Affected Lessor is unable, or otherwise is unwilling, so to
transfer its rights and obligations, Lessee 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.
ARTICLE VIII
General Tax Indemnity
Section 8.1 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 Lease Term, 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
shareholders 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 8.2 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 administrative 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
proceedings. The Indemnitee shall have the right to participate
in the conduct of any proceedings controlled by Lessee 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 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 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 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 Imposition,
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 8.3 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 Indemnitee of any amount,
including taxes, for which the payment to be received is made).
Section 8.4 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,
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). 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 8.5 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
incorporated 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 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 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
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 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
California income tax.
ARTICLE IX
Agent
Section 9.1 Appointment and Authorization. Each
Lessor hereby irrevocably (subject to Section 9.9) appoints,
designates and authorizes the Agent to take such action on its
behalf under the provisions of this Agreement and each other
Operative Agreement and to exercise such powers and perform such
duties as are expressly delegated to it by the terms of this
Agreement or any other Operative Agreement, together with this
Agreement and each other Operative Agreement and to exercise such
powers and perform such duties as are expressly delegated to it
by the terms of this Agreement or any other Operative Agreement,
together with such powers as are reasonably incidental thereto;
provided, however, that the Agent shall not be required to take
any action that exposes it to personal liability or that is
contrary to this Agreement or applicable law. Notwithstanding
any provision to the contrary contained elsewhere in this
Agreement or in any other Operative Agreement, the Agent shall
not have any duties or responsibilities, except those expressly
set forth herein, nor shall the Agent have or be deemed to have
any fiduciary relationship with any Lessor, and no implied
covenants, functions. responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other
Operative Agreement or otherwise exist against the Agent.
Without limiting the generality of the foregoing sentence, the
use of the term agent in this Agreement with reference to the
Agent is not intended to connote any fiduciary or other implied
(or express) obligations arising under agency doctrine of any
applicable law. Instead, such, term is used merely as a matter
of market custom, and is intended to create or reflect only an
administrative relationship between independent contracting
parties.
Section 9.2 Delegation of Duties. The Agent may
execute any of its duties under this Agreement or any other
Operative Agreement by or through agents, employees or
attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties.
Section 9.3 Liability of the Agent. None of the Agent-
Related Persons shall (i) be liable for any action taken or to be
taken by any of them under or in connection with this Agreement
or any other Operative Agreement or the transactions contemplated
hereby (except for its own gross negligence or willful
misconduct), or (ii) be responsible in any manner to any of the
Lessors for any recital, statement, representation or warranty
made by the Lessee or any Subsidiary or Affiliate of the Lessee,
or any officer thereof, contained in this Agreement or in any
other Operative Agreement, or in any certificate, report,
statement or other document referred to or provided for in, or
received by the Agent under or in connection with, this Agreement
or any other Operative Agreement, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or
any other Operative Agreement, or for any failure of the Lessee
or any other party to any Operative Agreement to perform its
obligations hereunder or thereunder. No Agent-Related Person
shall be under any obligation to any Lessor to ascertain or to
inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any
other Operative Agreement, or to inspect the properties, books or
records or the Lessee or any of the Lessees Subsidiaries or
Affiliates.
Section 9.4 Reliance by the Agent. (a) The Agent
shall be entitled to rely, and shall be fully protected in
relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, instrument, telegram, facsimile,
telex, telecopier or telephone message, statement or other
document or writing or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper
Person or Persons, and upon advice and statements of legal
counsel (including counsel to the Lessee), independent
accountants and other experts selected by the Agent. The Agent
shall be fully justified in failing or refusing to take any
action under this Agreement or any other Operative Agreement
unless it shall first receive such advice or concurrence of the
Required Lessors as it deems appropriate and, if it so requests,
it shall first be indemnified to its satisfaction by the Lessors
against any and all liability and expense which may be incurred
by it by reason of taking or continuing to take any such action.
The Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement or any other
Operative Agreement in accordance with a request or consent of
the Required Lessors and such request and any action taken or
failure to act pursuant thereto shall be binding upon all of the
Lessors.
(b) Without limiting the generality of the foregoing, the
Agent (i) makes no warranty or representation to any Lessor and
shall not be responsible to any Lessor for any statements,
warranties or representations (whether written or oral) made in
or in connection with any Operative Agreement; (ii) shall not
have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of this
Agreement on the part of the Lessee or to inspect the property
(including the books and records) of the Lessee; and (iii) shall
not be responsible to any Lessor for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of
any Operative Agreement or any other instrument or document
furnished pursuant hereto.
Section 9.5 Notice of Default. The Agent shall not be
deemed to have knowledge or notice of the occurrence of any
Default, except with respect to defaults in the payment of Rent
to be paid to the Agent for the account of the Lessors, unless
the Agent shall have received written notice from a Lessor or the
Lessee referring to this Agreement, describing such Default and
stating that such notice is a notice of default. The Agent will
notify the Lessors of its receipt of any such notice. The Agent
shall take such action with respect to such Default as may be
permitted in accordance with Section 8.2 or Section 8.3 of the
Lease.
Section 9.6 Lessor Credit Decision. Each Lessor
acknowledges that none of the Agent-Related Persons has made any
representation or warranty to it, and that no act by the Agent
hereinafter taken, including any review of the affairs of the
Lessee and its Subsidiaries, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any
Lessor. Each Lessor represents to the Agent that it has,
independently and without reliance upon any Agent-Related Person
and based on the financial statements referred to in Section 3.6
and such other documents, and information as it has deemed
appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other
condition and creditworthiness of the Lessee and its
Subsidiaries, and all applicable bank regulatory laws relating to
the transactions contemplated hereby, and made its own decision
to enter into this Agreement and to extend credit to the Lessee
hereunder. Each Lessor also represents that it will,
independently and without reliance upon any Agent-Related Person
and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit
analysis, appraisals and decisions in taking or not taking action
under this Agreement and the other Operative Agreements, and to
make such investigations as it deems necessary to inform itself
as to the business, prospects, operations, property, financial
and other condition and creditworthiness of the Lessee. Except
for notices, reports and other documents expressly herein
required to be furnished to the Lessors by the Agent, the Agent
shall have no duty or responsibility to provide any Lessor with
any credit or other information concerning the business,
prospects, operations, property, financial and other condition or
creditworthiness of the Lessee which may come into the possession
of any of the Agent-Related Persons.
Section 9.7 Indemnification of the Agent. (a) Whether
or not the transactions contemplated hereby are consummated, each
Lessor shall indemnify upon demand the Agent-Related Persons (to
the extent not reimbursed by or on behalf of the Lessee and
without limiting the obligation of the Lessee to do so), pro
rata, from and against any and all Indemnified Liabilities;
provided, however, that no Lessor shall be liable for the payment
to any Agent-Related Person of any portion of such Indemnified
Liabilities resulting solely from such Person's gross negligence
or willful misconduct as found in a final, non-appealable
judgment by a court of competent jurisdiction. Without
limitation of the foregoing, each Lessor shall reimburse the
Agent upon demand for its ratable share of any costs or
out-of-pocket expenses (including Attorney Costs) incurred by the
Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or
legal advice in respect of rights or responsibilities under, this
Agreement, any other Operative Agreement, or any document
contemplated by or referred to herein, to the extent that the
Agent is not reimbursed for such expenses by or on behalf of the
Lessee.
(b) In the case of any investigation, litigation or
proceeding giving rise to any Agent's Indemnified Liabilities,
this Section 9.7 applies whether any such investigation,
litigation or proceeding is brought by the Agent, any Lessor or a
third party. Without prejudice to the survival of any other
agreement of any Lessor hereunder, the agreement, obligations and
undertaking of each Lessor contained in this Section 9.7 shall
survive the payment in full of all payments of Rent and all other
amounts payable hereunder and under the other Operative
Agreements and the resignation or replacement of the Agent.
Section 9.8 Agent in Individual Capacity. ABN AMRO
and its Affiliates may make loans to, issue letters of credit for
the account of, accept deposits from, acquire equity interests in
and generally engage in any kind of banking, trust, financial
advisory, underwriting or other business with the Lessee and its
Affiliates as though ABN AMRO were not the Agent hereunder and
without notice to or consent of the other Lessors. The Lessors
acknowledge that, pursuant to such activities, ABN AMRO or its
Affiliates may receive information regarding the Lessee and its
Affiliates (including information that may be subject to
confidentiality obligations in favor of the Lessee or such
Affiliates) and acknowledge that the Agent shall not be under any
obligation to provide such information to them. In its capacity
as a Lessor, ABN AMRO shall have the same rights and powers under
this Agreement as any other Lessor and may exercise the same as
though it were not the Agent.
Section 9.9 Successor Agent. The Agent may, and at the
request of the Required Lessors shall, resign as the Agent upon
30 days' notice to the Lessors. If the Agent resigns under this
Agreement, the Required Lessors shall appoint from among the
Lessors a successor Agent for the Lessors which successor Agent
shall be approved by the Lessee. If no successor Agent is
appointed prior to the effective date of the resignation of the
Agent, the Agent may appoint, after consulting with the Lessors
and the Lessee, a successor Agent from among the Lessors. Upon
the acceptance of its appointment as successor Agent hereunder,
such successor Agent shall succeed to all the rights, powers,
discretion, privileges and duties of the retiring Agent and the
term Agent shall mean such successor Agent and the retiring
Agent's appointment, powers and duties as the Agent shall be
terminated. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Article IX and Sections 7.1 and
11.5 shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was the Agent under this
Agreement. If no successor Agent has accepted appointment as the
successor Agent by the date which is 30 days following the
retiring Agent's notice of resignation, the retiring Agent's
resignation shall nevertheless thereupon become effective and the
Lessors shall perform all of the duties of the Agent hereunder
until such time, if any, as the Required Lessors appoint a
successor Agent as provided for above.
ARTICLE X
Amendments to Operative Agreements
Section 10.1 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
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 9.4 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
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 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 the 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
(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 10.2 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 11.1 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 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.
Section 11.2 Applicable Law. This Agreement shall be
governed by, and construed in accordance with, the laws of the
State of California.
Section 11.3 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 Lessors 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 11.4 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.
If to the Lessors, to their respective addresses set
forth on Schedule I hereto or, in the case of all parties, at
such other place as any such party may designate by notice given
in accordance with this Section 11.4.
Section 11.5 Transaction Costs; Other Expenses. (a)
Lessee shall, whether or not the transactions contemplated hereby
are consummated, pay or reimburse all reasonable fees and
expenses of counsel for the Agent (including in its capacity as
the Agent) promptly after demand in connection with the
development, preparation, delivery, administration and execution
of, and any amendment, supplement, waiver or modification to (in
each case, whether or not consummated), this Agreement, any other
Operative Agreement and any other documents prepared in
connection herewith or therewith, and the consummation of the
transactions contemplated hereby and thereby, including
reasonable Attorney Costs incurred by ABN AMRO (including in its
capacity as the Agent) with respect thereto; and
(b) The Lessee shall pay or reimburse the Agent and each
Lessor within five Business Days after demand for all costs and
expenses (including Attorney Costs) incurred by them in
connection with the enforcement, attempted enforcement, or
preservation of any rights or remedies under this Agreement or
any other Operative Agreement during the existence of an Event of
Default (including in connection with any workout or
restructuring, and including in any insolvency proceeding,
bankruptcy proceeding, liquidation, winding up, reorganization,
receivership, arrangement, adjustment, protection, relief of
debtors or appellate proceeding (collectively, an Insolvency
Proceeding)).
(c) Without prejudice to the survival of any other
agreement of the Lessee hereunder, the agreements and obligations
of the Lessee contained in Sections 7.1, 7.3, 7.4, 7.5, Article
VIII and Section 11.5 shall survive the payment in full of Rent
and all other amounts payable hereunder.
Section 11.6 Counterparts. This Agreement may be
executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement. Delivery of an
executed counterpart of a signature page to this Agreement by
telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
Section 11.7 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 11.8 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 successors
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 Operative
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 attached hereto as
Exhibit E (the Investor's Letter), 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 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 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. 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 11.9 JURY TRIAL. EACH OF THE PARTIES HERETO
WAIVE 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.
Section 11.10 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 11.11 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
NOTIFIED, 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 11.12 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 11.13 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 11.14 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.
Section 11.15 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
Lessors 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.
Section 11.16 Submission to Jurisdiction. (a) Each
of the parties hereto hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive
jurisdictions of any California State court or federal court of
the United States of America sitting in San Francisco, and any
appellate court from any thereof, in any action or proceeding
arising out of or relating to this Agreement, or for recognition
or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and
determined in any such California State court or, to the extent
permitted by law, in such federal court. Each of the parties
hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any
right that any party may otherwise have to bring any action or
proceeding relating to this Agreement in the courts of any
jurisdiction.
(b) Each of the parties hereto irrevocably and
unconditionally waives, to the fullest extent it may legally and
effectively do so, any objection that it may now or hereafter
have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement in any California
State or federal court sitting in San Francisco. Each of the
parties hereto hereby irrevocably waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
[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
Name:
Title:
ABN AMRO BANK N.V.,
not
individually, but solely as Agent
for the Lessors
By
Name:
Title:
By
Name:
Title:
LESSORS:
ABN AMRO BANK N.V.
