Page 1
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, 1996 Commission File Number 1-5046
CONSOLIDATED FREIGHTWAYS, INC.
DBA
CNF TRANSPORTATION INC.
Incorporated in the State of Delaware
I.R.S. Employer Identification No. 94-1444798
3240 Hillview Avenue, Palo Alto, California 94304
Telephone Number (415) 494-2900
Securities Registered Pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
Common Stock ($.625 par value) New York Stock Exchange
Pacific Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act:
9-1/8% Notes Due 1999
Medium-Term Notes, Series A
7.35% Notes Due 2005
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes___X___ No_______
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.
Yes ___X__ No ______
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 Composite
Tape on January 31, 1996: $735,960,184.
Number of shares of Common Stock outstanding
as of January 31, 1997: 45,001,442
DOCUMENTS INCORPORATED BY REFERENCE
Parts I, II and IV
Consolidated Freightways, Inc. 1996 Annual Report to Shareholders (only
those portions referenced herein are incorporated in this Form 10-K).
Part III
Proxy Statement dated March 24, 1997 (only those portions referenced herein
are incorporated in this Form 10-K).
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CONSOLIDATED FREIGHTWAYS, INC.
DBA CNF TRANSPORTATION INC.
FORM 10-K
Year Ended December 31, 1996
___________________________________________________________________________
INDEX
Item Page
PART I
1. Business 3
2. Properties 11
3. Legal Proceedings 12
4. Submission of Matters to a Vote of Security Holders 12
PART II
5. Market for the Company's Common Stock and
Related Security Holder Matters 12
6. Selected Financial Data 12
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
8. Financial Statements and Supplementary Data 13
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 13
PART III
10. Directors and Executive Officers of the Company 14
11. Executive Compensation 15
12. Security Ownership of Certain Beneficial
Owners and Management 15
13. Certain Relationships and Related Transactions 15
PART IV
14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 15
SIGNATURES 16
INDEX TO FINANCIAL INFORMATION 19
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CONSOLIDATED FREIGHTWAYS, INC.
dba
CNF TRANSPORTATION INC.
FORM 10-K
Year Ended December 31, 1996
___________________________________________________________________________
PART I
ITEM 1. BUSINESS
(a) General Development of Business
On December 2, 1996, Consolidated Freightways, Inc. (the Registrant)
completed the previously announced tax-free distribution (the Spin-off) to
its shareholders of a new publicly traded company, Consolidated Freightways
Corporation (CFC), composed of its long-haul motor carrier and related
businesses. The Registrant's shareholders received one share of CFC stock
for every two shares of the Registrant's stock owned on November 15, 1996.
Following the Spin-off, the Registrant began doing business as CNF
Transportation Inc., and intends to seek shareholder approval to change its
name at the annual shareholders meeting to be held April 28, 1997.
The Registrant is now a company that participates through subsidiaries in
regional trucking, truckload and intermodal rail, domestic and
international air cargo services, ocean forwarding, contract logistics and
related transportation activities. These operations are organized into
three primary business segments: regional trucking and full-service
truckload (Con-Way Transportation Services); air freight and ocean
forwarding (Emery Worldwide); and Other which is comprised of a third-party
contract logistics company (Menlo Logistics), Road Systems, a trailer
manufacturer, and VantageParts, a wholesale truck parts distributor.
Consolidated Freightways, Inc. was incorporated in Delaware in 1958 as a
successor to a business originally established in 1929. It is herein
referred to as the "Registrant" or "Company".
(b) Financial Information About Industry Segments
The operations of the Company are primarily conducted in the U.S. but to an
increasing extent are conducted in major foreign countries. An analysis by
industry group of revenues, operating income, depreciation and capital
expenditures for the years ended December 31, 1996, 1995 and 1994, and
identifiable assets as of those dates is presented in Note 13 on pages 37
and 38 of the 1996 Annual Report to Shareholders and is incorporated herein
by reference. Geographic group information is also presented therein.
Intersegment revenues and earnings thereon have been eliminated.
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(c) Narrative Description of Business
The Company, for reporting purposes, has designated three principal
operating segments: the Con-Way Transportation Services Group which
provides one- and two-day, less-than-truckload service as well as highway,
rail and multi-modal logistics services; the Emery Worldwide Group which is
responsible for all domestic and international air freight activities and
ocean forwarding services; and the Other group which is comprised of the
full-service contract logistics subsidiary, Menlo Logistics, Road Systems
and VanatageParts. Each segment is described in greater detail as follows:
CON-WAY TRANSPORTATION SERVICES
Con-Way Transportation Services, Inc. (CTS) is a time-definite and day-
definite freight transportation company with business units that provide
regional and inter-regional LTL freight transportation; full-service
truckload freight service and expedited shipping. CTS serves the regional
and national markets utilizing a dedicated highway fleet and intermodal
rail stack train resources for regional, inter-regional and
transcontinental transportation; urgent or emergency ground expedited
shipping; local and interstate container drayage and international
shipping; assembly and distribution logistics programs. CTS has four main
operating units consisting of three regional carriers as well as a
truckload operation. Beginning in 1996, CTS began operations of Con-Way
NOW, an expedited and emergency ground shipping company initially serving
the Midwest.
Con-Way Regional Carriers
CTS has three regional motor carrier units, each of which operates
dedicated regional trucking networks principally serving core geographic
territories with next-day and second-day service. The regional carriers
serve manufacturing, industrial, commercial and retail business-to-business
customers with a fleet of approximately 23,500 trucks, tractors and
trailers at December 31, 1996.
Con-Way Western Express (CWX) was founded in May 1983 and today operates in
13 western states and serves Canada and Mexico. At December 31, 1996, CWX
operated 63 service centers.
Con-Way Central Express (CCX) was founded in June 1983 and today serves 23
states of the central and northeast U.S. (including New Jersey and
metropolitan New York City), and Ontario, Canada. At December 31, 1996 CCX
operated 205 service centers
Con-Way Southern Express was founded in April 1987 and was combined with
CTS' south-western regional operation in December 1994 to form a single
operating unit under the Con-Way Southern Express (CSE) name. CSE serves a
14-state southern market from Texas to the Carolinas and Florida, and also
serves Puerto Rico and Mexico. CSE operated 100 service centers at
December 31, 1996.
CTS has completed regional service expansions that allow the regional
carriers to provide next-day and second-day freight delivery between their
principal geographic regions, utilizing existing infrastructure. CTS can
now provide full regional service throughout the U.S. and parts of Canada.
The joint service offering is intended to generate additional business by
allowing each regional carrier to
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compete for new traffic and provide coverage of regional market lanes not
individually serviced as part of the regional carrier's core territory. In
1996, a new subsidiary, Con-Way NOW, began operations in the Midwest
serving the expedited surface shipment market with plans for expansion in
1997.
Con-Way Truckload Services
Con-Way Truckload Services (CWT), formerly known as Con-Way Intermodal, is
a full-service, multi-modal truckload company. CWT provides door-to-door
transcontinental movement of truckload shipments by rail container stack
train and rail trailer, utilizing nationwide operating alliances with major
railroads. It also provides expedited inter-regional and regional over-the-
road truckload service with a fleet of company-owned trucks and trailers.
Additionally, CWT provides rail freight forwarding with domestic intermodal
marketing services, assembly and distribution services, and local and
interstate container drayage.
Employees
CTS's domestic employment has increased to approximately 14,300 employees
at December 31, 1996 from approximately 12,400 at December 31, 1995 and
9,700 employees at December 31, 1994.
Customers
There is a broad diversity in the customers served, size of shipments,
commodities transported and length of haul. No single customer or
commodity accounted for more than a small fraction of total revenues.
Competition
The regional trucking companies face competition as national LTL companies
extend into regional markets, and acquire and combine formerly independent
regional carriers into inter-regional groups. Competitors include both
national LTL companies and regional companies, some of which may have
greater financial and other resources than CTS. CTS has sought to meet
these competitive challenges by, among other things, new service offerings,
continued expansion by its regional carrier networks, extension of next-day
and second-day service and enhanced inter-regional network capabilities.
Fuel
Fuel prices have increased significantly in the last year after remaining
stable for the two prior years. CTS's average annual diesel fuel cost per
gallon (without tax) has increased approximately 20% in 1996 compared with
1995. The 1995 fuel cost remained virtually unchanged compared with the
per gallon cost of 1994. To recapture the fuel cost increases, CTS
implemented a fuel surcharge beginning in the second-half of 1996.
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Federal and State Regulation
Regulation of motor carriers has changed substantially in recent 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. The process culminated with
federal pre-emption of most economic regulation of intrastate trucking
regulatory bodies effective January 1, 1995, and with legislation to
terminate 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) and the Surface Transportation
Board (STB), both 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. In addition, the FHWA
enforces comprehensive trucking safety regulations relating to driver
qualifications, driver hours of service, safety-related equipment
requirements, vehicle inspection and maintenance, recordkeeping on
accidents, and transportation of hazardous materials. 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 preemption 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.