By
Name:
Title:
By
Name:
Title:
BANK ONE, NA (Main Office Chicago),
as Lessor
By
Name:
Title:
UNION BANK OF CALIFORNIA, N.A., as
Lessor
By
Name:
Title:
CREDIT AGRICOLE INDOSUEZ, as Lessor
By
Name:
Title:
FIRST UNION NATIONAL BANK, as Lessor
By
Name:
Title:
U.S. BANK NATIONAL ASSOCIATION, as
Lessor
By
Name:
Title:
BANK POLSKA KASA OPIEKI S.A.,
as Lessor
By
Name:
Title:
By
Name:
Title:
TABLE OF CONTENTS
Page
ARTICLE I Delivery and Acceptance -1-
Section 1.1 Transfer, Acceptance and Lease of Vehicles -1-
Section 1.2 Acceptance Procedure -1-
ARTICLE II Lease Term -2-
Section 2.1 Lease Term -2-
Section 2.2 Lease Renewal -2-
ARTICLE III Rent; Other Economic Provisions -2-
Section 3.1 Rent Payments -2-
Section 3.2 Place and Manner of Payment -2-
Section 3.3 Net Lease -3-
ARTICLE IV Agreements by Lessee; Warranties -4-
Section 4.1 Inspection and Approval -4-
Section 4.2 Warranty -4-
Section 4.3 Warranty Disclaimer -4-
Section 4.4 Quiet Enjoyment -4-
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 -5-
Section 5.3 Maintenance -6-
Section 5.4 Repair, Replacement and Substitution -7-
Section 5.5 Alterations, Modifications and Additions;
Removable Parts -8-
Section 5.6 Inspection of Collateral -9-
ARTICLE VI Risk of Loss; Replacement; Waiver and Indemnity -9-
Section 6.1 Casualty -9-
Section 6.2 Casualty Proceeds -10-
ARTICLE VII Insurance -10-
Section 7.1 Required Coverages -10-
Section 7.2 Delivery of Insurance Certificates -11-
ARTICLE VIII Default -11-
Section 8.1 Events of Default -11-
Section 8.2 Remedies -14-
Section 8.3 Additional Remedies -15-
Section 8.4 Right to Perform Lessees Agreements -15-
Section 8.5 Proceeds of Sale; Deficiency -16-
Section 8.6 Limitation of Remedies -16-
ARTICLE IX Return of Vehicles -17-
ARTICLE X Early Termination -17-
Section 10.1 Early Termination as to All Vehicles -17-
Section 10.2 Early Termination as to a Vehicle -18-
ARTICLE XI Lease Termination -18-
Section 11.1 Options -18-
Section 11.2 Lessee Purchase Option -19-
Section 11.3 Sale Option -19-
ARTICLE XII Ownership, Grant of Security Interest to Lessor
and Further Assurances -20-
Section 12.1 Grant of Security Interest -20-
Section 12.2 Retention of Proceeds in the Case of Default -21-
Section 12.3 Attorney-in-Fact -21-
Section 12.4 Release of Liens -22-
ARTICLE XIII Miscellaneous -22-
Section 13.1 No Waiver -22-
Section 13.2 Survival of Covenants -22-
Section 13.3 APPLICABLE LAW -22-
Section 13.4 Effect and Modification of Lease -22-
Section 13.5 Notices -23-
Section 13.6 Counterparts -23-
Section 13.7 Severability -23-
Section 13.8 Successors and Assigns: Benefit of Agreement -23-
Section 13.9 Assignment by Agent -23-
Section 13.10 Assignment by Lessee -23-
Section 13.11 Jury Trial -23-
Section 13.12 Section Headings: Table of Contents -24-
Section 13.13 Final Agreement -24-
Section 13.14 Timeliness of Performance -24-
LEASE INTENDED AS SECURITY (as amended, modified,
restated or supplemented from time to time, this Lease) dated as
of October 12, 1999 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
October 12, 1999 (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, to secure Lessees 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:
ARTICLE I
Delivery and Acceptance
Section 1.1 Transfer, Acceptance and Lease of
Vehicles. On the date hereof (a) Agent, on behalf of Lessors,
hereby agrees to lease the Vehicles to Lessee under this Lease,
and (b) Lessee hereby agrees, expressly for the direct benefit of
Agent and the Lessors, to lease from Agent hereunder, for the
Lease Term, the Vehicles and confirms acceptance of delivery and
lease from Agent of the Vehicles.
Section 1.2 Acceptance Procedure. Agent hereby
authorizes one or more employees of Lessee, as the authorized
representative or representatives of Agent, to accept delivery of
the Vehicles identified on Schedule I hereto. Lessee hereby
agrees that such acceptance of delivery by such authorized
representative or representatives 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 2.1 Lease Term. Unless earlier terminated, the
term of this Lease shall consist of (a) a base period, commencing
on and including the Effective Date and ending on but excluding
the first anniversary thereof (the Base Term) and (b) any
exercised Renewal Terms (collectively, the Lease Term).
Section 2.2 Lease Renewal. Lessee may elect to renew
this Lease for up to two successive one-year renewal terms with
respect to all, but not less than all, of the Vehicles (each, a
Renewal Term) as provided in Article XI.
ARTICLE III
Rent; Other Economic Provisions
Section 3.1 Rent Payments. Lessee shall pay to Agent,
for the benefit of the Lessors, the amounts of Base Rent or
Renewal Rent, as applicable, determined in accordance with this
Section 3.1. Scheduled installments of Base 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 the actual number of days elapsed in a 360-day year.
(a) Base Rent. On each Payment Date during the Base
Term, Lessee shall pay to Agent, for the benefit of the Lessors,
Base Rent consisting of the amount of Fixed Rent set forth
opposite the applicable Payment Date on Schedule II hereto and
Variable Rent accrued on the Lease Balance during the Rent Period
ended on such Payment Date.
(b) 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 consisting of the amount of
Fixed Rent set forth opposite the applicable Payment Date on
Schedule II hereto and Variable Rent accrued on the Lease Balance
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, to the
Agent's Account, and if payable to a Lessor at its Eurodollar
Office or such other 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 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 2:00
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 3.3 Net Lease. This Lease is a net lease and
Lessees 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
Lessees 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 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, 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 Lessees 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
Agreements by Lessee; Warranties
Section 4.1 Inspection and Approval. Lessee hereby
acknowledges and confirms that it has inspected and approved the
Vehicles for all purposes hereof and the other Operative
Agreements and, as between the Lessors and Lessee, such Vehicles
comply in all material respects with the specifications for such
Vehicles, are in good working order, repair, condition and
appearance, and without defect therein with respect to design,
manufacture, conditions, operation and fitness for use or in any
other respect, whether or not discoverable by Lessee as of the
date hereof.
Section 4.2 Warranty. Lessee hereby represents and
warrants that no event which would constitute a Casualty under
the Lease has occurred with respect to the Vehicles as of the
date hereof. Lessee hereby reaffirms each of the representations
and warranties set forth in Section 5.1 of the Participation
Agreement as if made on the date hereof, including that the
Vehicles are free and clear of all Liens other than Permitted
Liens.
Section 4.3 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 4.4 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 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.
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 regulation
of any Authority; (b) except as permitted by Section 6.1, abandon
any Vehicle; (c) except as permitted by Section 5.2 or for the
temporary loan of Vehicles to other carriers pursuant to
interchange agreements in the ordinary course of business,
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) unless the security interest of the Agent is
noted in the certificate of title in the new jurisdiction and
Lessee 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 was titled on the Effective 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 5.2 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 this Lease and shall be expressly subordinate and
subject to this Lease and the Liens created hereunder;
(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 Lessees rights, title and interest in, to and under such
Sublease, as Collateral for Lessees 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(i) 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 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, 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
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 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 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 5.4 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 Lessees
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 Agent, 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 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 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 5.5 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 Lessees
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 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 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 Lessees records in a separate
file entitled AABN AMRO Documentation.
ARTICLE VI
Risk of Loss; Replacement; Waiver and Indemnity
Section 6.1 Casualty. Upon a Casualty, Lessee shall
give prompt written notice thereof (a ACasualty 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 ACasualty 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, and with such Vehicle to have the Allocated Value of the
Vehicle it replaced), provided that upon the occurrence and
during the continuance of a 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 hereunder 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 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 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 Lessees 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
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 (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, Lessees obligations under Section
5.4 shall not be affected by the amount of any Casualty Proceeds
received by Lessee.
ARTICLE VII
Insurance
Section 7.1 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 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 Lessees
insurance, its primary insurance, from financially responsible
companies selected by Lessee and having an A.M. Best rating of
AA@ 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) 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. Lessee 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 Effective 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 Lessees 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 8.1 Events of Default. The following shall
constitute events of default (each an AEvent of Default)
hereunder (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
certificate, 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) or (f) 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, liquidation
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) (a) any ERISA Event shall have occurred with
respect to a Plan which has resulted or could reasonably be
expected to result in liability of the Lessee under Title IV of
ERISA to the Plan or the PBGC in an aggregate amount in excess of
$25,000,000; or (b) the Lessee or any ERISA Affiliate shall fail
to pay when due, after the expiration of any applicable grace
period, any installment payment with respect to its withdrawal
liability under Section 4201 of ERISA under a Multiemployer Plan
in an aggregate amount in excess of $25,000,000;
(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 Lessees 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 $10,000,000 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; 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 $10,000,000 over
the amount provided by insurance in respect of such judgments.
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
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, 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 Lessees 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 8.3 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 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 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 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 9.7 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 8.5 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.
Section 8.6 Limitation of Remedies. Notwithstanding
any provision of the preceding sections of this Article VIII, if
any Event of Default has occurred and is continuing solely
because of a Material Adverse Effect Cross-Acceleration, then the
Lessors' remedies under this Article VIII shall be limited to the
aggregate Lessee Risk Amount. In such event, the Agent on behalf
of the Lessors shall have the right to require the Lessee to
relinquish all of its right, title and interest in and to the
Vehicles to the Agent on behalf of the Lessors in accordance with
the procedures set forth in Article IX hereof, and the Lessee
shall pay to the Agent on behalf of the Lessors the aggregate
Lessee Risk Amount. In the event of any sale of the Vehicles by
the Agent on behalf of the Lessors in such circumstances, any
excess of the amount realized upon such sale of the Vehicles over
the Lease Balance shall be distributed in accordance with the
terms of Section 8.4 hereof.
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
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 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 10.1 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 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 Lessees sole cost and
expense.
Section 10.2 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 during each of the Base Term and any exercised Renewal
Term.
ARTICLE XI
Lease Termination
Section 11.1 Options. Not later than 90 days prior to
the last day of the Base Term 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 then in effect 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 Term 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).
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 a 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 a
Default.
Section 11.2 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 Lessees sole cost and
expense.
Section 11.3 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 Lessors, 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) Agent shall
pay to Lessee in immediately available funds an amount equal to
the excess, if any, of (A) the sale proceeds over (B) the
Termination Value as of the Termination Date, (vi) title to the
Vehicles shall be transferred to such Purchaser free and clear of
Lessor Liens, and (vii) 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 12.1 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 Agents 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 12.2 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 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 Default exists.
Section 12.3 Attorney-in-Fact. Lessee hereby
irrevocably appoints Agent as Lessees 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 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 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
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 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 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 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.
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 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 13.11 Jury Trial. EACH OF THE PARTIES HERETO
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.
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
Name:
Title:
ABN AMRO BANK N.V.,
not individually but solely as
Agent for the Lessors
By
Name:
Title:
By
Name:
Title:
SCHEDULE X
TO
PARTICIPATION AGREEMENT
DEFINITIONS
The following 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.
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 shall mean, as to any Person, any other
Person that, directly or indirectly, controls, is controlled by
or is under common control with such Person or is a director or
officer of 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 Fees shall mean all fees payable to the Agent as
agreed in a letter between the Agent and the Lessee dated August
20, 1999 and accepted by the Lessee as of August 24, 1999.
Agent-Related Persons means ABN AMRO and any successor
Agent arising under Section 9.9 of the Participation Agreement,
together with their respective Affiliates, and the officers,
directors, employees, agents and attorneys-in-fact of such
Persons and Affiliates.
Agent's Account shall mean the account of the Agent
maintained by the Agent at ABN AMRO Bank N.V. with its office in
New York, New York, ABA No. 026009580, F/O ABN AMRO Bank -
Chicago CPU, ACCT no. 650-001-1789-41, Ref: CPU00197211 -
Consolidated Freightways.
Allocation Fraction of any Vehicle shall mean, with
respect to the Lease, a fraction, the numerator of which is the
Allocated Value of such Vehicle set forth on Schedule I to the
Lease (or, if applicable, as provided in Section 6.1(b) of the
Lease) and the denominator of which is the aggregate Allocated
Value of all of the Vehicles set forth on Schedule I to the Lease
(or, if applicable, as provided in Section 6.1(b) of the Lease)
then subject to the Lease, including such Vehicle.
Alter shall have the meaning provided in Section 5.5(a)
of the Lease.
Applicable Margin shall mean, as of any date of
determination, a percentage per annum determined as set forth on
Schedule III to 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.
Assignment Agreement shall have the meaning provided in
the preamble to the Participation Agreement.
Assumption Agreement shall have the meaning provided in
Section 6.1(c) of the Participation Agreement.
Attorney Costs means and includes all reasonable fees
and services of any law firm or other external counsel.
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 Rate means, for any period, a fluctuating interest
rate per annum as shall be in effect from time to time which rate
per annum shall at all times be equal to the higher of: (a) the
rate of interest announced publicly by the Agent at its office in
Chicago, Illinois, from time to time, as its prime or base rate;
and (b) 2 of one percent per annum above the Federal Funds Rate.