EMERY WORLDWIDE
Emery Worldwide (EWW), the Company's air freight unit, was formed when the
Company purchased Emery Air Freight Corporation in April 1989. EWW
provides global air cargo services to 200 countries through an integrated,
combination carrier, freight system designed for the movement of parcels
and packages of all sizes and weights. In North America, EWW provides these
services through a system of sales offices and service centers, and
overseas through foreign subsidiaries, branch sales offices, service
centers and agents. In 1996, international revenues comprised nearly 40%
of Emery's total commercial revenues.
EWW provides door-to-door service within North America by using its own
airlift system, supplemented with commercial airlines. International
services are performed by operating primarily as an air freight forwarder
using commercial airlines, and
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with controlled lift used on a limited basis. Emery also operated
approximately 2,000 trucks, vans and tractors at December 31, 1996.
As of December 31, 1996, EWW utilized a fleet of 71 dedicated aircraft, 48
of which are leased on a long-term basis, while 9 were owned and 14 were
contracted on a short-term basis to supplement nightly volumes and to
provide feeder services. The nightly lift capacity of the aircraft fleet,
excluding charters, was over 4 million pounds.
EWW's hub-and-spoke system is based at the Dayton, Ohio International
Airport where a leased air cargo facility (Hub) and related support
facilities are located. The Hub handles all types of shipments, ranging
from small packages to heavyweight cargo, with a total effective sort
capacity of approximately 1.2 million pounds per hour. The operation of
the Hub in conjunction with EWW's airlift system enables it to maintain a
high level of service reliability.
Through a separate subsidiary of the Company, Emery Worldwide Airlines,
Inc. (EWA), the Company provides nightly cargo airline services under a
contract with the U.S. Postal Service (USPS) to carry Express and Priority
Mail, using 24 aircraft, of which 4 were leased on a long-term basis and 20
were owned at December 31, 1996. The ten year USPS contract was awarded to
EWA in 1993 with service beginning in January 1994.
The Company has recognized approximately $110 million of revenue each year
in 1996, 1995 and 1994, respectively, from contracts to carry Express and
Priority Mail for the USPS.
Operating subsidiaries of EWW include Emery Expedite!, a rapid response
freight handling subsidiary providing door-to-door delivery of shipments in
North America and overseas. EWW's logistics subsidiary, Emery Global
Logistics, continues to expand its service capabilities, and now operates
warehouse and distribution centers for customers in six countries. Emery
Customs Brokerage provides full service customs clearance regardless of
mode or carrier. Another subsidiary, Emery Ocean Services, is a global
freight forwarder and non-vessel operating common carrier that provides
full and less-than-container load service.
Employees
As of December 31, 1996, EWW had nearly 10,000 full-time and regular
part-time employees compared with approximately 9,000 at December 31, 1995.
EWW had approximately 8,000 employees at December 31, 1994.
Technology
An important element in the movement of goods is the rapid movement of
information to track freight, optimize carrier selections, and interlink
and analyze customer data. Starting in 1996, EWW began to invest in what is
expected to be a $70 million multi-year technology program to upgrade its
hardware and software systems architecture, including the tracking system
at its Hub in Dayton, Ohio. The system will provide enhanced tracking
information for shipments to reduce missorts, avoid potential overloads and
to signal freight with specialized handling requirements.
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Customers
EWW services, among others, the automotive, aerospace, machinery, metals,
electronic and electrical equipment, chemical, apparel, film and technology
industries. Service industries and governmental entities also utilize EWW's
services. Both U.S. and international operations of EWW have a wide
variety of customers. No single customer accounted for more then 10% of
EWW's total commercial revenues in 1996.
Competition
The heavy air-freight market within North America is highly competitive and
price and service sensitive. The Company believes that, in 1996, EWW had
the largest market share, based on revenues, in the North American heavy
air-freight segment. EWW competes with other integrated air freight
carriers as well as freight forwarders.
The North Atlantic market is especially price sensitive due to abundant
airlift capacity. Competition in international markets is also service and
price sensitive. In these markets, which the Company believes are typically
more fragmented than the North American market, EWW competes with
international airlines and air freight forwarders. EWW's competitors in
North American and international markets include companies which may have
greater financial and other resources than EWW.
Fuel
EWW purchases substantially all of its jet fuel from major oil companies,
refiners and trading companies on annual contracts with prepayment and/or
volume discounts. These contract purchases are supplemented by spot
purchases. The price of jet fuel has increased significantly in 1996
following only a slight increase in 1995. EWW's 1996 weighted average cost
per gallon (without tax) increased over 21% compared with the 1995 cost per
gallon. EWW began to recover a portion of these higher costs starting in
November 1996 with a fuel index fee. The 1995 weighted average price per
gallon was less than 2% higher than 1994.
EWW believes that it has the flexibility to continue its operations without
material interruption unless there are significant curtailments of its jet
fuel supplies. Neither EWW nor the operators of the aircraft it charters
have experienced any material fuel supply problems. There is a four
million gallon fuel storage facility at the Hub.
Regulation of Air Transportation
The air transportation industry is subject to federal regulation under the
Federal Aviation Act of 1958, as amended (Aviation Act) and regulations
issued by the Department of Transportation (DOT) pursuant to the Aviation
Act. EWW, as an air freight forwarder, and EWA, as an airline, are subject
to different regulations. Air freight forwarders are exempted from most DOT
economic regulations and are not subject to Federal Aviation Administration
(FAA) safety regulations, except security-related rules. Airlines are
subject to economic regulation by the DOT, and maintenance, operating and
other safety-related regulation by the FAA. Thus,
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EWA and other airlines conducting operations for EWW are subject to DOT and
FAA regulation while EWW is not covered by most DOT and FAA regulations.
Regulation of Ground Transportation
When EWW provides ground transportation of cargo having prior or subsequent
air movement, the ground transportation is exempt from the motor carrier
registration requirements and economic regulations which were inherited
from the ICC by FHWA and STB, respectively. Such ground transportation,
however, is subject to comprehensive trucking safety regulation by FHWA as
described in the Con-Way Transportation Services section. In addition, EWW
holds FHWA motor carrier registrations which can be utilized in providing
non-exempt ground transportation. For a description of applicable state
regulations, refer to the discussion in the Con-Way Transportation Services
section.
Environmental Matters
During recent years, operations at several airports have been subject to
restrictions or curfews on arrivals or departures during certain night-time
hours designed to reduce or eliminate noise for surrounding residential
areas. None of these restrictions have materially affected EWW's
operations. If such restrictions
were to be imposed with respect to the airports at which EWW's activities
are centered, and no alternative airports were available to serve the
affected areas, there could be a material adverse effect on EWW's
operations. As provided in the Aviation Act, the FAA is authorized to
establish aircraft noise standards. Under the National Emission Standards
Act of 1967, as amended, the administrator of the Environmental Protection
Agency is authorized to issue regulations setting forth standards for
aircraft emissions. EWW believes that its present fleet of owned, leased or
chartered aircraft is operating in compliance with currently applicable
noise and emission laws.
The Aviation Noise and Capacity Act of 1990 establishes a national aviation
noise policy. The FAA has promulgated regulations under this Act regarding
the phase-in requirements for compliance. This legislation and the related
regulations will require all of EWW's and EWA's owned and leased aircraft
eligible for operation in the contiguous United States to either undergo
modifications or otherwise comply with Stage 3 noise restrictions by year-
end 1999.
OTHER
Menlo Logistics
Menlo Logistics, Inc. (MLI), founded in 1990, provides full-service
contract logistics services for technology, manufacturing and industrial,
food and beverage and retail businesses. MLI assists its customers in
managing their supply and distribution networks, including transportation
management, dedicated contract warehousing, dedicated contract carriage,
just-in-time delivery programs, customer order processing and freight bill
payment and auditing. At December 31, 1996, MLI had a workforce of
approximately 1,500 employees.
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As contract logistics is a relatively new industry, competition is expected
to come from new entrants into the markets MLI serves. MLI addresses the
increased competition by utilizing technologies and its established
experience. Refer to the Con-Way Transportation Services section for
discussion of federal and state regulation affecting the transportation
activities of MLI.
Road Systems and VantageParts
Two non-carrier operations that are included in the Other segment for
reporting purposes generate a majority of their revenues from sales to
other subsidiaries of the Company and in prior years from the spun-off
entity, CFC. Road Systems, primarily manufactures and rebuilds trailers,
converter dollies and other transportation equipment. VantageParts serves
as a distributor and remanufacturer of vehicle component parts and
accessories to the heavy-duty truck and trailer industry, as well as the
maritime, construction, aviation and other industries.
GENERAL
The research and development activities of the Company are not significant.
During 1996, 1995 and 1994 there was no single customer of the Company that
accounted for more than 10% of consolidated revenues.
The total number of employees is presented in the "Five Year Financial
Summary" on page 40 of the 1996 Annual Report to Shareholders and is
incorporated herein by reference.
The Company has been designated a Potentially Responsible Party (PRP) by
the EPA with respect to the disposal of hazardous substances at various
sites. The Company expects its share of the clean-up cost will not have a
material adverse effect on the Company's financial position or results of
operations. The Company expects the costs of complying with existing and
future federal, state and local environmental regulations to continue to
increase. On the other hand, it does not anticipate that such cost
increases will have a materially adverse effect on the Company.
(d) Financial Information About Foreign
and Domestic Operations and Export Sales
Information as to revenues, operating income and identifiable assets for
each of the Company's business segments and for its foreign operations in
1996, 1995 and 1994 is contained in Note 13 on pages 37 and 38 of the 1996
Annual Report to Shareholders and is incorporated herein by reference.
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ITEM 2. PROPERTIES
The following summarizes the freight service centers operated by the
Company at December 31, 1996:
Owned Leased Total
Con-Way Transportation Services 53 319 372
Emery Worldwide 12 243 255
The following table sets forth the location and square footage of the
Company's principal freight service centers at December 31, 1996:
Location Square Footage
CTS - freight service centers
Chicago, IL 113,116
Charlotte, NC 102,743
Des Plains, IL 100,440
Columbus, OH 86,537
Oakland, CA 85,600
Dallas, TX 82,000
Atlanta, GA 56,160
Cincinnati, OH 55,618
Detroit, MI 66,320
St. Louis, MO 49,065
Carlstadt, NJ 48,360
Santa Fe Springs, CA 45,936
Jackson, MS 44,596
Knoxville, TN 44,460
Aurora, IL 44,235
South Bend, IN 39,320
Milwaukee, WI 36,560
Ft. Wayne, IN 35,400
Pontiac, MI 34,450
Sacramento, CA 25,968
Braintree, MA 22,160
EWW - freight service centers
* Dayton, OH 620,000
Los Angeles, CA 78,264
Chicago, IL 59,976
Boston, MA 42,236
Indianapolis, IN 38,500
* Facility partially or wholly financed through the issuance of
industrial revenue bonds. Principal amount of debt is secured by the
property.
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ITEM 3. LEGAL PROCEEDINGS
The legal proceedings of the Company are summarized in Note 12 on page 37
of the 1996 Annual Report to Shareholders and are incorporated herein by
reference. Discussions of certain environmental matters are presented in
Item 1 and Item 7.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
The Company's common stock is listed for trading on the New York and
Pacific Stock Exchanges under the symbol "CNF".
The Company's common stock price for each of the quarters in 1996 and 1995
is included in Note 14 on page 39 of the 1996 Annual Report to Shareholders
and is incorporated herein by reference.
Cash dividends on common shares had been paid in every year from 1962 to
1990. In June 1990 the Company's Board of Directors suspended the
quarterly dividend. In December 1994, the Board of Directors reinstated a
$.10 per share quarterly cash dividend on common stock. The amounts of
quarterly dividends declared on common stock for the last two years are
included in Note 14 on page 39 of the 1996 Annual Report to Shareholders
and are incorporated herein by reference.
Under the terms of the restructured TASP Notes, as set forth in Note 14 on
pages 30 and 31 of the 1996 Annual Report to Shareholders, the Company is
restricted from paying dividends in an aggregate amount in excess of $10
million plus one half of the cumulative net income applicable to common
shareholders since the commencement of the agreement.
Effective March 15, 1995, all of the 690,000 shares of the Company's Series
C Preferred Stock were converted to 6,900,000 shares of common stock.
As of December 31, 1996, there were 16,090 holders of record of the common
stock ($.625 par value) of the Company. The number of shareholders is also
presented in the "Five Year Financial Summary" on page 40 of the 1996
Annual Report to Shareholders and is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The Selected Financial Data is presented in the "Five Year Financial
Summary" on page 40 of the 1996 Annual Report to Shareholders and is
incorporated herein by reference.
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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 in the "Financial Review and Management Discussion"
on pages 18 through 20, inclusive, of the 1996 Annual Report to
Shareholders and is incorporated herein by reference.
Certain statements included or incorporated by reference herein constitute
"forward-looking statements" within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended, and are subject to a number of
risks and uncertainties. Any such forward-looking statements contained 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" or "anticipates" or the
negative thereof or other variations thereof or comparable terminology, or
by discussions of strategy. 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, could cause actual results and other
matters to differ materially from those in such forward-looking statements:
changes in general business and economic conditions; increasing domestic
and international competition and pricing pressure; changes in fuel prices;
uncertainty regarding the Company's ability to improve results of
operations; labor matters, including changes in labor costs, renegotiation
of labor contracts and the risk of work stoppages or strikes; changes in
governmental regulation; environmental and tax matters; and matters
relating to the recently completed Spin-off of Consolidated Freightways
Corporation (CFC). In that regard, the Company is or may be subject to
substantial liabilities with respect to certain matters relating to CFC's
business and operations, including, without limitation, guarantees of
certain indebtedness of CFC and liabilities for employment-related matters.
Although CFC is, in general, either the primary obligor or jointly and
severally liable with the Company with respect to these matters, a failure
to pay or other default by CFC with respect to the obligations as to which
the Company is or may be, or may be perceived to be, liable, whether
because of CFC's bankruptcy or insolvency or otherwise, could lead to
substantial claims against the Company. As a result of the foregoing, no
assurance can be given as to future results of operations or financial
condition.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and Report of Independent Public
Accountants are presented on pages 21 through 40, inclusive, of the 1996
Annual Report to Shareholders and are incorporated herein by reference.
The unaudited quarterly financial data is included in Note 14 on page 39 of
the 1996 Annual Report to Shareholders and is incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PAGE 14
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The identification of the Company's Directors is presented on pages 3
through 8, inclusive, of the Proxy Statement dated March 24, 1997 and those
pages are incorporated herein by reference.
The Executive Officers of the Company, their ages at December 31, 1996 and
their applicable business experience are as follows:
Donald E. Moffitt, 64, Chairman of the Board, President and Chief Executive
Officer of the Company. Mr. Moffitt joined Consolidated Freightways
Corporation of Delaware, the Company's nationwide, full-service trucking
subsidiary, as an accountant in 1955 and advanced to Vice President -
Finance in 1973. In 1975, he transferred to the Company as Vice President
- - Finance and Treasurer and in 1981, was elected Executive Vice President -
Finance and Administration. In 1983, he assumed the additional duties of
President, CF International and Air, Inc., where he directed the Company's
international and air freight businesses. Mr. Moffitt was elected Vice
Chairman of the Board of the Company in 1986. He retired as an employee
and as Vice Chairman of the Board of Directors in 1988 and returned to the
Company as Executive Vice President - Finance and Chief Financial Officer
in 1990. Mr. Moffitt was named President and Chief Executive Officer of the
Company and was elected to the Board of Directors in 1991. In 1995, Mr.
Moffitt was named Chairman of the Board of Directors. Mr. Moffitt is a
member of the Boards of Directors of the U.S. Chamber of Commerce, the
California Business Roundtable, the Conference Board and the Business
Advisory Council of the Northwestern University Transportation Center. He
also serves on the boards of the San Francisco Bay Area Council, Boy Scouts
of America and the American Red Cross, and is a member of the Board of
Trustees of the Automotive Safety Foundation and the National Commission
Against Drunk Driving. He is a former member of the Board of Directors and
the Executive Committee of the Highway Users Federation. Mr. Moffitt is
Chairman of the Executive Committee and serves on the Director Affairs
Committee of the Company.
David I. Beatson, 49, President and Chief Executive Officer of Emery Air
Freight Corporation and Senior Vice President of the Company. Mr. Beatson
joined CF AirFreight in 1977, advancing through several increasingly
responsible positions to Vice President of National Accounts. After
leaving the Company for a time, he returned to EWW in 1991 as Vice
President of Sales and Marketing. He became President and Chief Executive
Officer of Emery Air Freight Corporation in 1994.
Gregory L. Quesnel, 48, Executive Vice President and Chief Financial
Officer of the Company. Mr. Quesnel joined Consolidated Freightways
Corporation of Delaware in 1975 as Director of Financial Accounting.
Through several increasingly responsible financial positions, he advanced
to become the top financial officer of CFCD. In 1989, he was elected Vice
President-Accounting for the Company and in 1990, was named Vice President
and Treasurer. Mr. Quesnel became Senior Vice President-Finance and Chief
Financial Officer of the Company in 1991 and Executive Vice President and
Chief Financial Officer in 1993.
PAGE 15
Robert T. Robertson, 55, President and Chief Executive Officer of Con-Way
Transportation Services, Inc. and Senior Vice President of the Company.
Mr. Robertson joined CFCD in 1970 as a sales representative and advanced to
Manager of Eastern Area Sales by 1973. He transferred to Texas in 1976
where he became involved in CFCD's operations and was promoted to Division
Manager in 1978. In 1983, he was named Vice President and General Manager
of Con-Way Transportation Services, Inc. In 1986, Mr. Robertson was
elected President of CTS.