Any change in the prime or base rate announced by the Agent shall
take effect at the opening of business on the day specified in
the public announcement of such change. Such prime or base rate
is determined as a means of pricing credit extensions to some
customers and is not directly related to any external rate of
interest or index, nor necessarily the lowest rate of interest
charged at any given time for any particular class of customers.
Base Rent shall mean all installments of Fixed Rent and
Variable Rent due and payable by Lessee on each Payment Date
during the Base Term.
Base Term shall have the meaning provided in Section
2.1 of the Lease.
Business Day shall mean any day on which:
(a) banks are not required or authorized by law
to close in New York, Chicago or San Francisco; and
(b) solely with respect to determinations of
Variable Rent determined on the basis of the Eurodollar
Rate, dealings in Dollars are carried on in the London
Interbank market.
Capital Adequacy Regulation means any guideline,
request or directive of any central bank or other Authority, or
any other law, rule or regulation, whether or not having the
force of law, in each case, regarding capital adequacy of any
Lessor or of any corporation controlling a Lessor.
Capital Lease means any lease of Property by the Parent
or any of its Subsidiaries which, in accordance with GAAP, is or
should be capitalized on the Parent's or such Subsidiary's
balance sheet, as the case may be, or for which the amount of the
asset and liability thereunder, if so capitalized, should be
disclosed in a footnote to such balance sheet.
Cash Equivalents means: (a) direct obligations of the
Government of the United States or any agency or instrumentality
thereof or obligations unconditionally guaranteed by the full
faith and credit of the Government of the United States,
(b) money market funds with assets in excess of $1,000,000,000,
(c) certificates of deposit (CD's), bankers acceptances,
eurodollar CD's or Yankee CD's with (i) U.S. commercial banks
with capital of at least $200,000,000 and a senior long-term
dollar denominated debt rating of at least A by Moody's and S&P
or (ii) foreign commercial banks with assets of at least
$1,000,000,000 and a Thompson Bankwatch rating of at least TBW-1,
(d) eurodollar time deposits with the Nassau or Cayman offshore
branches of U.S. commercial banks with capital of at least
$200,000,000 and a senior long-term dollar denominated debt
rating of at least A by Moody's and S&P, (e) commercial paper
rated at least P2 by Moody's and A2 by S&P, (f) medium term,
fixed or floating rate notes in offerings of at least
$100,000,000 with a maximum tenor of five years, issued by U.S.
corporations with a senior long-term dollar denominated debt
rating of at least A by Moody's and S&P, and (g) repurchase
agreements, provided that (w) the market value of the collateral
securing any such repurchase agreement must be equal to at least
102% of the repurchase value plus accrued interest, (x) the
collateral (A) has a maturity of three years or less, (B) is
issued by the Government of the United States or any agency or
instrumentality thereof or U.S. commercial banks with capital of
at least $200,000,000 and a senior long-term dollar denominated
debt rating of at least A by Moody's and S&P and (C) has pricing
information that is available on the Bloomberg Reporting Service,
(y) must be executed with primary dealers listed by the New York
Federal Reserve Board and rated at least P1 by Moody's and A1 by
S&P, and (z) such collateral must be delivered to Lessee's
custodian.
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 in the business judgment of Lessee;
(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, an amount equal to the product of (a) the Lease
Balance on the date of such Casualty 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.
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.
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.
CNF shall mean CNF Transportation, Inc., a Delaware
corporation.
CNF Note means any promissory note payable by the
Parent to CNF under the Tax Sharing Agreement and any substitute,
replacement or refinancing of any such promissory note, whether
such substitute, replacement or refinanced promissory note is to
CNF or other Persons; provided that the Parent's obligations
under any such promissory note are subordinated to its
obligations under the Affiliate Guaranty and that the terms and
conditions of such subordination may not be amended, supplemented
or otherwise modified after the date hereof in a manner adverse
to the interests of any of the Lessors.
Code shall mean the Internal Revenue Code of 1986, as
amended.
Collateral shall mean all of Lessees 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 Percentage shall mean, with respect to each
Lessor, the quotient (expressed as a percentage) of such Lessors
Commitment divided by the Total Commitment.
Consolidated refers to the consolidation of accounts in
accordance with GAAP.
Consolidated EBIT shall mean, for any period, the sum
of (i) Consolidated Net Income of the Parent and its
Subsidiaries, before total interest expense (whether cash or non-
cash) and provisions for taxes based on income, and determined
without giving effect to any extraordinary gains or losses but
giving effect to gains or losses from sales of assets sold in the
ordinary course of business plus (ii) an amount not in excess of
$15,000,000 related to charges in connection with the Tax Sharing
Agreement plus (iii) any non-cash charge incurred by the Parent
and its Subsidiaries for the issuance of common shares under the
Parent's restricted stock plan.
Consolidated EBITDAR shall mean, for any period,
Consolidated EBIT, adjusted by adding thereto the amount of all
expenses for depreciation, amortization and Consolidated Rental
Expenses that were deducted in determining Consolidated EBIT for
such period.
Consolidated Funded Indebtedness means, for any period,
without duplication, the sum of (a) all short term Debt of the
Parent and its Consolidated Subsidiaries (including the current
maturities of long-term Debt) plus (b) all long-term Debt of the
Parent and its Consolidated Subsidiaries, including obligations
in respect of Capitalized Leases plus (c) the present value
(using a discount rate of 10% per annum) of future payments under
operating leases of the Parent and its Consolidated Subsidiaries
with initial or remaining non-cancellable lease terms in excess
of one year plus (d) the undrawn amount of all standby letters of
credit issued for the account of the Parent and its Consolidated
Subsidiaries, including any unpaid reimbursement obligations
thereunder minus (e) in the event that the CNF Note is
outstanding as of any date of determination, an amount equal to
the lesser of (i) $40,000,000 and (ii) the outstanding principal
amount of the CNF Note.
Consolidated Interest and Rental Expense means, for any
period, total interest expense (including amounts properly
attributable to interest with respect to Capital Leases in
accordance with GAAP, letter of credit costs, and amortization of
debt discount and debt issuance costs) and Consolidated Rental
Expense of the Parent and its Consolidated Subsidiaries for such
period with respect to all outstanding Debt of the Parent and its
Consolidated Subsidiaries, including without limitation all
commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing
and net costs or benefits under interest rate protection
agreements.
Consolidated Net Income means, for any period, the net
income of the Parent and its Consolidated Subsidiaries for such
period determined in accordance with GAAP provided, however, that
if the Parent 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 shall not be included in Consolidated Net Income.
Consolidated Rental Expense means lease payments by the
Parent and its Consolidated Subsidiaries under all leases
having an initial non-cancellable lease term in excess of
one year.
Consolidated Stockholders' Equity means, with respect
to any Person at any date, the Consolidated stockholders' equity
of such Person, excluding any amounts attributable to mandatorily
redeemable preferred stock.
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 means, for any Person
at any date, the Consolidated Stockholders' Equity of such Person
and its Consolidated Subsidiaries less goodwill and intangibles
determined on a consolidated basis in accordance with GAAP.
Consolidated Total Assets means, as of any date, the
Consolidated total assets of the Parent and its Subsidiaries as
of such date.
Credit Agreement means the Credit Agreement dated as of
October 12, 1999 by and among the Lessee, the Lender Parties
party thereto and ABN AMRO BANK N.V., as agent for the Lender
Parties, as amended, modified or supplemented from time to time
in accordance with its terms.
Debt of any Person means, without duplication: (a) all
obligations and liabilities of such Person in respect of borrowed
money, (b) all obligations and liabilities of such Person in
respect of Hedging Contracts, (c) all obligations and liabilities
at any time owing by Lessee, Parent or any of their Subsidiaries
to Agent and/or any Lessor hereunder or under any other Operative
Agreement, (d) all obligations and liabilities of such Person
secured by any Lien on the Property of such Person, even though
such Person shall not have assumed or become liable for the
payment thereof; provided, however, that all such obligations and
liabilities which are limited in recourse to such Property shall
be included in Debt only to the extent of the book value of such
Property as would be shown on a balance sheet of such Person
prepared in accordance with GAAP, (e) all obligations or
liabilities created or arising under any Capital Lease or
conditional sale or other title retention agreement with respect
to Property used or acquired by a Person, even if the rights and
remedies of the lessor, seller or lender thereunder are limited
to repossession of such Property; provided, however, that all
such obligations and liabilities which are limited in recourse to
such Property shall be included in Debt only to the extent of the
book value of such Property as would be shown on a balance sheet
of such Person prepared in accordance with GAAP, (f) all
obligations and liabilities under any Guaranty of the foregoing.
Default shall mean any Event of Default or any event or
condition that would constitute an Event of Default but for the
requirement that notice be given or time elapse or both.
Deposit Account shall have the meaning provided in
Section 6.2 of the Lease.
Designated Entity means any entity identified by Lessee
to the Agent in a written notice delivered prior to the
respective Investment in accordance with Section 11.4 of the
Participation Agreement.
Dollar and the sign $ mean lawful money of the United
States.
Effective Date shall mean the date when the conditions
set forth in Section 3.1 of the Participation Agreement have been
satisfied or waived as provided therein.
Effective Date Notice shall mean a notice in the form
of Exhibit B to the Participation Agreement.
Environmental Action means any action, suit, demand,
demand letter, claim, notice of non-compliance or violation,
notice of liability or potential liability, investigation,
proceeding, consent order or consent agreement relating in any
way to any violation of an Environmental Law or arising from
alleged injury or threat of injury to health, safety or the
environment, including, without limitation, (a) by any
governmental or regulatory authority for enforcement, cleanup,
removal, response, remedial or other actions or damages and
(b) by any governmental or regulatory authority or any third
party for damages, contribution, indemnification, cost recovery,
compensation or injunctive relief.
Environmental Law shall mean any federal, state, local
or foreign statute, law, ordinance, rule, regulation, code,
order, judgment, decree or judicial or agency interpretation,
policy or guidance that has the force or effect of law relating
to pollution or protection of the environment, health, safety or
natural resources, including, without limitation, those relating
to the use, handling, transportation, treatment, storage,
disposal, release or discharge of Hazardous Materials.
Equity Interests means, with respect to any Person, all
of the shares of capital stock of (or other ownership or profit
interests in) such Person, all of the warrants, options or other
rights for the purchase or other acquisition from such Person of
shares of capital stock of (or other ownership or profit
interests in) such Person, all of the securities convertible into
or exchangeable for shares of capital stock of (or other
ownership or profit interests in) such Person or warrants, rights
or options for the purchase or other acquisition from such Person
of such shares (or such other interests), and all of the other
ownership or profit interests in such Person (including, without
limitation, partnership, member or trust interests therein),
whether voting or nonvoting, and whether or not such shares,
warrants, options, rights or other interests are authorized or
otherwise existing on any date of determination.
ERISA shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time, and the
regulations promulgated and rulings issued thereunder..
ERISA Event means (a) (i) the occurrence of a
reportable event, within the meaning of Section 4043 of ERISA,
with respect to any Plan unless the 30-day notice requirement
with respect to such event has been waived by the PBGC, or (ii)
the requirements of subsection (1) of Section 4043(b) of ERISA
are met with respect to a contributing sponsor, as defined in
Section 4001(a)(13) of ERISA, of a Plan, and an event described
in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of
ERISA is reasonably expected to occur with respect to such Plan
within the following 30 days but only if the PBGC has not waived
the requirements of Section 4043(b) of ERISA with respect to a
contributing sponsor; (b) the application for a minimum funding
waiver with respect to a Plan; (c) the provision by the
administrator of any Plan of a notice of intent to terminate such
Plan in a distress termination pursuant to Section 4041(a)(2) of
ERISA (including any such notice with respect to a plan amendment
referred to in Section 4041(e) of ERISA); (d) the cessation of
operations at a facility of the Lessee or any ERISA Affiliate in
the circumstances described in Section 4062(e) of ERISA; (e) the
withdrawal by the Lessee or any ERISA Affiliate from a Multiple
Employer Plan during a plan year for which it was a substantial
employer, as defined in Section 4001(a)(2) of ERISA; (f) the
conditions for the imposition of a lien under Section 302(f) of
ERISA shall have been met with respect to any Plan; (g) the
adoption of an amendment to a Plan requiring the provision of
security to such Plan pursuant to Section 307 of ERISA; or
(h) the institution by the PBGC of proceedings to terminate a
Plan pursuant to Section 4042 of ERISA, or the occurrence of any
event or condition described in Section 4042 of ERISA that
constitutes grounds for the termination of, or the appointment of
a trustee to administer, a Plan.
Eurodollar Office means, with respect to any Lessor,
the office of such Lessor specified as its Eurodollar Office
opposite its name on Schedule I to the Participation Agreement or
in the Investor's Letter pursuant to which it becomes a Lessor or
such other office of such Lessor as such Lessor may from time to
time specify to the Lessee and the Agent.