Eberhard G.H. Schmoller, 53, Senior Vice President, General Counsel and
Secretary of the Company. Mr. Schmoller joined CFCD in 1974 as a staff
attorney and in 1976 was promoted to CFCD assistant general counsel. In
1983, he was appointed Vice President and General Counsel of CF AirFreight
and assumed the same position with EWW after the acquisition in 1989. Mr.
Schmoller was named Senior Vice President and General Counsel of the
Company in 1993.
ITEM 11. EXECUTIVE COMPENSATION
The required information for Item 11 is presented on pages 12 through 16,
inclusive, of the Proxy Statement dated March 24, 1997, and is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The required information for Item 12 is included on pages 9, 10 and 30 of
the Proxy Statement dated March 24, 1997 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
A Form 8-K dated December 2, 1996, was filed on December 17, 1996,
under Item 5, Other Information, to report the previously announced spin-
off to the Company's shareholders of the stock of the new publicly traded
company Consolidated Freightways Corporation, composed of the long-haul
carrier and related businesses. Included in the filing were amended By-
laws, as of December 9, 1996.
PAGE 16
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.
CONSOLIDATED FREIGHTWAYS, INC.
dba CNF TRANSPORTATION INC.
(Registrant)
March 26, 1997 /s/Donald E. Moffitt
Donald E. Moffitt
Chairman, President and Chief Executive
Officer
March 26, 1997 /s/Gregory L. Quesnel
Gregory L. Quesnel
Executive Vice President and Chief
Financial Officer
March 26, 1997 /s/Gary D. Taliaferro
Gary D. Taliaferro
Vice President and Controller
PAGE 17
SIGNATURES
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 26, 1997 /s/Donald E. Moffitt
Donald E. Moffitt
Chairman of the Board, President and
Chief Executive Officer
March 26, 1997 _______________________
Robert Alpert, Director
March 26, 1997 /s/Earl F. Cheit
Earl F. Cheit, Director
March 26, 1997 /s/Richard A. Clarke
Richard A. Clarke, Director
March 26, 1997 ________________________
Margaret G. Gill, Director
March 26, 1997 /s/Robert Jaunich II
Robert Jaunich II, Director
March 26, 1997 /s/W. Keith Kennedy, Jr.
W. Keith Kennedy, Jr., Director
March 26, 1997 /s/Richard B. Madden
Richard B. Madden, Director
PAGE 18
SIGNATURES
March 26, 1997 /s/Robert D. Rogers
Robert D. Rogers, Director
March 26, 1997 /s/William J. Schroeder
William J. Schroeder, Director
March 26, 1997 /s/Robert P. Wayman
Robert P. Wayman, Director
PAGE 19
CONSOLIDATED FREIGHTWAYS, INC.
dba
CNF TRANSPORTATION INC.
FORM 10-K
Year Ended December 31, 1996
___________________________________________________________________________
INDEX TO FINANCIAL INFORMATION
CNF Transportation Inc. and Subsidiaries
The following Consolidated Financial Statements of CNF Transportation Inc.
and Subsidiaries appearing on pages 21 through 39, inclusive, of the
Company's 1996 Annual Report to Shareholders are incorporated herein by
reference:
Report of Independent Public Accountants
Consolidated Balance Sheets - December 31, 1996 and 1995
Statements of Consolidated Income - Years Ended December 31, 1996,
1995 and 1994
Statements of Consolidated Cash Flows - Years Ended December 31, 1996,
1995 and 1994
Statements of Consolidated Shareholders' Equity - Years Ended
December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
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 20
Report of Independent Public Accountants 20
Schedule II - Valuation and Qualifying Accounts 21
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.
PAGE 20
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 the Company's previously filed Registration Statement File Nos. 2-
81030, 33-52599, 33-60619, 33-60625 and 33-60629.
/s/Arthur Andersen LLP
ARTHUR ANDERSEN LLP
San Francisco, California
March 26, 1997
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
CNF Transportation Inc.:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in CNF Transportation Inc.'s
1996 Annual Report to Shareholders incorporated by reference in this Form
10-K, and have issued our report thereon dated January 24, 1997. Our audit
was made for the purpose of forming an opinion on those statements taken as
a whole. The Schedule II--Valuation and Qualifying Accounts on page 21 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
San Francisco, California
January 24, 1997
PAGE 21
SCHEDULE II
CNF TRANSPORTATION INC.
VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 1996
(In thousands)
DESCRIPTION
ALLOWANCE FOR DOUBTFUL ACCOUNTS
ADDITIONS
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
1996 $16,870 $16,729 $ - $(14,887)(a) $18,712
1995 $15,889 $11,017 $ - $(10,036)(a) $16,870
1994 $17,506 $ 5,067 $ - $ (6,684)(a) $15,889
(a) Accounts written off net of recoveries.
PAGE 22
INDEX TO EXHIBITS
ITEM 14(a)(3)
Exhibit No.
(3) Articles of incorporation and by-laws:
3.1 Consolidated Freightways, Inc. Certificates of Incorporation, as
amended. (Exhibit 3(a)(2) to the Company's Quarterly Report
Form 10-Q for the quarter ended March 31, 1987*)
3.2 Consolidated Freightways, Inc. By-laws, as amended, December 9,
1996 (Exhibit 3.1 to the Company's Form 8-K dated
December 2, 1996*).
(4) Instruments defining the rights of security holders, including
debentures:
4.1 Consolidated Freightways, Inc. Stockholder Rights Plan.
(Exhibit 1 on Form 8-A dated October 27, 1986*)
4.2 Certificate of Designations of the Series B Cumulative
Convertible Preferred Stock. (Exhibit 4.1 as filed on Form SE
dated May 25, 1989*)
4.3 Indenture between the Registrant and Bank One, Columbus, NA, as
successor trustee, with respect to 9-1/8% Notes Due 1999, Medium-
Term Notes, Series A and 7.35% Notes due 2005. (Exhibit 4.1 as
filed on Form SE dated March 20, 1990*)
4.4 Form of Security for 9-1/8% Notes Due 1999 issued by
Consolidated Freightways, Inc. (Exhibit 4.1 as filed on Form
SE dated August 25, 1989*)
4.5 Officers' Certificate dated as of August 24, 1989 establishing
the form and terms of debt securities issued by Consolidated
Freightways, Inc. (Exhibit 4.2 as filed on Form SE dated August
25, 1989*)
4.6 Form of Security for Medium-Term Notes, Series A to be issued by
Consolidated Freightways, Inc. (Exhibit 4.1 as filed on Form SE
dated September 18, 1989*)
4.7 Officers' Certificate dated September 18, 1989, establishing the
form and terms of debt securities to be issued by Consolidated
Freightways, Inc. (Exhibit 4.2 as filed on Form SE dated
September 19, 1989*)
4.8 Indenture between the Registrant and The First National Bank of
Chicago Bank, trustee, with respect to debt securities. (Exhibit
4(d) as filed on Form S-3 dated June 27, 1995*)
4.9 Indenture between the Registrant and Bank One, Columbus, NA,
trustee, with respect to subordinated debt securities.
(Exhibit 4(e) as filed on Form S-3 dated June 27, 1995*)
4.10 Form of Security for 7.35% Notes due 2005 issued by Consolidated
Freightways, Inc. (Exhibit 4.4 as filed on Form S-4 dated June 27,
1995*)
* Previously filed with the Securities and Exchange Commission and
incorporated herein by reference.
PAGE 23
Instruments defining the rights of security holders of long-term debt
of Consolidated Freightways, Inc., and its subsidiaries for which
financial statements are required to be filed with this Form 10-K,
of which the total amount of securities authorized under each such
instrument is less than 10% of the total assets of Consolidated
Freightways, Inc. and its subsidiaries on a consolidated basis, have
not been filed as exhibits to this Form 10-K. The Company agrees to
furnish a copy of each applicable instrument to the Securities and
Exchange Commission upon request.
Exhibit No.
(10) Material contracts:
10.1 Consolidated Freightways, Inc. Long-Term Incentive Plan of 1978,
as amended through Amendment No. 7.(Exhibit 10.1 as filed on
Form SE dated March 25, 1991*#)
10.2 Consolidated Freightways, Inc. Long-Term Incentive Plan of 1988
as amended through Amendment 3. (Exhibit 10.2 as filed on Form
SE dated March 25, 1991*#)
10.3 Consolidated Freightways, Inc. Stock Option Plan of 1978, as
amended through Amendment No. 1. (Exhibit 10(e) to the
Company's Form 10-K for the year ended December 31, 1981*#)
10.4 Consolidated Freightways, Inc. Stock Option Plan of 1988 as
amended. (Exhibit 10(i) to the Company's Form 10-K for the year
ended December 31, 1987 as amended in Form S-8 dated
December 16, 1992*#)
10.5 Forms of Stock Option Agreement (with and without Cash Surrender
Rights) under the Consolidated Freightways, Inc. Stock Option
Plan of 1988. (Exhibit 10(j) to the Company's Form 10-K for
the year ended December 31, 1987*#)
10.6 Form of Consolidated Freightways, Inc. Deferred Compensation
Agreement. (Exhibit 10(i) to the Company's Form 10-K for the
year ended December 31, 1981*#)
10.7 Consolidated Freightways, Inc. Retirement Plan (formerly Emery
Air Freight Corporation Pension Plan), as amended effective
through January 1, 1985, and amendments dated as of October 30,
1987.(Exhibit 4.22 to the Emery Air Freight Corporation Quarterly
Report on Form 10-Q dated November 16, 1987**)
* Previously filed with the Securities and Exchange Commission and
incorporated herein by reference.
** Incorporated by reference to indicated reports filed under the
Securities Act of 1934, as amended, by Emery Air Freight
Corporation File No. 1-3893.
# Designates a contract or compensation plan for Management or
Directors.
PAGE 24
Exhibit No.
10.8 Emery Air Freight Plan for Retirees, effective October 31, 1987.
(Exhibit 4.23 to the Emery Air Freight Corporation Quarterly
Report on Form 10-Q dated November 16, 1987**)
10.9 Consolidated Freightways, Inc. Common Stock Fund (formerly Emery
Air Freight Corporation Employee Stock Ownership Plan,
as effective October 1, 1987 ("ESOP"). (Exhibit 4.33 to
the Emery Air Freight Corporation Annual Report on Form 10-K
dated March 28, 1988**)
10.10 Employee Stock Ownership Trust Agreement, dated as of October 8,
1987, as amended, between Emery Air Freight Corporation and
Arthur W. DeMelle, Daniel J. McCauley and Daniel W. Shea, as
Trustees under the ESOP Trust. (Exhibit 4.34 to the Emery Air
Freight Corporation Annual Report on Form 10-K dated March 28,
1988**)
10.11 Amended and Restated Subscription and Stock Purchase Agreement
dated as of December 31, 1987 between Emery Air Freight
Corporation and Boston Safe Deposit and Trust Company in its
capacity as successor trustee under the Emery Air Freight
Corporation Employee Stock Ownership Plan Trust ("Boston Safe").
(Exhibit B to the Emery Air Freight Corporation Current Report
on Form 8-K dated January 11, 1988**)
10.12 Supplemental Subscription and Stock Purchase Agreement dated as
of January 29, 1988 between Emery Air Freight Corporation and
Boston Safe. (Exhibit B to the Emery Air Freight Corporation
Current Report on Form 8-K dated February 12, 1988**)
10.13 Trust Indenture, dated as of November 1, 1988, between City of
Dayton, Ohio and Security Pacific National Trust Company (New
York), as Trustee and Bankers Trust Company, Trustee. (Exhibit
4.1 to Emery Air Freight Corporation Current Report on Form 8-K
dated December 2, 1988**)
10.14 Bond Purchase Agreement dated November 7, 1988, among the City of
Dayton, Ohio, the Emery Air Freight Corporation and Drexel Burnham
Lambert Incorporated. (Exhibit 28.7 to the Emery Air Freight
Corporation Current Report on Form 8-K dated December 2, 1988**)
10.15 Lease agreement dated November 1, 1988 between the City of Dayton,
Ohio and Emery Air Freight Corporation. (Exhibit 10.1 to the
Emery Air Freight Corporation Annual Report on Form 10-K for the
year ended December 31, 1988**)
10.16 Consolidated Freightways, Inc. Directors' Election Form for
deferral payment of director's fees. #
10.17 Consolidated Freightways, Inc. 1993 Executive Deferral Plan.
(Exhibit 10.22 to the Company's Form 10-K for the year ended
December 31, 1992*#).
* Previously filed with the Securities and Exchange Commission and
incorporated herein by reference.
** Incorporated by reference to indicated reports filed under the
Securities Act of 1934, as amended, by Emery Air Freight
Corporation File No. 1-3893.
# Designates a contract or compensation plan for Management or
Directors.
PAGE 25
Exhibit No.
10.18 $350 million Amended and Restated Credit Agreement dated November
21, 1996 among Consolidated Freightways, Inc. and
various financial institutions.
10.19 Official Statement of the Issuer's Special Facilities Revenue
Refunding Bonds, 1993 Series E and F dated
September 29, 1993 among the City of Dayton, Ohio and Emery
Air Freight Corporation. (Exhibit 10.1 to the Company's Form
10-Q for the quarterly period ended September 30, 1993*).
10.20 Trust Indenture, dated September 1, 1993 between the City of
Dayton, Ohio and Banker's Trust Company as Trustee.
(Exhibit 10.2 to the Company's Form 10-Q for the quarterly
period ended September 30, 1993*).
10.21 Supplemental Lease Agreement dated September 1, 1993 between
the City of Dayton, Ohio, as Lessor, and Emery Air Freight
Corporation, as Lessee. (Exhibit 10.3 to the Company's Form 10-Q
for the quarterly period ended September 30, 1993*).
10.22 Supplemental Retirement Plan dated January 1, 1990. (Exhibit
10.31 to the Company's Form 10-K for the year ended December 31,
1993*#)
10.23 Directors' 24-Hour Accidental Death and Dismemberment Plan.
(Exhibit 10.32 to the Company's Form 10-K for the year ended
December 31, 1993*#)
10.24 Executive Split-Dollar Life Insurance Plan dated January 1,
1994. (Exhibit 10.33 to the Company's Form 10-K for the year
ended December 31, 1993*#)
10.25 Board of Directors' Compensation Plan dated January 1, 1994.
(Exhibit 10.34 to the Company's Form 10-K for the year ended
December 31, 1993*#)
10.26 Excess Benefit Plan dated January 1, 1987. (Exhibit 10.35 to
the Company's Form 10-K for the year ended December 31, 1993*#)
10.27 Directors' Business Travel Insurance Plan. (Exhibit 10.36 to
the Company's Form 10-K for the year ended December 31, 1993*#)
10.28 Deferred Compensation Plan for Executives dated October 1,
1993. (Exhibit 10.37 to the Company's Form 10-K for the year
ended December 31, 1993*#)
10.29 Amended and Restated 1993 Nonqualified Employee Benefit
Plans Trust Agreement dated January 1, 1995. (Exhibit 10.38
to the Company's Form 10-K for the year ended December
31, 1994.*#)
* Previously filed with the Securities and Exchange Commission and
incorporated herein by reference.
** Incorporated by reference to indicated reports filed under the
Securities Act of 1934, as amended, by Emery Air Freight
Corporation File No. 1-3893.
# Designates a contract or compensation plan for Management or
Directors.
PAGE 26
Exhibit No.
10.30 Consolidated Freightways, Inc. Equity Incentive Plan for Non-
Employee Directors. (Attachment to the Company's 1994 Proxy
Statement dated March 18, 1994.*#)
10.31 Amended and Restated Retirement Plan for Directors of
Consolidated Freightways, Inc. dated January 1, 1994. (Exhibit
10.40 to the Company's Form 10-K for the year ended
December 31, 1994.*#)
10.32 Consolidated Freightways, Inc. 1996 Return on Equity Plan dated
March 4, 1996. (Exhibit 10.36 to the Company's Form 10-K for the
year ended December 31, 1995*#)
10.33 Employee Benefit Matters Agreement by and between Consolidated
Freightways, Inc. and Consolidated Freightways Corporation dated
December 2, 1996.
10.34 Distribution Agreement between Consolidated Freightways, Inc.,
and Consolidated Freightways Corporation dated November 25,
1996.
10.35 Transition Services Agreement between CNF Service Company, Inc.
and Consolidated Freightways Corporation dated December 2, 1996.
10.36 Tax Sharing Agreement between Consolidated Freightways, Inc.,
and Consolidated Freightways Corporation dated December 2, 1996.
10.37 CNF Transportation Inc. Executive Incentive Plan for 1997. #
10.38 CNF Service Company Executive Incentive Plan for 1997. #
10.39 Con-Way Transportation Services, Inc. Incentive Plan for 1997. #
10.40 Emery Worldwide Incentive Plan for 1997. #
10.41 CNF Transportation Inc. Special Bonus Plan for 1997. #
(12) Computation of ratios of earnings to fixed charges
(13) Annual report to security holders:
CNF Transportation Inc. 1996 Annual Report to Shareholders (Only
those portions referenced herein are incorporated in this Form 10-K.
Other portions such as "Letter to Shareholders" are not required and,
therefore, are not "filed" as part of this Form 10-K.)
(21) Significant Subsidiaries of the Company.
(27) Financial Data Schedule
* Previously filed with the Securities and Exchange Commission and
incorporated herein by reference.
# Designates a contract or compensation plan for Management or
Directors.
PAGE 27
Exhibit No.