Eurodollar Rate means, for any Rent Period, an interest
rate per annum (rounded upward to the nearest 1/100th of 1%)
equal to the rate for deposits in Dollars for the period
commencing on the first day of such Rent Period and ending on the
last day of such Rent Period which appears on Telerate Page 3750
as of 11:00 A.M., London time, two Business Days prior to the
beginning of such Rent Period. If at least two rates appear on
such Telerate Page for such Rent Period, the Eurodollar Rate
shall be the arithmetic mean of such rates. If the AEurodollar
Rate cannot be determined in accordance with the immediately
preceding sentences with respect to any Rent Period, the
Eurodollar Rate with respect to each day during such Rent Period
shall be determined by reference to such other publicly available
service for displaying eurodollar rates as may be agreed upon by
the Agent and the Lessee or, in the absence of such agreement,
the Eurodollar Rate shall instead be the rate per annum equal to
the arithmetic mean (rounded upwards to the nearest 1/100th of
1%) of the respective rates notified to the Agent by each of the
Reference Lessors as the rate at which such Reference Lessor is
offered Dollar deposits at or about 11:00 A.M., San Francisco
time, two Business Days prior to the beginning of such Rent
Period in the interbank eurodollar market where the eurodollar
and foreign currency and exchange operations in respect of its
Eurodollar Loans are then being conducted for delivery on the
first day of such Rent Period for the number of days comprised
therein and in an amount comparable to the Lease Balance.
Event of Default shall have the meaning provided in
Section 8.1 of the Lease.
Federal Funds Rate means, for any day, the rate set
forth in the weekly statistical release designated as H.15(519),
or any successor publication, published by the Federal Reserve
Bank of New York (including any such successor, AH.15(519)) for
such day opposite the caption AFederal Funds (Effective); or, if
for any relevant day such rate is not yet published in H.15(519),
the rate for such day will be the rate set forth in the daily
statistical release designated as the Composite 3:30 P.M.
Quotations for U.S. Government Securities, or any successor
publication, published by the Federal Reserve Bank of New York
(including any such successor, the Composite 3:30 P.M. Quotation)
for such day under the caption Federal Funds Effective Rate. If
on any relevant day the appropriate rate for such day is not yet
published in either H.15(519) or the Composite 3:30 P.M.
Quotations, the rate for such day will be the arithmetic mean of
the rates for the last transaction in overnight Federal funds
arranged prior to 9:00 A.M. (New York City time) on that day by
each of three leading brokers of Federal funds transactions in
New York City selected by the Agent.
Fixed Rent shall mean, for each Payment Date during the
Base Term 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 the Lease.
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.
Guaranty means, with respect to any Person, all
obligations of such Person which in any manner directly or
indirectly guarantee or assure, or in effect guarantee or assure,
the payment or performance of any indebtedness, dividend or other
obligations of any other Person (the Aguaranteed obligations), or
assure or in effect assure the holder of the guaranteed
obligations against loss in respect thereof, including, without
limitation, any such obligations incurred through an agreement,
contingent or otherwise: (a) to purchase the guaranteed
obligations or any property constituting security therefor, (b)
to advance or supply funds for the purchase or payment of the
guaranteed obligations or to maintain a working capital or other
balance sheet condition, or (c) to lease property or to purchase
any debt or equity securities or other property or services, but
excluding the endorsement for collection of checks received in
the ordinary course of business.
Hazardous Materials means (a) petroleum and petroleum
products, byproducts or breakdown products, radioactive
materials, asbestos-containing materials, polychlorinated
biphenyls and radon gas and (b) any other chemicals, materials or
substances designated, classified or regulated as hazardous or
toxic or as a pollutant or contaminant under any Environmental
Law.
Hedging Contract means any interest rate swap
agreement, currency swap agreement, commodities swap agreement,
equity option or put arrangement, cap, floor or collar agreement,
insurance relating to the respective risk protection or other
similar agreement or arrangement designed to provide such risk
protection.
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.
Indemnified Liabilities shall have the meaning
specified in Section 7.1 of the Participation Agreement.
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.
Index Reference shall have the meaning specified in
Schedule III to the Lease.
Insolvency Proceeding shall have the meaning specified
in Section 11.5(b) 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,
the rate per annum equal to the sum of the Eurodollar Rate for
such Rent Period plus the Applicable Margin, provided that if the
Eurodollar Rate is not available for any reason as provided in
the Participation Agreement, then as provided therein the
Interest Rate shall be the rate per annum equal to the sum of the
Base Rate in effect from time to time during such Rent Period
plus the Applicable Margin.
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, as appropriate, within the United States.
Investment in any Person, means any loan or advance to
such Person, any purchase or other acquisition of any capital
stock or other ownership or profit interest, warrants, rights,
options, obligations or other securities of such Person, any
capital contribution to such Person or any other investment in
such Person, and any Guaranty in respect of obligations of such
Person.
Investor's Letter shall have the meaning provided in
Section 11.8(b) of the Participation Agreement.
Lease shall mean that certain Lease Intended as
Security, dated as of October 12, 1999 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 Term shall have the meaning provided in Section
2.1 of the Lease.
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, an amount
equal to the product of (i) the percentage (expressed as a
decimal) set forth opposite such date under the heading ALessee
Risk Percentage on Schedule II to the Lease times (ii) the
aggregate Purchase Price of all Vehicles.
Lessee Risk Percentage shall mean the applicable
percentage set forth under the heading Lessee Risk Percentage on
Schedule II to the Lease.
Lessor Liens shall mean, on any date, Liens or other
conveyances resulting 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, an amount
equal to the product of (i) the percentage (expressed as a
decimal) set forth opposite such date under the heading ALessor
Risk Percentage on Schedule II to the Lease times (ii) the
aggregate Purchase Price of all Vehicles.
Lessor Risk Percentage shall mean the applicable
percentage set forth under the heading Lessor Risk Percentage on
Schedule II to the Lease.
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.
Lien shall mean: (a) any interest in property securing
an obligation owed to, or a claim by, a Person other than the
owner of such property, whether such interest is based on common
law, statute, or contract, and including without limitation, a
security interest, charge, claim, or lien arising from a
mortgage, deed of trust, encumbrance, pledge, hypothecation,
assignment, deposit arrangement, agreement, security agreement,
conditional sale or trust receipt or a lease, consignment or
bailment for security purposes (but excluding any lease,
consignment or bailment which is not for security purposes) and
(b) to the extent not included in clause (a), any reservation,
exception, encroachment, easement, right-of-way, covenant,
condition, restriction, lease or other title exception or
encumbrance affecting property.
Material Adverse Effect shall mean a material adverse
effect on (a) the business, condition (financial or otherwise),
operations, performance or properties of Lessee or the Parent and
its Subsidiaries taken as a whole, (b) the legality, validity,
binding effect, or enforceability of any Operative Agreement or
(c) the ability of Lessee to perform its obligations in any
material respect under any Operative Agreement.
Material Adverse Effect Cross-Acceleration shall mean
that a default has occurred under Section 8.1(j) of the Lease as
a result of the acceleration of Debt of the Lessee (or of an
Affiliate of the Lessee) to any Lessor or group of Lessors
because of the acceleration of that Debt either (i) as a result
of an Event of Default under Section 6.01(l) of the Credit
Agreement (without any other Event of Default under the Credit
Agreement) or (ii) under any similar provision of any other
agreement to which the Lessee or an Affiliate of the Lessee is a
party as obligor and any Lessor or group of Lessors is a party as
obligee or obligees (without any other default under such other
agreement).
Moodys means Moodys Investors Service, Inc.
Multiemployer Plan shall have the meaning assigned to
the term multiemployer plan in Section 3(37) of ERISA.
Net Cash Proceeds means, with respect to the sale or
issuance of any Equity Interests in any Person, the aggregate
amount of cash received from time to time (whether as initial
consideration or through payment of deferred consideration) by or
on behalf of such Person for its own account in connection with
any such transaction, after deducting therefrom (without
duplication) only reasonable and customary underwriting fees and
discounts, legal fees, accounting fees and other similar fees and
reasonable and customary printing expenses and, to the extent,
but only to the extent, that the amounts so deducted are actually
paid (i) at the time of the receipt of such cash or (ii) if
later, within 30 days after the consummation of such transaction
(based on such Person's reasonable estimate of the aggregate
amount of all such discounts, fees, costs and expenses therefor
at the time of the consummation of such transaction); provided,
however, that, notwithstanding any of the foregoing provisions of
this definition, (A) any and all amounts so deducted by any such
Person pursuant to this definition shall be properly attributable
to the transaction that are the subject thereof and shall be
payable solely to one or more Persons that are not Affiliates of
the Lessee or any Affiliate of the Lessee and (B) if, at the time
any of the discounts, fees, costs, or expenses, referred to in
this definition are actually paid or otherwise satisfied, the
reserve therefor or the amount otherwise retained by such Person
for the payment or satisfaction thereof exceeds the amount so
paid or otherwise satisfied, then the amount of such excess
reserve or retained amount, as the case may be, shall constitute
ANet Cash Proceeds@ on and as of the date of such payment or
other satisfaction for all purposes of this definition.
Operative Agreement(s) shall mean the Participation
Agreement, the Lease, the Effective Date Notice, 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.
Original States has the meaning provided in Section
5.1(b) of the Participation Agreement.
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,
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.
Parent means Consolidated Freightways Corporation, a
Delaware corporation.
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 or the rendition of any Vehicle unfit
for normal use for any reason whatsoever in the business judgment
of Lessee, in each case 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 October 12, 1999, 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 (i) the respective dates
specified on Schedule II to the Lease for Fixed Rent ; provided,
however, that if any such date is not a Business Day, then such
Payment Date shall occur on the next following Business Day and
(ii) the last day of each Rent Period for Variable Rent.
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 or any successor.
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 as 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 of 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 requirements;
(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 challenged
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
voluntarily 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 an individual, partnership,
corporation (including a business trust), joint stock company,
trust, unincorporated association, joint venture, limited
liability company or other entity, or a government or any
political subdivision or agency thereof.
Plan shall mean an employee benefit plan as defined in
section 3(3) of ERISA.
Pricing Index shall have the meaning specified in
Schedule III to the Lease.
Purchase Price shall mean, for the Vehicles, the
purchase price provided in the Assignment Agreement.
Real Estate means all of the present and future
interests of any Person, as owner, lessee, or otherwise, in real
property, including, without limitation, any interest arising
from an option to purchase or lease any such real property.
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, provided
that Reduction Amounts shall not include any Rent, Charges or any
costs, expenses or taxes to be paid by Lessee in connection with
any such purchase, sale or transfer.
Reference Lessors means ABN AMRO Bank N.V. and Bank
One, NA or such other Lessors as may be agreed by the Lessee and
the Agent from time to time.
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 have the meaning provided in
Section 11.1(a) of the Lease.
Renewal Rent shall mean 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
2.2 of the Lease.
Rent shall mean Base Rent and/or Renewal Rent, as the
context may require.
Rent Period shall mean the period beginning on the
first day of the Lease Term and ending on (but excluding) the
date which numerically corresponds to such date one month
thereafter and each consecutive one-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 Eurodollar 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.
Reportable Event shall mean a Areportable 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 51% of the Outstanding Investment.
Responsible Officer of a Person shall mean the chief
financial officer, treasurer or controller of the respective
Person.
S&P means Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc.
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 mean the Securities Act of 1933,
as amended, or any successor Federal statute, and the rules and
regulations of the Securities and Exchange Commission promulgated
thereunder, all as the same shall be in effect from time to time.
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.
Subsidiary of any Person means any corporation,
partnership, joint venture, limited liability company, trust or
estate of which (or in which) more than 50% of (a) the issued and
outstanding capital stock having ordinary voting power to elect a
majority of the Board of Directors of such corporation
(irrespective of whether at the time capital stock of any other
class or classes of such corporation shall or might have voting
power upon the occurrence of any contingency), (b) the interest
in the capital or profits of such limited liability company,
partnership or joint venture or (c) the beneficial interest in
such trust or estate is at the time directly or indirectly owned
or controlled by such Person, by such Person and one or more of
its other Subsidiaries or by one or more of such Person's other
Subsidiaries; provided that the term Subsidiary shall not include
any Designated Entity that would otherwise have constituted a
Subsidiary hereunder.
Synthetic Lease 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 the equipment
for tax purposes.
Tax Sharing Agreement means that certain Tax Sharing
Agreement dated December 2, 1996 between the Parent and CNF, as
it may be amended from time to time.
Termination Date shall mean the date on which the Lease
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 Percentage shall mean the applicable
percentage set forth under the heading Termination Percentage on
Schedule II to the Lease.
Termination Value shall mean, at any date, an amount
equal to the product of (i) the percentage (expressed as a
decimal) set forth opposite such date under the heading
Termination Percentage on Schedule II to the Lease times (ii) the
aggregate Purchase Price of all Vehicles.
Total Commitment shall mean the total of the
Commitments of the Lessors set forth on Schedule I to the
Participation Agreement.
Transaction Costs shall mean, without duplication,
(i) a fee in respect of legal fees of Shearman &
Sterling reasonably incurred on behalf of Agent through
the Effective 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 Shearman &
Sterling in connection with the foregoing;
(ii) the fees and expenses of the Appraiser;
(iii) the Agent Fees; and
(iv) 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.
Variable Rent shall mean, with respect to each Rent
Period, an amount equal to interest accrued on the Lease Balance
outstanding during such period at the Interest Rate.
Vehicle shall mean each tractor listed on Schedule I to
the Lease, and any substitutions therefor, replacements 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.
Exhibit 13
CONSOLIDATED FREIGHTWAYS CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Revenues for 1999 increased 6.3% over 1998 on
total and less-than-truckload (LTL) tonnage increases of
0.9% and 1.4%, respectively. Total and LTL shipments
increased 3.9% and 4.0%, respectively. During 1999, the
Company's growth benefited from a 37% increase in its
PrimeTime business and continued expansion of its two-day
service offering. The Company also received incremental
business from existing customers following the mid-year
shutdown of two major LTL carriers. Revenue per
hundredweight increased 3.6% for the year due to rate
increases and the effects of a fuel surcharge implemented
in July in response to higher fuel costs. Revenues for 1998
decreased 2.6% from 1997 on total and LTL tonnage decreases
of 8.7% and 6.6%, respectively. Yield management programs
and shippers diverting freight due to the perceived threat
of a work stoppage early in 1998 contributed to the lower
tonnage levels. The decline in tonnage was partially offset
by a 6.4% increase in net revenue per hundredweight, due to
improved freight mix and general rate increases.