(99) Additional documents:
99.1 Consolidated Freightways, Inc. dba CNF Transportation Inc. 1997
Notice of Annual Meeting and Proxy Statement dated March 24, 1997.
(Only those portions referenced herein are incorporated in this
Form 10-K. Other portions are not required and, therefore, are
not "filed" as a part of this Form 10-K.*)
99.2 Note Agreement dated as of July 17, 1989, between the ESOP,
Consolidated Freightways, Inc. and the Note Purchasers named
therein. (Exhibit 28.1 as filed on Form SE dated July 21,
1989*)
99.3 Guarantee and Agreement dated as of July 17, 1989, delivered by
Consolidated Freightways, Inc. (Exhibit 28.2 as filed on Form
SE dated July 21, 1989*).
99.4 Form of Restructured Note Agreement between Consolidated
Freightways, Inc., Thrift and Stock Ownership Trust as Issuer
and various financial institutions as Purchasers named therein,
dated as of November 3, 1992. (Exhibit 28.4 to the Company's
Form 10-K for the year ended December 31, 1992*).
99.5 Form of Restructured Guarantee and Agreement between
Consolidated Freightways, Inc., as Issuer and various financial
institutions as Purchasers named therein, dated as of
November 3, 1992. (Exhibit 28.5 to the Company's Form 10-K for
the year ended December 31, 1992*).
The remaining exhibits 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.
* Previously filed with the Securities and Exchange Commission and
incorporated herein by reference.
# Designates a compensation plan for Management or Directors.
EXHIBIT 10.16
-------------
CNF TRANSPORTATION INC.
1997 Director's Election Form
Indicate amount of deferral under (A), timing of deferral under (B),
or select (C) if no deferral is elected.
In the event I earn any CNF Transportation Inc. director's fees
in 1996, I hereby elect to defer payment of such fees and any interest
equivalent as follows:
A. ( ) To defer annual retainer and all meeting fees and chair fees, if
applicable.
( ) To defer the annual retainer portion of such fees.
B. ( ) To be paid in the year following the year in which I cease to be
a director of CNF Transportation Inc.
( ) To be paid in equal annual installments for _____ year(s) but not
to exceed five (5) years, commencing in the year following the
year in which I cease to be a director of CNF Transportation
Inc.
( ) To be paid in the year following _____ year(s) (insert 1 or any
multiple of years) after the year in which fees are deferred (but in
no event later than the year following the year I cease to be a
director of CNF Transportation Inc.).
( ) To be paid in equal annual installments for _____ year(s) but not
to exceed five (5) years, commencing in the year following
_______ year(s) (insert 1 or any multiple of years) after
the year in which fees are deferred (but in no event later than
the year I cease to be a director of CNF Transportation Inc.).
I understand that payment of any amount deferred hereunder will be
made by January 31st of the year in which such payment is to be made. I
further understand that any amount deferred will be credited with interest
equivalents at the end of each calendar quarter following the date of
deferral and continuing until such deferred amount is paid to me. Interest
equivalents shall be calculated at the published Bank of America NT & SA
prime rate as of the date credited and shall be paid on prior interest
equivalents credited on amounts deferred. I also understand that no trust
is created hereby and that in the event of my death, any amounts unpaid
shall be paid to my designated beneficiary in a lump sum.
I designate as my beneficiary ________________________________________
C. ( ) I do not elect to defer payments of any fees earned in 1997.
_____________________ _____________________
Date of this Election Signature of Director
EXHIBIT 10.18
-------------
$350,000,000
AMENDED AND RESTATED CREDIT AGREEMENT
dated as of
November 21, 1996
among
Consolidated Freightways, Inc.
(to be renamed CNF Transportation, Inc.)
The Banks Party Hereto
ABN-AMRO Bank, N.V.,
Bank of America National Trust and Savings Association,
The First National Bank of Chicago
and
Morgan Guaranty Trust Company of New York,
as LC Issuing Banks
ABN-AMRO Bank, N.V.,
Bank of America National Trust and Savings Association
and
The First National Bank of Chicago,
as Co-Agents
and
Morgan Guaranty Trust Company of New York,
as Agent
TABLE OF CONTENTS
Page
ARTICLE 1 Definitions
Section 1.01. Definitions 2
Section 1.02. Accounting Terms and Determinations 18
Section 1.03. Types of Borrowings 18
ARTICLE 2 The Credits
Section 2.01. Commitments to Lend 19
Section 2.02. Notice of Committed Borrowing 19
Section 2.03. Money Market Borrowings 20
Section 2.04. Notice to Banks; Funding of Loans 24
Section 2.05. Notes 25
Section 2.06. Maturity of Loans 25
Section 2.07. Interest Rates 25
Section 2.08. Facility Fee 29
Section 2.09. Optional Termination or Reduction of
Commitments 30
Section 2.10. Method of Electing Interest Rates 30
Section 2.11. Mandatory Termination of Commitments 31
Section 2.12. Optional Prepayments 32
Section 2.13. General Provisions as to Payments 32
Section 2.14. Funding Losses 33
Section 2.15. Computation of Interest and Fees 33
Section 2.16. Letters of Credit 33
Section 2.17. Maximum Interest Rate 40
ARTICLE 3 Conditions
Section 3.01. Conditions to Effectiveness 41
Section 3.02. Consequence of Effectiveness 42
Section 3.03. Credit Extensions 42
ARTICLE 4 Representations and Warranties
Section 4.01. Corporate Existence and Power 43
Section 4.02. Corporate and Governmental
Authorization; No Contravention 43
Section 4.03. Binding Effect 44
Section 4.04. Financial Information 44
Section 4.05. Litigation 45
Section 4.06. Compliance with ERISA 45
Section 4.07. Environmental Matters 45
Section 4.08. Taxes 46
Section 4.09. Subsidiaries 46
Section 4.10. Not an Investment Company 46
Section 4.11. Full Disclosure 46
Section 4.12. Spin-Off 47
ARTICLE 5 Covenants
Section 5.01. Information 47
Section 5.02. Payment of Obligations 49
Section 5.03. Maintenance of Property; Insurance 49
Section 5.04. Conduct of Business and Maintenance of
Existence 50
Section 5.05. Compliance with Laws 50
Section 5.06. Inspection of Property, Books and
Records 50
Section 5.07. Debt 51
Section 5.08. Minimum Consolidated Net Worth 52
Section 5.09. Negative Pledge 52
Section 5.10. Consolidations, Mergers and Sales of
Assets 54
Section 5.11. Use of Proceeds 55
Section 5.12. Fixed Charge Coverage 55
Section 5.13. Transactions with Third Party Affiliates
55
ARTICLE 6 Defaults
Section 6.01. Events of Default 56
Section 6.02. Notice of Default 59
Section 6.03. Cash Cover 59
ARTICLE 7 The Agent and the Co-Agents
Section 7.01. Appointment and Authorization 59
Section 7.02. Agent and Affiliates 59
Section 7.03. Action by Agent 59
Section 7.04. Consultation with Experts 60
Section 7.05. Liability of Agent 60
Section 7.06. Indemnification 60
Section 7.07. Credit Decision 60
Section 7.08. Successor Agent 61
Section 7.09. Agent=s Fee 61
Section 7.10. Co-Agents 61
ARTICLE 8 Change in Circumstances
Section 8.01. Basis for Determining Interest Rate
Inadequate or Unfair 61
Section 8.02. Illegality 62
Section 8.03. Increased Cost and Reduced Return 63
Section 8.04. Taxes 64
Section 8.05. Base Rate Loans Substituted for Affected
Fixed Rate Loans 66
Section 8.06. Substitution of Banks 67
ARTICLE 9 Miscellaneous
Section 9.01. Notices 68
Section 9.02. No Waivers 68
Section 9.03. Expenses; Indemnification 69
Section 9.04. Sharing of Set-offs 69
Section 9.05. Amendments and Waivers 70
Section 9.06. Successors and Assigns 70
Section 9.07. Collateral 72
Section 9.08. Governing Law; Submission to
Jurisdiction 72
Section 9.09. Counterparts; Integration 72
Section 9.10. Waiver of Jury Trial 73
Section 9.11. Confidentiality 73
Commitment Schedule
AMENDED AND RESTATED CREDIT AGREEMENT
AGREEMENT dated as of November 21, 1996 among
CONSOLIDATED FREIGHTWAYS, INC., the BANKS party hereto,
ABN-AMRO BANK, N.V., BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, THE FIRST NATIONAL BANK OF CHICAGO
and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as LC
Issuing Banks, ABN-AMRO BANK, N.V., BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION and THE FIRST
NATIONAL BANK OF CHICAGO, as Co-Agents, and MORGAN
GUARANTY TRUST COMPANY OF NEW YORK, as Agent.
WHEREAS, the Borrower, the banks referred to
therein and Morgan Guaranty Trust Company of New York,
as Agent for such banks, are parties to an Amended and
Restated Credit Agreement dated as of January 10, 1995
under which both loans and letters of credit are
available to the Borrower on the terms and conditions
provided therein;
WHEREAS, The Long-Term Credit Bank of Japan, Ltd.
and First Interstate Bank of Oregon, N.A. (the
"Terminating Banks") desire to terminate their
commitments and participations in letters of credit
under said Credit Agreement;
WHEREAS, the other parties thereto desire to amend
and restate said Credit Agreement as provided in this
Agreement and, upon satisfaction of the conditions
specified in Section 3.01, said Credit Agreement will
be so amended and restated;
WHEREAS, The Bank of New York and NationsBank of
Texas, N.A. (the "New Banks") desire to become parties
to said Credit Agreement (as so amended and restated)
as Banks with Commitments and participations in letters
of credit as provided herein;
WHEREAS, in order to induce the Banks, the LC
Issuing Banks, the Co-Agents and the Agent to enter
into this Agreement, certain Subsidiaries of the
Borrower are willing to guaranty the obligations of the
Borrower under this Agreement and the Notes issued
pursuant hereto; and
WHEREAS, the Banks are willing to make loans to
the Borrower and the LC Issuing Banks are willing to
issue letters of credit at the request of the Borrower
on the terms and conditions provided herein;
NOW, THEREFORE, the parties hereto agree as
follows:
ARTICLE 1
Definitions
Section 1.1. Definitions. The following terms,
as used herein, have the following meanings:
"Absolute Rate Auction" means a solicitation of
Money Market Quotes setting forth Money Market Absolute
Rates pursuant to Section 2.03.
"Adjusted CD Rate" has the meaning set forth in
Section 2.07(b).
"Adjusted London Interbank Offered Rate" has the
meaning set forth in Section 2.07(c).
"Administrative Questionnaire" means, with respect
to each Bank, an administrative questionnaire in the
form prepared by the Agent and submitted to the Agent
(with a copy to the Borrower) duly completed by such
Bank.
"Agent" means Morgan Guaranty Trust Company of New
York in its capacity as agent for the Banks and the LC
Issuing Banks under the Financing Documents, and its
successors in such capacity.
"Aggregate Usage" means, at any time, the sum of
(i) the aggregate outstanding principal amount of the
Loans at such time plus (ii) the aggregate outstanding
amount of the LC Liabilities at such time.
"Agreement", when used with reference to this
Agreement, means this Amended and Restated Credit
Agreement dated as of November 21, 1996, as it may be
amended from time to time.
"Applicable Lending Office" means, with respect to
any Bank, (i) in the case of its Domestic Loans, its
Domestic Lending Office, (ii) in the case of its
Euro-Dollar Loans, its Euro-Dollar Lending Office and
(iii) in the case of its Money Market Loans, its Money
Market Lending Office.
"Assessment Rate" has the meaning set forth in
Section 2.07(b).
"Assignee" has the meaning set forth in Section
9.06(c).
"Bank" means each bank listed on the signature
pages hereof, each Assignee which becomes a Bank
pursuant to Section 9.06(c), and their respective
successors.
"Base Rate" means, for any day, a rate per annum
equal to the higher of (i) the Prime Rate for such day
and (ii) the sum of 2 of 1% plus the Federal Funds Rate
for such day.
"Base Rate Loan" means a Committed Loan which
bears interest at the Base Rate pursuant to the
applicable Notice of Committed Borrowing or Notice of
Interest Rate Election or pursuant to Section 2.10(c)
or Article 8.
"Benefit Arrangement" means at any time an
employee benefit plan within the meaning of Section
3(3) of ERISA which is not a Plan or a Multiemployer
Plan and which is maintained or otherwise contributed
to by any member of the ERISA Group.
"Borrower" means Consolidated Freightways, Inc., a
Delaware corporation, and its successors.
"Borrowing" has the meaning set forth in Section
1.03.
"CD Base Rate" has the meaning set forth in
Section 2.07(b).
"CD Loan" means a Committed Loan which bears
interest at a CD Rate pursuant to the applicable Notice
of Committed Borrowing or Notice of Interest Rate
Election.
"CD Margin" means a rate per annum determined in
accordance with the Pricing Schedule.
"CD Rate" means a rate of interest determined
pursuant to Section 2.07(b) on the basis of an Adjusted
CD Rate.
"CD Reference Banks" means Bank of America
National Trust and Savings Association, The First
National Bank of Chicago and Morgan Guaranty Trust
Company of New York.
"Co-Agents" means ABN-AMRO Bank, N.V., Bank of
America National Trust and Savings Association and The
First National Bank of Chicago, in their capacities as
co-agents hereunder.
"Commitment" means, as the context requires,
either (a) the commitment of a Bank to extend credit to
the Borrower hereunder or (b) the amount of such
commitment, which is (i) with respect to any Bank
listed on the Commitment Schedule, the amount set forth
opposite the name of such Bank on the Commitment
Schedule or (ii) with respect to any Assignee, the
amount of the transferor Bank=s Commitment assigned to
such Assignee pursuant to Section 9.06(c), in each case
as such amount may be reduced from time to time
pursuant to Section 2.09 or 2.11 or changed as a result
of an assignment pursuant to Section 9.06(c).
"Commitment Schedule" means the Commitment
Schedule attached hereto.
"Committed Loan" means a loan made by a Bank
pursuant to Section 2.01; provided that, if any such
loan or loans (or portions thereof) are combined or
subdivided pursuant to a Notice of Interest Rate
Election, the term "Committed Loan" shall refer to the
combined principal amount resulting from such
combination or to each of the separate principal
amounts resulting from such subdivision, as the case
may be.
"Consolidated Debt" means at any date the Debt of
the Borrower and its Consolidated Subsidiaries,
determined on a consolidated basis as of such date.
"Consolidated EBITDAR" means, for any period, the
sum of (i) the consolidated income before income taxes
of the Borrower and its Consolidated Subsidiaries for
such period plus (ii) to the extent deducted in
determining such consolidated income before income
taxes, the sum of (A) Consolidated Interest Expense,
(B) depreciation and amortization and (C) Consolidated
Rental Expense, provided that, for any period or
portion of a period prior to the Spin-Off, Consolidated
EBITDAR shall be calculated on a pro forma basis
assuming that the Spin-Off and related distribution of
shares had occurred prior to that period.
"Consolidated Fixed Charges" means, for any
period, the sum of Consolidated Interest Expense and
Consolidated Rental Expense for such period, provided
that, for any period or portion of a period prior to
the Spin-Off, Consolidated Fixed Charges shall be
calculated on a pro forma basis assuming that the Spin-
Off and related distribution of shares had occurred
prior to that period.
"Consolidated Interest Expense" means, for any
period, the interest expense of the Borrower and its
Consolidated Subsidiaries, determined on a consolidated
basis for such period.
"Consolidated Net Worth" means at any date the
consolidated shareholders= equity of the Borrower and
its Consolidated Subsidiaries determined as of such
date.
"Consolidated Rental Expense" means, for any
period, the rental expense for operating leases of the
Borrower and its Consolidated Subsidiaries determined
on a consolidated basis for such period.
"Consolidated Subsidiary" means at any date any
Subsidiary or other entity the accounts of which would
be consolidated with those of the Borrower in its
consolidated financial statements if such statements
were prepared as of such date.
"Continuing Director" means (i) any individual who
is a director of the Borrower on November 21, 1996 and
(ii) any individual who becomes a director of the
Borrower after November 21, 1996 and is elected or
nominated for election as a director of the Borrower by
a majority of the individuals who were Continuing
Directors immediately before such election or
nomination.
"Credit Extension" means the making of a Loan or
the issuance or extension of a Letter of Credit.
"Debt" of any Person means at any date, without
duplication,
(i) all obligations of such Person for
borrowed money,
(ii) all obligations of such Person evidenced
by bonds, debentures, notes or other similar
instruments,
(iii) all obligations of such Person to pay
the deferred purchase price of property or
services, except trade accounts payable arising in
the ordinary course of business,
(iv) all obligations of such Person as lessee
which are capitalized in accordance with generally
accepted accounting principles,
(v) all obligations of such Person to
reimburse banks for drawings under letters of
credit or payments with respect to bankers=
acceptances, which obligations remain unpaid for
more than three Domestic Business Days after they
become due, or, if later, after such Person is
notified of the due date thereof,
(vi) all obligations of the types referred to
in clauses (i) to (v), inclusive, of this
definition which are secured by a Lien on any
asset of such Person, whether or not such
obligations are otherwise obligations of such
Person; provided that the amount of Debt
attributed, for purposes of this Agreement, to any
such obligation that is not otherwise an
obligation of such Person shall be limited to the
lesser of (x) the net book value of the assets of
such Person by which such obligation is secured or
(y) the amount of such obligation secured thereby
(excluding accrued interest for the current
period); and
(vii) all Guarantees by such Person of
obligations of others of the types referred to in
clauses (i) to (v), inclusive, of this definition
(which Guarantees shall be deemed to constitute
Debt in an amount equal to the lesser of (x) the
maximum amount of such Guarantee and (y) the
amount of such obligation of others Guaranteed
thereby).