Salaries, wages and benefits increased 4.9% in
1999 due to increased business levels and a Teamster wage
and benefit increase on April 1. As noted above, the Company
received incremental business from the mid-year shutdown of
two major LTL carriers. Unfortunately, a high proportion of
this incremental business consisted of light and bulky
shipments inadequately priced to recoup incremental handling
costs. These increased expenses were partially offset by
reduced incentive compensation. In 1998 salaries, wages and
benefits decreased 4.2% from 1997 primarily due to lower
business volumes and continued benefits of workers'
compensation cost containment programs. The Company also
benefited in 1998 by paying a signing bonus on signature of
a new five-year National Master Freight Agreement, in lieu
of a first-year wage increase, a significant savings over
historical contractual wage increases.1998 and 1997 reflect
$14.4 million and $14.3 million non-cash charges,
respectively, for the issuance of common stock under the
Company's restricted stock plan.
Operating expenses increased 15.9% in 1999 due to
increased business levels and the change in freight mix, as
noted above, in addition to several other factors. The
average fuel cost per gallon increased 25% over 1998. In
response to this increase, the Company implemented a fuel
surcharge as permitted under the Company's rules tariff.
The Company was also impacted by higher than anticipated
initial and on-going costs associated with transitioning
information systems from its former parent to a third party;
start-up costs associated with the continued expansion of
the Company's 2-day service; and increased costs related to
the Company's Year 2000 project, including software
amortization related to the replacement of certain financial
systems. Lease expense for revenue equipment increased $6.1
million in 1999 as the Company continued to make significant
fleet replacements. During the fourth quarter, the Company
wrote-off $3.0 million related to a disappointing software
package implementation and was also adversely impacted from
the shedding of inadequately priced freight. Operating
expenses increased 1.0% in 1998 over 1997, despite lower
business volumes, due primarily to expenses related to the
Company's Year 2000 project and a 9.0% increase in repair
and maintenance expense on the Company's aging fleet. These
increases were partially offset by lower fuel costs per
gallon and a higher proportion of freight transported via
rail.
Purchased transportation increased 15.2% in 1999 due to
increased business levels, increased use of owner-operators
for truckload operations, costs associated with the
Company's growing PrimeTime service and increased rail
costs. The Company continued to maximize the use of lower-
cost rail services where possible. Purchased transportation
increased 8.6% in 1998 over 1997, despite lower business
levels, due to the same factors noted above.
Operating taxes and licenses increased 13.6% in 1999
due to increased business levels and increased property
taxes on terminal properties. Operating taxes and licenses
decreased 16.2% in 1998 from 1997 due to lower business
volumes, increased use of rail services and reductions of
property tax assessments.
Claims and insurance increased 21.3% over 1998 due to
increased business levels, higher than anticipated cargo
claims and higher-cost vehicular accidents during the fourth
quarter. In 1998 claims and insurance decreased 12.5%.
Depreciation increased 7.1% in 1999 over 1998 due to
increased capital expenditures in 1999 for the replacement
of older revenue equipment. Depreciation decreased 7.2% in
1998 from 1997 due primarily to a higher proportion of fully
depreciated equipment.
Operating income in 1999 decreased $44.2 million to
$7.9 million, based upon the above factors, with the
operating ratio deteriorating to 99.7% from 97.7% in 1998.
The Company's Canadian subsidiaries contributed $11.3
million of operating income in 1999. Operating income
increased $6.8 million in 1998 to $52.1 million, with the
Canadian subsidiaries contributing $10.5 million. The
Company's operating ratio improved to 97.7% in 1998 from
98.0% in 1997.
Other expense, net increased $1.6 million in 1999 over
1998 due primarily to a $2.3 million decrease in investment
income on the Company's short-term investments. Short-term
investments decreased as funds were used for capital
expenditures and share repurchases. The decrease in invest-
ment income was partially offset by a $1.1 million gain on
sale of a non-operating property. Other expense, net
decreased $3.0 million in 1998 from 1997 due to increased
investment income on the Company's short-term investments.
The Company's effective income tax rates differ from
the statutory Federal rate due primarily to foreign and
state taxes and non-deductible items.
RISK FACTORS
DECLINING MARKET SHARE: The Company is faced with a steady
erosion of its traditional "greater than 1,500 miles" length
of haul market due to trends such as the "regionalization"
of freight due to just-in-time inventory practices,
distributed warehousing and other changes in business
processes. Also contributing to this decline are new longer
length-of-haul service offerings by regional and parcel
carriers. To enjoy continued growth, the Company must
continue to invest in its infrastructure to become more
competitive in shorter length- of-haul lanes and develop
services tailored to customer needs.
PRICE STABILITY: Continuing pricing discipline among
competitors and reduced industry capacity have contributed
to relative price stability over the last three years. A
decline in economic growth and/or competitive action through
price discounting may significantly impact the Company's
performance through a reduction in revenue per hundredweight
with minimal reduction in cost.
CYCLICALITY AND SEASONALITY: The LTL industry is affected
by the state of the overall economy and seasonal
fluctuations, which affect the amount of freight to be
transported. Freight shipments, operating costs and earnings
are also affected adversely by inclement weather conditions.
The months of September, October and November of each year
usually have the highest business levels while the first
quarter has the lowest.
MARKET RISK: The Company is subject to market risks related
to changes in interest rates and foreign currency exchange
rates, primarily the Canadian dollar and Mexican peso.
Management believes that the impact on the Company's
financial position, results of operations and cash flows
from fluctuations in interest rates and foreign currency
exchange rates would not be material. Consequently,
management does not currently use derivative instruments to
manage these risks; however, it may do so in the future.
In 2000, management will continue to expand its
expedited service offerings and invest in its new 2-day
service offering. This includes consolidating some terminals
and expanding others to expedite freight through the system,
reducing handling and related costs. Additionally, the
Company is committed to improving its freight profile
through yield management programs designed to seek
appropriate compensation for the freight it handles. As a
result, the Company may experience a reduction in business
levels. As shipment volumes stabilize, management will
resize its freight flow infrastructure to expected business
levels. In the short term, the Company expects the
continuing infrastructure costs to adversely impact profits.
As discussed in Footnote 9 in the Company's
Consolidated Financial Statements, the Company is party to a
tax-sharing agreement with its former parent. Given the
uncertainties surrounding the amount and timing of any
obligations of the Company under the tax-sharing agreement,
there can be no assurance that the amount or timing of any
liability of the Company to the former parent will not have
a material adverse effect on the Company's results of
operations or financial position.
As discussed in Footnote 8 in the Company's 1999
Consolidated Financial Statements, the Company has a
restricted stock plan. As of December 31, 1999, there were
1,107,000 shares for which the stock price had not achieved
the pre-determined increases required for vesting.
Compensation expense will be recognized for those shares
once the stock price meets the required levels.
YEAR 2000
The Company successfully completed the conversion of its
internal systems for Year 2000 compliance. Costs to modify
operational and financial systems and applications in 1999
were $4.9 million, and include payroll and payroll related
costs as well as the costs of external consultants. Total
life-to-date costs of modifying operational and financial
systems and applications for Year 2000 compliance were $11.1
million. In certain cases, management opted to replace
rather than modify certain of its financial systems and
applications. Costs associated with the replacement of those
systems and applications have been capitalized. As of
December 31, 1999, $41.2 million has been capitalized and
includes the costs of hardware, software, and payroll costs,
as well as the costs of external consultants. Given the
possibility that not all Year 2000 problems would appear on
January 1, the Company is continuing to monitor its internal
systems, as well as its ability to transact with major
customers and suppliers. However, the Company does not
expect that the impact of any subsequent Year 2000
disruptions will have a material adverse effect on the
Company's financial position or results of operations.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1999, the Company had $49.1 million in
cash and cash equivalents. Net cash flow from operations for
the year ended December 31, 1999 was $21.5 million compared
with $73.8 million in the prior year. The decrease was due
in large part to lower net income and an increase in
accounts receivable. The increase in accounts receivable
reflects a temporary increase in days sales outstanding due
primarily to a fourth quarter change to a delayed invoicing
process to improve billing accuracy and customer
satisfaction. Capital expenditures in 1999 were $67.3
million compared with $31.3 million last year, as the
Company made expenditures to replace older revenue equipment
and upgrade terminal properties. Management expects capital
expenditures to be approximately $80-$100 million in 2000,
primarily for the purchase of revenue equipment, continued
upgrades to terminal properties and technology enhancements.
It is anticipated that those expenditures will be funded
with cash from operations, supplemented by financing
arrangements.
During 1999, the Company repurchased 1,407,725 shares
of its common stock for $12.6 million. This completed a $25
million stock repurchase program approved by the Board of
Directors in 1998. On December 14, 1999, the Board of
Directors authorized the repurchase of an additional $20
million of common stock, of which $19.8 million remains
available.
On October 12, 1999, the Company entered into a new,
multi-year $175 million unsecured credit facility with
several banks to provide for working capital and letter of
credit needs. Borrowings under the agreement bear interest
at LIBOR plus a margin. As of December 31, 1999, the Company
had no short-term borrowings and $66 million of letters of
credit outstanding. The continued availability of funds
under this credit facility will require that the Company
comply with certain financial covenants, the most
restrictive of which requires the Company to maintain a
minimum tangible net worth. The Company is in compliance as
of December 31, 1999 and expects to be in compliance with
these covenants in 2000.
Also in October, the Company entered into a lease
agreement covering 2,700 of the Company's trucks and
tractors. The lease agreement requires that the Company
comply with certain financial covenants, the most
restrictive of which requires the Company to maintain a
minimum tangible net worth. The Company is in compliance
as of December 31, 1999 and expects to be in compliance with
these covenants in 2000.
During the year, the Company completed operating lease
agreements for 767 new tractors and 285 new trailers.
Incremental lease payments are expected to be $6.8 million
annually through 2005. These new units are replacements for
older equipment.
As discussed in Footnote 9 in the Company's
Consolidated Financial Statements, the Company is party to a
tax-sharing agreement with its former parent. Given the
uncertainties surrounding the amount and timing of any
obligations of the Company under the tax-sharing agreement,
there can be no assurance that the amount or timing of any
liability of the Company to the former parent will not have
a material adverse effect on the Company's results of
operations or financial position.
As of December 31, 1999, the Company's ratio of long-
term debt to total capital was 5.5% compared with 5.4% as of
December 31, 1998. The current ratio was 1.2 to 1 and 1.3 to
1 as of December 31, 1999 and 1998, respectively.
INFLATION
As discussed above, the Company experienced a
25% increase in the average fuel cost per gallon in 1999.
The Company's rules tariff implements a fuel surcharge when
the average cost per gallon of on-highway diesel fuel
exceeds $1.10, as determined from the Energy Information
Administration of the Department of Energy's publication of
weekly retail on-highway diesel prices. This provision of
the rules tariff became effective in July. However, there
can be no assurance that the Company will be able to
maintain this surcharge or successfully implement such
surcharges in response to increased fuel costs in the
future.
OTHER
On January 24, 2000, the Board of Directors
elected Director G. Robert Evans vice chairman of the Board
and interim chief executive officer. He replaces W. Roger
Curry who retired after 31 years of service to the Company.
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. Under
CERCLA, PRP's are jointly and severally liable for all site
remediation and expenses. 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 statements included or incorporated by
reference herein constitute "forward-looking statements"
within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, and are subject to a number of
risks and uncertainties. Any such forward-looking statements
included or incorporated by reference herein should not be
relied upon as predictions of future events. Certain such
forward-looking statements can be identified by the use of
forward-looking terminology such as "believes," "expects,"
"may," "will," "should," "seeks," "approximately,"
"intends," "plans," "pro forma," "estimates," or
"anticipates" or the negative thereof or other variations
thereof or comparable terminology, or by discussions of
strategy, plans or intentions. Such forward-looking
statements are necessarily dependent on assumptions, data or
methods that may be incorrect or imprecise and they may be
incapable of being realized. In that regard, the following
factors, among others, and in addition to matters discussed
elsewhere herein and in documents incorporated by reference
herein, could cause actual results and other matters to
differ materially from those in such forward-looking
statements: changes in general business and economic
conditions; increases in domestic and international
competition and pricing pressure; increases in fuel prices;
uncertainty regarding the Company's ability to improve
results of operations; labor matters, including shortages of
drivers and increases in labor costs; 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.
CONSOLIDATED FREIGHTWAYS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
(Dollars in thousands)
1999 1998
ASSETS
Current Assets
Cash and cash equivalents (Note 2) $ 49,050 $ 123,081
Trade accounts receivable, net of
allowances (Note 2) 343,198 292,463
Other accounts receivable 6,524 9,195
Operating supplies, at lower of
average cost or market 9,268 7,561
Prepaid expenses 41,405 40,335
Deferred income taxes (Notes 2 and 6) 21,567 6,806
Total Current Assets 471,012 479,441
Property, Plant and Equipment, at cost (Note 2)
Land 82,701 78,218
Buildings and improvements 354,012 343,492
Revenue equipment 545,129 562,624
Other equipment and leasehold improvements 139,408 123,404
1,121,250 1,107,738
Accumulated depreciation and amortization (752,298) (746,966)
368,952 360,772
Other Assets
Deposits and other assets (Note 2) 57,712 32,199
Deferred income taxes (Notes 2 and 6) 18,596 17,978
76,308 50,177
Total Assets $ 916,272 $ 890,390
The accompanying notes are an integral part of these statements.
CONSOLIDATED FREIGHTWAYS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
(Dollars in thousands)
1999 1998
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 98,701 $ 84,861
Accrued liabilities (Note 3) 202,287 187,528
Accrued claims costs (Note 2) 78,584 72,942
Federal and other income taxes (Note 6) 16,883 14,173
Total Current Liabilities 396,455 359,504
Long-Term Liabilities
Long-term debt (Note 4) 15,100 15,100
Accrued claims costs (Note 2) 97,839 103,574
Employee benefits (Note 7) 121,783 117,236
Other liabilities 26,533 28,258
Total Liabilities 657,710 623,672
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 23,133,848
and 23,066,905 shares, respectively 231 231
Additional paid-in capital 77,406 77,303
Accumulated other comprehensive loss (10,087) (11,565)
Retained earnings 207,632 204,919
Treasury stock, at cost (1,863,691 and 477,686
shares, respectively) (16,620) (4,170)
Total Shareholders' Equity 258,562 266,718
Total Liabilities and Shareholders' Equity $ 916,272 $ 890,390
The accompanying notes are an integral part of these statements.
<TABLE>
<CAPION>
CONSOLIDATED FREIGHTWAYS CORPORATION
AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
Years Ended December 31,
(Dollars in thousands except per share data)
1999 1998 1997
<S> <C> <C> <C>
REVENUES $ 2,379,000 $ 2,238,423 $ 2,299,075
COSTS AND EXPENSES
Salaries, wages and benefits 1,516,978 1,445,899 1,509,665
Operating expenses 425,580 367,098 363,615
Purchased transportation 238,944 207,388 191,041
Operating taxes and licenses 69,382 61,090 72,882
Claims and insurance 67,685 55,804 63,741
Depreciation 52,556 49,080 52,872
2,371,125 2,186,359 2,253,816
OPERATING INCOME 7,875 52,064 45,259
OTHER INCOME (EXPENSE)
Investment income 2,688 4,957 1,894
Interest expense (4,160) (4,012) (3,213)
Miscellaneous, net (375) (1,192) (1,958)
(1,847) (247) (3,277)
Income before income taxes 6,028 51,817 41,982
Income taxes (Note 6) 3,315 25,471 21,623
NET INCOME $ 2,713 $ 26,346 $ 20,359
Basic average shares outstanding (Note 2) 22,349,997 22,634,362 22,066,212
Diluted average shares outstanding (Note 2) 22,556,275 23,510,752 22,755,714
Basic Earnings per Share: (Note 2) $ 0.12 $ 1.16 $ 0.92
Diluted Earnings per Share: (Note 2) $ 0.12 $ 1.12 $ 0.89
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED FREIGHTWAYS CORPORATION
AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
Years Ended December 31,
(Dollars in thousands)
1999 1998 1997
<S> <C> <C> <C>
Cash and Cash Equivalents, Beginning
of Year $ 123,081 $ 107,721 $ 48,679
Cash Flows from Operating Activities
Net income 2,713 26,346 20,359
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 58,363 50,918 54,679
Increase (decrease) in deferred income taxes (Note 6) (15,379) 3,498 16,522
(Gains) losses from property disposals, net (4,286) 94 (914)
Issuance of common stock under restricted stock and
safety award plans (Note 8) 289 14,449 14,297
Changes in assets and liabilities:
Receivables (48,064) 19,243 (32,152)
Accounts payable 13,840 1,734 (4,384)
Accrued liabilities 14,759 (25,116) 25,377
Accrued claims costs (93) (17,680) (11,784)
Income taxes 2,710 6,467 3,623
Employee benefits 4,547 2,016 1,908
Other (7,886) (8,127) (10,161)
Net Cash Provided by Operating Activities 21,513 73,842 77,370
Cash Flows from Investing Activities
Capital expenditures (67,273) (31,271) (22,674)
Software expenditures (27,938) (17,574) -
Proceeds from sales of property 12,308 2,918 4,591
Net Cash Used by Investing Activities (82,903) (45,927) (18,083)
Cash Flows from Financing Activities
Purchase of treasury stock (12,641) (12,555) (245)
Net Cash Used by Financing Activities (12,641) (12,555) (245)
Increase (Decrease) in Cash and Cash Equivalents (74,031) 15,360 59,042
Cash and Cash Equivalents, End of Year $ 49,050 $ 123,081 $ 107,721
Supplemental Disclosure
Cash paid for income taxes $ 14,469 $ 15,104 $ 6,399
Cash paid for interest $ 904 $ 775 $ 1,389
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED FREIGHTWAYS CORPORATION
AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
(Dollars in thousands)
Common Stock Additional
Number of Paid- in
Shares Amount Capital
<S> <C> <C> <C> <C>
Balance, December 31, 1996 22,025,323 $ 220 $ 57,174
Comprehensive income (loss) (Note 2)
Net income - - -
Foreign currency translation adjustment - - -
Total comprehensive income
Issuance of common stock under restricted
stock plan (Note 8) 1,013,114 10 14,287
Purchase of 18,151 treasury shares - - -
Balance, December 31, 1997 23,038,437 230 71,461
Comprehensive income (loss) (Note 2)
Net income - - -
Foreign currency translation adjustment - - -
Total comprehensive income
Purchase of 1,448,174 treasury shares - - -
Issuance of common stock under restricted
stock plan (Note 8) 28,468 1 23
Issuance of 988,639 treasury shares under
restricted stock plan (Note 8) - - 5,819
Balance, December 31, 1998 23,066,905 231 77,303
Comprehensive income (Note 2)
Net income - - -
Foreign currency translation adjustment - - -
Total comprehensive income
Purchase of 1,407,725 treasury shares - - -
Issuance of 21,720 treasury shares under
restricted stock
and safety award plans (Note 8) - - 98
Issuance of common stock under restricted
stock plan (Note 8) 66,943 - 5
Balance, December 31, 1999 23,133,848 $ 231 $ 77,406
Accumulated
Other
Comprehensive Retained Treasury
Income (Loss) Earnings Stock, at cost Total
Balance, December 31, 1996 $ (4,910) $ 158,214 $ - $ 210,698
Comprehensive income (loss) (Note 2)
Net income - 20,359 - 20,359
Foreign currency translation adjustment (1,662) - - (1,662)
Total comprehensive income 18,697
Issuance of common stock under restricted
stock plan (Note 8) - - - 14,297
Purchase of 18,151 treasury shares - - (245) (245)
Balance, December 31, 1997 (6,572) 178,573 (245) 243,447
Comprehensive income (loss) (Note 2)
Net income - 26,346 - 26,346
Foreign currency translation adjustment (4,993) - - (4,993)
Total comprehensive income 21,353
Purchase of 1,448,174 treasury shares - - (12,555) (12,555)
Issuance of common stock under restricted
stock plan (Note 8) - - - 24
Issuance of 988,639 treasury shares under
restricted stock plan (Note 8) - - 8,630 14,449
Balance, December 31, 1998 (11,565) 204,919 (4,170) 266,718
Comprehensive income (Note 2)
Net income - 2,713 - 2,713
Foreign currency translation adjustment 1,478 - - 1,478
Total comprehensive income 4,191
Purchase of 1,407,725 treasury shares - - (12,641) (12,641)
Issuance of 21,720 treasury shares under
restricted stock
and safety award plans (Note 8) - - 191 289
Issuance of common stock under restricted
stock plan (Note 8) - - - 5
Balance, December 31, 1999 $ (10,087) $ 207,632 $ (16,620) $ 258,562
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
CONSOLIDATED FREIGHTWAYS CORPORATION AND SUBSIDIAIRES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1 ORGANIZATION
Consolidated Financial Statements and Basis of
Presentation:The accompanying consolidated financial
statements include the accounts of Consolidated Freightways
Corporation and its wholly owned subsidiaries (the Company).
The Company, incorporated in the state of Delaware, consists
of Consolidated Freightways Corporation of Delaware, a
nationwide motor carrier, and its Canadian operations,
including Canadian Freightways Ltd., Epic Express, Milne &
Craighead, Canadian Sufferance Warehouses, Blackfoot
Logistics, and other related businesses; Redwood Systems,
Inc., a third party logistics provider; and the Leland James
Service Corporation, an administrative service provider. The
Company primarily provides less-than-truckload
transportation and supply chain management services
throughout the United States and Canada, as well as in
Mexico through a joint venture, and international freight
services between the United States and more than 80
countries.
2 PRINCIPAL ACCOUNTING POLICIES
Recognition of Revenues: Transportation freight charges are
recognized as revenue when freight is received for shipment.
The estimated costs of performing the total transportation
services are then accrued. This revenue recognition method
does not result in a material difference from in-transit or
completed service methods of recognition.
Cash and Cash Equivalents: The Company considers highly
liquid investments with an original maturity of three months
or less to be cash equivalents.
Trade Accounts Receivable, Net: Trade accounts
receivable are net of allowances of $12,794,000 and
$11,413,000 as of December 31, 1999 and 1998, respectively.
Property, Plant and Equipment: Property, plant and
equipment are depreciated on a straight-line basis over
their estimated useful lives, which are generally 25 years
for buildings and improvements, 6 to 10 years for tractor
and trailer equipment and 3 to 10 years for most other
equipment. Leasehold improvements are amortized over the
shorter of the terms of the respective leases or the useful
lives of the assets.
Expenditures for equipment maintenance and repairs
are charged to operating expenses as incurred; betterments
are capitalized. Gains or losses on sales of equipment and
operating properties are recorded in operating expenses.
Software Costs: The Company capitalizes the costs of
purchased and internally developed software in accordance
with American Institute of Certified Public Accountants
Statement of Position 98-1 "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use."
Prior to adoption of this statement in January 1998, the
Company capitalized only the costs of purchased software
while costs of internally developed software were expensed.
Deposits and Other Assets on the Consolidated Balance Sheets
includes $38,850,000 and $18,000,000 of purchased and
internally developed software costs as of December 31, 1999
and 1998, respectively. These costs are being amortized over
5 years.
Income Taxes: The Company follows the liability method
of accounting for income taxes.
Accrued Claims Costs: The Company provides for the
uninsured costs of medical, casualty, liability, vehicular,
cargo and workers' compensation claims. Such costs are
estimated each year based on historical claims and unfiled
claims relating to operations conducted through December 31.
The actual costs may vary from estimates based upon trends
of losses for filed claims and claims estimated to be
incurred. The long-term portion of accrued claims costs
relates primarily to workers' compensation claims which are
payable over several years.
Translation of Foreign Currency: Local currencies are
generally considered to be the functional currencies outside
the United States. The Company translates the assets and
liabilities of its foreign operations at the exchange rate
in effect at the balance sheet date. Income and expenses are
translated using the average exchange rate for the period.
The resulting translation adjustments are reflected in the
Statements of Consolidated Shareholders' Equity.
Transactional gains and losses are included in results of
operations.
Interest Expense: The interest expense presented in the
Statements of Consolidated Income is related to industrial
revenue bonds, as discussed in Footnote 4, "Debt", and long-
term tax liabilities.
Earnings per Share: Basic earnings per share are
calculated using only the weighted average shares
outstanding for the period. Diluted earnings per share
include the dilutive effect of restricted stock and stock
options. See Footnote 8, "Stock Compensation Plans."
The following chart reconciles basic to diluted
earnings per share for the years ended December 31, 1999,
1998 and 1997:
(Dollars in thousands except per share amounts)
Weighted Earnings
Net Average Per
Years Ended Income Shares Share
December 31, 1999
Basic $ 2,713 22,349,997 $ 0.12
Dilutive effect of restricted
stock and stock options - 206,278 -
Diluted $ 2,713 22,556,275 $ 0.12
December 31, 1998
Basic $26,346 22,634,362 $ 1.16
Dilutive effect of restricted
stock - 876,390 (0.04)
Diluted $26,346 23,510,752 $ 1.12
December 31, 1997
Basic $20,359 22,066,212 $ 0.92
Dilutive effect of restricted
stock - 689,502 (0.03)
Diluted $20,359 22,755,714 $ 0.89
Comprehensive Income: Comprehensive income includes all
changes in equity during a period except those resulting
from investments by and distributions to owners. Comprehen-
sive income (loss) for the years ended December 31, 1999,
1998 and 1997 is presented in the Statements of Consolidated
Shareholders' Equity.
Estimates: Management makes estimates and assumptions
when preparing the financial statements in conformity with
generally accepted accounting principles. These estimates
and assumptions affect the amounts reported in the accom-
panying financial statements and notes thereto. Actual
results could differ from those estimates.
Recent Accounting Pronouncements: The Financial
Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) No. 137 "Accounting for
Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of FASB Statement No. 133 (SFAS 133)."
SFAS 133, "Accounting for Derivative Instruments and Hedging
Activities," requires that an organization recognize all
derivatives as either assets or liabilities on the balance
sheet at fair value and establishes the timing of
recognition of the gain/loss based upon the derivatives'
intended use. Based upon SFAS No. 137, the Company will
adopt the provisions of SFAS 133 in the quarter ended March
31, 2001. Management does not expect that adoption of this
standard will have a material effect on the Company's
financial position or results of operations.
Reclassification: Certain amounts in prior years'
financial statements have been reclassified to conform to
the current year presentation.
3 ACCRUED LIABILITIES
Accrued liabilities consisted of the following as of December 31:
(Dollars in thousands)
1999 1998
Accrued payroll and benefits $ 89,568 $ 88,173
Other accrued liabilities 67,245 54,184
Accrued union health and welfare 23,952 21,857
Accrued taxes other than income taxes 19,776 14,045
Accrued incentive bonus 1,746 9,269
Total accrued liabilities $202,287 $187,528
4 DEBT
Long-term debt consisted of $15,100,000 of industrial
revenue bonds with rates between 5.15% and 5.25% as of
December 31, 1999. Annual maturities and sinking fund
requirements of long-term debt as of December 31, 1999 are
as follows: $0 in 2000; $0 in 2001; $0 in 2002; $1,000,000
in 2003 and $14,100,000 in 2004.
The Company has a multi-year $175 million unsecured
credit facility with several banks to provide for working
capital and letter of credit needs. Borrowings under the
agreement bear interest at LIBOR plus a margin. As of
December 31, 1999, the Company had no short-term borrowings
and $66 million of letters of credit outstanding. The
continued availability of funds under this credit facility
will require that the Company comply with certain financial
covenants, the most restrictive of which requires the
Company to maintain a minimum tangible net worth. The
Company is in compliance as of December 31, 1999 and expects
to be in compliance with these covenants in 2000.
Based on interest rates currently available to the
Company for debt with similar terms and maturities, the fair
value of long-term debt was equivalent to book value as of
December 31, 1999 and 1998.
5 LEASES
The Company is obligated under various non-cancelable leases
that expire at various dates through 2013. Future minimum
lease payments under all leases with initial or remaining
non-cancelable lease terms in excess of one year as of
December 31, 1999, are $22,826,000 in 2000, $19,697,000 in
2001, $16,619,000 in 2002, $15,098,000 in 2003, $14,667,000
in 2004, and $7,120,000 thereafter.
A lease agreement covering 2,700 of the Company's
trucks and tractors requires that the Company comply with
certain financial covenants, the most restrictive of which
requires the Company to maintain a minimum tangible net
worth. The Company is in compliance as of December 31, 1999
and expects to be in compliance with these covenants in
2000.
Rental expense for operating leases is comprised of the
following:
(Dollars in thousands)
1999 1998 1997
Minimum rentals $48,065 $37,953 $38,558
Less sublease rentals (2,707) (1,809) (2,102)
Net rental expense $45,358 $36,144 $36,456
6 INCOME TAXES
The components of pretax income and income taxes are
as follows:
(Dollars in thousands)
1999 1998 1997
Pretax income (loss)
U.S. corporations $ (7,201) $38,115 $31,296
Foreign corporations 13,229 13,702 10,686
Total pretax income $ 6,028 $51,817 $41,982
Income taxes (benefits)
Current
U.S. Federal $ 7,297 $14,244 $ (296)
State and local 6,024 2,025 88
Foreign 5,373 5,704 5,309
18,694 21,973 5,101
Deferred
U.S. Federal (10,705) 2,615 14,526
State and local (5,478) 660 1,884
Foreign 804 223 112
(15,379) 3,498 16,522
Total income taxes $ 3,315 $25,471 $21,623
Deferred tax assets and liabilities in the Consolidated
Balance Sheets are classified based on the related asset or
liability creating the deferred tax. Deferred taxes not
related to a specific asset or liability are classified
based on the estimated period of reversal. Although
realization is not assured, management believes it more
likely than not that all deferred tax assets will be
realized.
The components of deferred tax assets and liabilities
in the Consolidated Balance Sheets as of December 31 relate
to the following:
(Dollars in thousands)
1999 1998
Deferred taxes-current
Assets
Reserves for accrued claims costs $ 25,107 $ 19,740
Other reserves not currently deductible 13,470 7,358
Liabilities
Unearned revenue, net (10,134) (8,871)
Employee benefits (6,876) (11,421)
Total deferred taxes - current 21,567 6,806
Deferred taxes-non current
Assets
Reserves for accrued claims costs 33,156 39,865
Employee benefits 29,898 27,469
Retiree health benefits 24,146 24,016
Liabilities
Depreciation (52,797) (57,899)
Tax benefits from leasing transactions (11,913) (12,383)
Other (3,894) (3,090)
Total deferred taxes - non current 18,596 17,978
Net deferred taxes $ 40,163 $ 24,784
Income taxes varied from the amounts calculated by applying
the U.S. statutory income tax rate to the pretax income as
set forth in the following reconciliation:
1999 1998 1997
U.S. statutory tax rate 35.0% 35.0% 35.0%
State income taxes, net of
federal income tax benefit 4.0 3.8 4.7
Foreign taxes in excess
of U.S. statutory rate 16.8 2.2 4.0
Non-deductible operating
expenses 91.8 3.5 3.8
Fuel tax credits (4.2) (0.4) (0.6)
Foreign tax credits (83.7) - (0.2)
Other, net (4.7) 5.1 4.8
Effective income tax rate 55.0% 49.2% 51.5%
The cumulative undistributed earnings of the Company's
foreign subsidiaries, totaling $64 million as of December
31, 1999, have been reinvested indefinitely in the
respective foreign subsidiaries. Therefore, no provision has
been made for any U.S. tax applicable to foreign
subsidiaries' undistributed earnings. Taxes paid to foreign
jurisdictions on distributed foreign earnings may be used,
in whole or in part, as credits against U.S. tax. During
1999, the company repatriated $5 million in previously
undistributed earnings from its foreign subsidiaries
resulting in a one-time foreign tax credit of $5 million.
7 EMPLOYEE BENEFIT PLANS
The Company maintains a non-contributory defined benefit
pension plan (the Pension Plan) covering the Company's non-
contractual employees in the United States. The Company's
annual pension provision and contributions are based on an
independent actuarial computation. The Company's funding
policy is to contribute the minimum required tax-deductible
contribution for the year. However, it may increase its
contribution above the minimum if appropriate to its tax and
cash position and the Pension Plan's funded status. Benefits
under the Pension Plan are based on a career average final
five-year pay formula. Approximately 93% of the Pension Plan
assets are invested in publicly traded stocks and bonds. The
remainder is invested in temporary cash investments and real
estate funds.
The following information sets forth the Company's
pension liabilities included in Employee Benefits in the
Consolidated Balance Sheets as of December 31:
(Dollars in thousands) 1999 1998
Change in Benefit Obligation
Benefit obligation at beginning of year $277,083 $243,869
Service cost 8,418 7,252
Interest cost 20,291 18,661
Benefit payments (11,456) (10,424)
Actuarial (gain) loss (23,262) 17,725
Benefit obligation at end of year $271,074 $277,083
Change in Fair Value of Plan Assets
Fair value of plan assets
at beginning of year $268,398 $244,286
Actual return on plan assets 51,139 34,536
Benefit payments (11,456) (10,424)
Fair value of plan assets at end of year $308,081 $268,398
Funded Status of the Plan
Funded status at end of year $ 37,007 $ (8,685)
Unrecognized net actuarial gain (90,923) (41,738)
Unrecognized prior service cost 5,942 6,999
Unrecognized net transition asset (4,414) (5,518)
Accrued Pension Plan Liability $ (52,388)$ (48,942)
Weighted-average assumptions as of December 31:
1999 1998
Discount rate 8.0% 7.0%
Expected return on plan assets 9.5% 9.5%
Rate of compensation increase 5.5% 4.5%
Net pension cost includes the following:
(Dollars in thousands)
1999 1998 1997
Components of net pension cost
Service cost $ 8,418 $ 7,252 $ 5,975
Interest cost 20,291 18,661 17,172
Expected return
on plan assets (24,963) (22,758) (20,196)
Amortization of:
Transition asset (1,104) (1,103) (1,104)
Prior service cost 1,057 1,057 1,057
Actuarial gain (253) (1,799) (2,484)
Total net pension cost $ 3,446 $ 1,310 $ 420
The Company's Pension Plan includes a program to provide
additional benefits for compensation excluded from the basic
Pension Plan. The annual provision for this plan is based
upon independent actuarial computations using assumptions
consistent with the Pension Plan. As of December 31, 1999
and 1998, the liability was $1,901,000 and $1,492,000. The
pension cost was $421,000, $315,000 and $175,000 for the
years ended December 31, 1999, 1998 and 1997, respectively.
Approximately 82% of the Company's domestic employees
are covered by union-sponsored, collectively bargained,
multi-employer pension plans. The Company contributed and
charged to expense $131,470,000 in 1999, $123,882,000
in 1998 and $126,606,000 in 1997 for such plans. Those
contributions were made in accordance with negotiated labor
contracts and generally were based on time worked.
The Company maintains a retiree health plan that
provides benefits to non-contractual employees at least 55
years of age with 10 years or more of service. The retiree
health plan limits benefits for participants who were not
eligible to retire before January 1, 1993, to a defined
dollar amount based on age and years of service and does not
provide employer-subsidized retiree health care benefits for
employees hired on or after January 1, 1993.
The following information sets forth the Company's
total postretirement benefit liabilities included in
Employee Benefits in the Consolidated Balance Sheets as of
December 31:
(Dollars in thousands)
1999 1998
Change in Benefit Obligation
Benefit obligation at beginning of year $ 59,883 $ 46,776
Service cost 548 434
Interest cost 4,221 4,121
Benefit payments (3,515) (3,882)
Actuarial (gain) loss (3,611) 12,434
Benefit obligation at end of year $ 57,526 $ 59,883
Change in Fair Value of Plan Assets
Fair value of plan assets
at beginning of year $ - $ -
Company contributions 3,515 3,882
Benefit payments (3,515) (3,882)
Fair value of plan assets at end of year $ - $ -
Funded Status of the Plan
Funded status at end of year $(57,526) $(59,883)
Unrecognized net actuarial gain (8,863) (5,252)
Unrecognized prior service credit (264) (308)
Accrued Postretirement Benefit Liability $(66,653) $(65,443)
Weighted-average assumptions as of December 31:
1999 1998
Discount rate 8.0% 7.0%
For measurement purposes, a 6.5% annual increase in the per
capita cost of covered health care benefits was assumed for
2000 decreasing by 0.5% per year to the ultimate rate of
5.5% in 2002 and after.
Net post-retirement cost includes the following:
(Dollars in thousands)
1999 1998 1997
Components of net benefit cost
Service cost $ 548 $ 434 $ 409
Interest cost 4,221 4,121 3,472
Amortization of:
Prior service credit (44) (44) (43)
Actuarial gain - (167) (980)
Total net benefit cost $4,725 $4,344 $2,858
Assumed health care cost trend rates have a significant
effect on the amounts reported for the health care plan. A
one-percentage point change in the assumed health care cost
trend rates would have the following effects:
1% 1%
(Dollars in thousands) Increase Decrease
Effect on total of service and interest
cost components $ 178 $ (184)
Effect on the post-retirement benefit obligation $2,356 $(2,427)
The Company's non-contractual employees in the United States
are eligible to participate in the Company's Stock and
Savings Plan. This is a 401(k) plan that allows employees to
make contributions that the Company matches with common
stock up to 50% of the first three percent of a
participant's basic compensation. The Company's
contribution, which is charged as an expense, totaled
$2,460,000 in 1999, $2,088,000 in 1998, and $1,993,000 in
1997.
The Company has adopted various plans relating to the
achievement of specific goals to provide incentive bonuses
for designated employees. Total incentive bonuses earned by
the participants were $2,282,000, $21,493,000 and
$25,690,000 for the years ended December 31, 1999, 1998 and
1997, respectively.
8 STOCK COMPENSATION PLANS
The Company has various stock incentive plans (the Plans)
under which shares of restricted stock and stock options
have been awarded to regular, full-time employees and non-
employee directors. In 1999, 141,000 shares of restricted
stock were granted at $14.0625 per share; in 1998, 78,874
shares were granted at $12.20 per share; and in 1997,
1,057,027 shares were granted at $15.31 per share.
The restricted stock awards vest over time and are
contingent on the Company's average stock price achieving
pre-determined increases over the grant price for 10
consecutive trading days. All restricted stock awards
entitle the participant credit for any dividends.
Compensation expense is recognized based upon the stock
price when the minimum stock price is achieved. In December
1999, 1998 and 1997, the Company recognized non-cash charges
of $228,000, $14,449,000 and $14,297,000, respectively, as
restrictions on previously granted shares lapsed. As of
December 31, 1999, there were 1,107,000 shares for which the
stock price had not achieved the pre-determined increases
required for vesting. Compensation expense will be
recognized for those shares once the stock price meets the
required levels.
In May 1999, the Company granted 716,400 stock options
to designated employees at $14.0625 per share. Additionally,
200,000 stock options were granted to non-employee directors
at $13.00 per share. The grant prices are equal to the
closing stock prices on the dates of the grants. The options
vest ratably over 48 months, beginning in January 2000 and
expire in May 2004.
As of December 31, 1999 there were approximately
1,280,600 shares remaining reserved for granting of stock
options and restricted stock under the Plans.
The Company also has a Safety Award Plan under which it
awards shares of common stock to designated employees who
achieve certain operational safety goals. During the year
ended December 31, 1999, the Company issued 8,120 treasury
shares and recognized a non-cash charge of $60,900. As of
December 31, 1999, 141,880 shares remained in this plan.
The Company accounts for stock compensation under
Accounting Principles Board Opinion No. 25 "Accounting for
Stock Issued to Employees." In 1995, the FASB issued SFAS
No. 123, "Accounting for Stock-Based Compensation," which
encourages companies to measure stock compensation based
upon the fair value method. Had the fair value method been
applied, pro forma net loss for the year ended December 31,
1999 would have been $683,000 or $0.03 per basic and diluted
share. Pro forma net income for the year ended December 31,
1998 would have been $29.8 million or $1.32 per basic share
and $1.27 per diluted share. Pro forma net income for the
year ended December 31, 1997 would have been $16.6 million
or $0.75 per basic share and $0.73 per diluted share. The
weighted average grant date fair value of the options
granted in 1999 using the Black-Scholes option pricing model
was $7.84 per share. The following assumptions were used to
calculate the stock option values: risk-free interest rate,
5.5%; expected life, 5 years; expected volatility, 60%; and
expected dividend yield, 0%.
9 CONTINGENCIES
The Company and its subsidiaries are involved 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
financial position or results of operations.
The Company's former parent, CNF Inc., is engaged in
disputes with the Internal Revenue Service over the amount
and timing of certain tax deductions reported by the former
parent in tax years prior to the spin-off of the Company.
These disputes arise from tax positions first taken by the
former parent in the mid-1980's. The former parent, which is
contesting the IRS's positions, has made certain advance
payments to the IRS which would be applied against any
ultimate liability.
Under a tax sharing agreement entered into by the
former parent and the Company at the time of the spin-off,
the Company may be obligated to reimburse the former parent
for a portion of any additional taxes and interest which
relate to the Company's business prior to the spin-off. The
amount and timing of such payments, if any, is dependent on
the ultimate resolution of the former parent's disputes with
the IRS and the determination of the nature and extent of
the Company's obligations under the tax sharing arrangement.
The Company has established certain reserves both at the
time of and subsequent to the spin-off with respect to the
foregoing. There can be no assurance that the amount or
timing of any liability of the Company to the former parent
will not have a material adverse effect on the Company's
results of operations or financial position.
The Company has received notices from the Environmental
Protection Agency (EPA) 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. Under
CERCLA, PRP's are jointly and severally liable for all site
remediation and expenses. 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 position or results
of operations.
10 SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates in a single industry segment primarily
providing less-than-truckload transportation and supply
chain management services throughout the United States and
Canada, as well as in Mexico through a joint venture, and
international freight services between the United States and
more than 80 countries. The following information sets forth
revenues and property, plant and equipment by geographic
location. Revenues are attributed to geographic location
based upon the location of the customer. No one customer
provides 10% or more of total revenues.
Geographic Information
(Dollars in thousands) 1999 1998 1997
Revenues
United States $2,248,773 $2,117,415 $2,173,588
Canada 130,227 121,008 125,487
Total $2,379,000 $2,238,423 $2,299,075
Property, Plant and Equipment
United States $ 332,999 $ 332,912 $ 359,961
Canada 35,953 27,860 23,026
Total $ 368,952 $ 360,772 $ 382,987
11 RELATED PARTY TRANSACTIONS
The Company was a subsidiary of CNF Inc, through December 2,
1996. As part of the spin-off, the Company received
information systems, communications and certain
administrative services under a transition services
agreement that expired on December 2, 1999. The Company paid
for services on an arm's length negotiated basis. For the
years ended December 31, 1999, 1998 and 1997, the Company
was charged $7,804,000, $21,100,000 and $22,649,000 for
services under the agreement. During 1999, the Company
assumed responsibility for most of the administrative
services and completed transitioning of information systems
and communications services from the former parent to a
third party. The Company continues to receive certain
administrative services from the former parent.
The Company is also party to an agreement with its
former parent that provides for the allocation of taxes and
certain liabilities arising from periods prior to the spin-
off. See Footnote 9, "Contingencies."
As of December 31, 1999, the Company has pledged $7.5
million of real properties and $11 million of letters of
credit to its former parent for uninsured workers'
compensation and employer's liability claims incurred prior
to the spin-off and guaranteed by the former parent. The
pledged collateral is reduced over time as the Company's
pending claims are resolved.
Management Report on Responsibility for Financial Reporting
The management of Consolidated
Freightways Corporation has prepared the accompanying
financial statements and is responsible for their integrity.
The statements were prepared in accordance with generally
accepted accounting principles, after giving consideration
to materiality, and are based on management's best estimates
and judgments. The other financial information in the annual
report is consistent with the financial statements.
Management has established and maintains a system of
internal control. Limitations exist in any control structure
based on the recognition that the cost of such system should
not exceed the benefits derived. Management believes its
control system provides reasonable assurance as to the
integrity and reliability of the financial statements, the
protection of assets from unauthorized use or disposition,
and the prevention and detection of fraudulent financial
reporting. The system of internal control is documented by
written policies and procedures that are communicated to
employees. The Company's independent public accountants test
the adequacy and effectiveness of the internal controls.
The Board of Directors, through its audit committee
consisting of three independent directors, is responsible
for engaging the independent accountants and assuring that
management fulfills its responsibilities in the preparation
of the financial statements. The Company's financial
statements have been audited by Arthur Andersen LLP,
independent public accountants. Arthur Andersen LLP has
access to the audit committee without the presence of
management to discuss internal accounting controls, auditing
and financial reporting matters.
/s/G. Robert Evans
G. Robert Evans
Vice Chairman and Chief Executive Officer
/s/Sunil Bhardwaj
Sunil Bhardwaj
Senior Vice President and
Chief Financial Officer
/s/Robert E. Wrightson
Robert E. Wrightson
Senior Vice President and Controller
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of Consolidated
Freightways Corporation:
We have audited the accompanying consolidated balance sheets
of Consolidated Freightways Corporation (a Delaware
corporation) and subsidiaries as of December 31, 1999 and
1998, and the related statements of consolidated income,
cash flows and shareholders' equity for each of the three
years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the
financial position of Consolidated Freightways Corporation
and subsidiaries as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for each of
the three years in the period ended December 31, 1999 in
conformity with generally accepted accounting principles.
/s/Arthur Andersen LLP
Arthur Andersen LLP
Portland, Oregon
January 26, 2000
<TABLE>
<CAPTION>
CONSOLIDATED FREIGHTWAYS CORPORATION
AND SUBSIDIARIES
Quarterly Financial Data
(Unaudited)
(Dollars in thousands except per share data)
March 31 June 30 September 30 December 31
<S> <C> <C> <C> <C>
1999 - Quarter Ended
Revenues $558,208 $589,781 $625,547 $605,464
Operating income (loss) 13,192 4,962 9,723 (20,002)
Income (loss) before
income taxes (benefits) 12,619 4,686 9,364 (20,641)
Income taxes (benefits) 5,868 2,179 4,634 (9,366)
Net income (loss) 6,751 2,507 4,730 (11,275)
Basic earnings (loss)
per share 0.30 0.11 0.21 (0.52)
Diluted earnings (loss)
per share 0.30 0.11 0.21 (0.52)
Market price range $11.50-$18.44 $10.25-$15.00 $9.00-$12.50 $6.75-$10.63
March 31 June 30 September 30 December 31
1998 - Quarter Ended
Revenues $545,648 $551,841 $571,231 $569,703
Operating income 14,800 15,506 17,397 4,361 (a)
Income before income taxes 14,319 15,557 17,566 4,375
Income taxes 7,302 8,084 8,335 1,750
Net income 7,017 7,473 9,231 2,625
Basic earnings per share 0.30 0.32 0.41 0.12
Diluted earnings
per share 0.29 0.31 0.41 0.11
Market price range $13.00-$18.50 $12.88-$19.75 $7.63-$14.00 $7.50-$18.38
<FN>
(a) Includes $14.4 million non-cash charge for the issuance of common stock under the Company's
restricted stock plan.
</TABLE>
<TABLE>
CAPTION>
Five Year Financial Summary
Consolidated Freightways Corporation
And Subsidiaries
Years Ended December 31
(Dollars in thousands except per share data)
(Unaudited)
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Revenues $ 2,379,000 $ 2,238,423 $ 2,299,075 $ 2,146,172 $ 2,106,529
Operating income (loss) 7,875 52,064(a) 45,259(b) (73,066)(c) (42,786)(d)
Depreciation and amortization 58,363 50,918 54,679 64,565 63,902
Investment income 2,688 4,957 1,894 263 756
Interest expense 4,160 4,012 3,213 843 918
Income (loss) before income taxes
(benefits) 6,028 51,817 41,982 (77,777) (43,798)
Income taxes (benefits) 3,315 25,471 21,623 (22,201) (13,889)
Net income (loss) 2,713 26,346 20,359 (55,576) (29,909)
Cash from operations 21,513 73,842 77,370 2,545 41,772
PER SHARE
Basic earnings (loss) 0.12 1.16 0.92 (2.52) (1.36)
Diluted earnings (loss) 0.12 1.12 0.89 (2.52) (1.36)
Shareholders' equity 12.16 11.81 10.58 9.57 11.76
FINANCIAL POSITION
Cash and cash equivalents 49,050 123,081 107,721 48,679 26,558
Property, plant and equipment, net 368,952 360,772 382,987 416,688 501,311
Total assets 916,272 890,390 897,796 857,087 866,698
Capital expenditures 67,273 31,271 22,674 48,203 111,962
Long-term debt 15,100 15,100 15,100 15,100 15,100
Shareholders' equity 258,562 266,718 243,447 210,698 259,108
RATIOS AND STATISTICS
Current ratio 1.2 to 1 1.3 to 1 1.3 to 1 1.1 to 1 1.0 to 1
Net income (loss) as % of revenues 0.1% 1.2% 0.9% (2.6)% (1.4)%
Effective income tax rate 55.0% 49.2% 51.5% (28.5)% (31.7)%
Long-term debt as % of
total capitalization 5.5% 5.4% 5.8% 6.7% 5.5%
Return on average invested capital 3.6% 26.2% 24.9% (27.8)% (17.1)%
Return on average shareholders'
equity 1.1% 13.9% 12.9% (21.2)% (12.7)%
Average shares outstanding 22,349,997 22,634,362 22,066,212 22,025,323 22,025,323
Market price range $6.75-$18.44 $7.50-$19.75 $7.00-$18.50 $6.00-$9.125 n/a
Number of shareholders 31,800 34,350 31,650 13,500 n/a
Number of employees 22,100 21,000 21,600 20,300 20,200
<FN>
(a) Includes $14.4 million non-cash charge for the issuance of common stock under the Company's restricted stock plan.
(b) Includes $14.3 million non-cash charge for the issuance of common stock under the Company's restricted stock plan.
(c) Includes $15.0 million non-cash charge for the increase in workers' compensation reserve.
(d) Includes approximately $26 million of costs related to reconfiguration of freight flow system.
</TABLE>
EXHIBIT 21
CONSOLIDATED FREIGHTWAYS CORPORATION
SIGNIFICANT SUBSIDIARIES OF THE COMPANY
December 31, 1999
The significant subsidiaries of the Company were:
State or
Percent of Province or
Stock Owned Country of
Significant Subsidiaries by Company Incorporation
Consolidated Freightways
Corporation of Delaware 100 Delaware
Canadian Freightways, Limited 100 Alberta, Canada
Milne & Craighead, Inc. 100 Alberta, Canada
Canadian Freightways Eastern Limited 100 Ontario, Canada
United Terminals Ltd. 100 B.C., Canada
Blackfoot Logistics Ltd. 100 B.C., Canada
Transport CFQI, Inc., d.b.a.
Epic Express and Universal Contract
Logistics 100 Quebec, Canada
Click Express Inc. 100 Alberta,Canada
Interport Sufferance Warehouses 100 Ontario,Canada
Panorama Mainland Ltd. 100 Alberta,Canada
724569 Alberta Ltd. d.b.a. Evergreen
Logistics 100 Alberta,Canada
Consolidadora De Fletes Mexico S.A. de C.V. 99 Mexico, D.F.
Transportes CF Dominican Republic 34 Dominican Republic
Transportes CF Guatemala S.A. 99.9 Guatemala
Transportes CF Costa Rica S.A. 100 Costa Rica
Leland James Service Corporation 100 Delaware
Redwood Systems, Inc. 100 Delaware
Redwood Systems Logistics de Mexico 100 Mexico - Jalisco
Redwood Systems Services de Mexico 100 Mexico - Jalisco
Grupo Consolidated Freightways S.A. de C.V. 100 Mexico, D.F.
CF Alfri-Loder, S. de R.L. de C.V. 50 Mexico - Nuevo Leon
Transportes CF Alfri-Loder 49 Mexico - Nuevo Leon
CF MovesU.com Incorporated 100 Delaware
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 49,050
<SECURITIES> 0
<RECEIVABLES> 362,516
<ALLOWANCES> (12,794)
<INVENTORY> 9,268
<CURRENT-ASSETS> 471,012
<PP&E> 1,121,250
<DEPRECIATION> (752,298)
<TOTAL-ASSETS> 916,272
<CURRENT-LIABILITIES> 396,455
<BONDS> 15,100
0
0
<COMMON> 77,637
<OTHER-SE> 180,925
<TOTAL-LIABILITY-AND-EQUITY> 916,272
<SALES> 0
<TOTAL-REVENUES> 2,379,000
<CGS> 0
<TOTAL-COSTS> 2,371,125
<OTHER-EXPENSES> 1,847
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,160
<INCOME-PRETAX> 6,028
<INCOME-TAX> 3,315
<INCOME-CONTINUING> 2,713
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,713
<EPS-BASIC> 0.12
<EPS-DILUTED> 0.12
</TABLE>