"Default" means any condition or event which
constitutes an Event of Default or which with the
giving of notice or lapse of time or both would, unless
cured or waived, become an Event of Default.
"Domestic Business Day" means any day except a
Saturday, Sunday or other day on which commercial banks
in New York City are authorized by law to close;
provided that, when used in Section 2.16 with reference
to any LC Issuing Bank, the term "Domestic Business
Day" shall not include any day on which commercial
banks are authorized to close in the jurisdiction where
the LC Office of such LC Issuing Bank is located.
"Domestic Lending Office" means, as to each Bank,
its office located at its address set forth in its
Administrative Questionnaire (or identified in its
Administrative Questionnaire as its Domestic Lending
Office) or such other office as such Bank may hereafter
designate as its Domestic Lending Office by notice to
the Borrower and the Agent; provided that any Bank may
so designate separate Domestic Lending Offices for its
Base Rate Loans, on the one hand, and its CD Loans, on
the other hand, in which case all references herein to
the Domestic Lending Office of such Bank shall be
deemed to refer to either or both of such offices, as
the context may require.
"Domestic Loans" means CD Loans or Base Rate
Loans or both.
"Domestic Reserve Percentage" has the meaning set
forth in Section 2.07(b).
"Effective Date" means the date this Agreement
becomes effective in accordance with Section 3.01.
"Emery Receivables Facility" means the Credit
Agreement dated January 14, 1993, as amended, among
Emery Receivables Corporation, Emery Air Freight
Corporation, Consolidated Freightways, Inc. and the
financial institutions referred to therein.
"Environmental Laws" means any and all federal,
state, local and foreign statutes, laws, judicial
decisions, regulations, ordinances, rules, judgments,
orders, decrees, plans, injunctions, permits,
concessions, grants, franchises, licenses, agreements
and other governmental restrictions relating to the
environment, the effect of the environment on human
health or to emissions, discharges or releases of
pollutants, contaminants, Hazardous Substances or
wastes into the environment including, without
limitation, ambient air, surface water, ground water,
or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants,
contaminants, Hazardous Substances or wastes or the
clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended, or any successor
statute.
"ERISA Group" means the Borrower, any Subsidiary
and all members of a controlled group of corporations
and all trades or businesses (whether or not
incorporated) under common control which, together with
the Borrower or any Subsidiary, are treated as a single
employer under Section 414 of the Internal Revenue
Code.
"Euro-Dollar Business Day" means any Domestic
Business Day on which commercial banks are open for
international business (including dealings in dollar
deposits) in London.
"Euro-Dollar Lending Office" means, as to each
Bank, its office, branch or affiliate located at its
address set forth in its Administrative Questionnaire
(or identified in its Administrative Questionnaire as
its Euro-Dollar Lending Office) or such other office,
branch or affiliate of such Bank as it may hereafter
designate as its Euro-Dollar Lending Office by notice
to the Borrower and the Agent.
"Euro-Dollar Loan" means a Committed Loan which
bears interest at a Euro-Dollar Rate pursuant to the
applicable Notice of Committed Borrowing or Notice of
Interest Rate Election.
"Euro-Dollar Margin" means a rate per annum
determined in accordance with the Pricing Schedule.
"Euro-Dollar Rate" means a rate of interest
determined pursuant to Section 2.07(c) on the basis of
a London Interbank Offered Rate.
"Euro-Dollar Reference Banks" means the principal
London offices of ABN-AMRO Bank, N.V., The First
National Bank of Chicago and Morgan Guaranty Trust
Company of New York.
"Euro-Dollar Reserve Percentage" has the meaning
set forth in Section 2.07(c).
"Event of Default" has the meaning set forth in
Section 6.01.
"Existing Agreement" means the Amended and
Restated Credit Agreement dated as of January 10, 1995
among the Borrower, the banks referred to therein, and
Morgan Guaranty Trust Company of New York, as Agent, as
in effect from time to time prior to the Effective
Date.
"Existing Bank" means a "Bank" (as such term is
defined in the Existing Agreement) that is a party to
the Existing Agreement immediately prior to the
Effective Date.
"Existing Letters of Credit" means the letters of
credit issued on or before the Effective Date and
either (i) listed in Exhibit J hereto or (ii) issued
after the date hereof under (and in accordance with the
provisions of) the Existing Agreement.
"Federal Funds Rate" means, for any day, the rate
per annum (rounded upward, if necessary, to the nearest
1/100 of 1%) equal to the weighted average of the rates
on overnight Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds
brokers on such day, as published by the Federal
Reserve Bank of New York on the Domestic Business Day
next succeeding such day, provided that (i) if such day
is not a Domestic Business Day, the Federal Funds Rate
for such day shall be such rate on such transactions on
the next preceding Domestic Business Day as so
published on the next succeeding Domestic Business Day,
and (ii) if no such rate is so published on such next
succeeding Domestic Business Day, the Federal Funds
Rate for such day shall be the average rate quoted to
Morgan Guaranty Trust Company of New York on such day
on such transactions as determined by the Agent.
"Financing Documents" means this Agreement, the
Subsidiary Guaranty Agreement and the Notes.
"Fixed Rate Loans" means CD Loans or Euro-Dollar
Loans or Money Market Loans (excluding Money Market
LIBOR Loans bearing interest at the Base Rate pursuant
to Section 8.01(a)) or any combination of the
foregoing.
"Group of Loans" means at any time a group of
Loans consisting of (i) all Committed Loans which are
Base Rate Loans at such time or (ii) all Committed
Loans which are Fixed Rate Loans of the same type
having the same Interest Period at such time; provided
that, if a Committed Loan of any particular Bank is
converted to or made as a Base Rate Loan pursuant to
Section 8.02 or 8.04, such Loan shall be included in
the same Group or Groups of Loans from time to time as
it would have been in if it had not been so converted
or made.
"Guarantee" by any Person means any obligation,
contingent or otherwise, of such Person directly or
indirectly guaranteeing any Debt of any other Person
and, without limiting the generality of the foregoing,
any obligation, direct or indirect, contingent or
otherwise, of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of)
such Debt (whether arising by virtue of partnership
arrangements, by agreement to keep-well, to purchase
assets, goods, securities or services, to take-or-pay,
or to maintain financial statement conditions or
otherwise) or (ii) entered into for the purpose of
assuring in any other manner the obligee of such Debt
of the payment thereof or to protect such obligee
against loss in respect thereof (in whole or in part),
provided that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary
course of business. The term "Guarantee" used as a
verb has a corresponding meaning.
"Hazardous Substances" means any toxic,
radioactive, caustic or otherwise hazardous substance,
including petroleum, its derivatives, by-products and
other hydrocarbons, or any substance having any
constituent elements displaying any of the foregoing
characteristics.
"Indemnitee" has the meaning set forth in Section
9.03(b).
"Insignificant Subsidiaries" means Subsidiaries
which, if aggregated and considered as a single
Subsidiary, would not have total assets, shareholders=
equity or revenues in excess of 10% of the consolidated
total assets, consolidated shareholders= equity or
consolidated revenues, respectively, of the Borrower
and its Consolidated Subsidiaries, all calculated at
the date of the most recent financial statements
delivered to the Banks pursuant to Section 5.01 or, in
the case of revenues, for the twelve calendar months
then ended; provided that, prior to the delivery of
such financial statements for the year ending December
31, 1996, such amounts shall be calculated on the basis
of the pro forma balance sheet as of June 30, 1996 and
the pro forma statement of income for the six months
then ended set forth in the Borrower=s current report
on Form 8-K dated August 26, 1996.
"Interest Period" means: (a) with respect to each
Euro-Dollar Loan, the period commencing on the date of
borrowing specified in the applicable Notice of
Borrowing or on the date specified in the applicable
Notice of Interest Rate Election and ending one, two,
three or six months thereafter, as the Borrower may
elect in the applicable notice; provided that:
(i) any Interest Period which would otherwise
end on a day which is not a Euro-Dollar Business
Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar
Business Day falls in another calendar month, in
which case such Interest Period shall end on the
next preceding Euro-Dollar Business Day;
(ii) any Interest Period which begins on the
last Euro-Dollar 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, subject to clause
(iii) below, end on the last Euro-Dollar Business
Day of a calendar month; and
(iii) any Interest Period which would otherwise
end after the Termination Date shall end on the
Termination Date.
(b) with respect to each CD Loan, the period
commencing on the date of borrowing specified in the
applicable Notice of Borrowing or on the date specified
in the applicable Notice of Interest Rate Election and
ending 30, 60, 90 or 180 days thereafter, as the
Borrower may elect in the applicable notice; provided
that:
(i) any Interest Period which would otherwise
end on a day which is not a Euro-Dollar Business
Day shall be extended to the next succeeding
Euro-Dollar Business Day; and
(ii) any Interest Period which would otherwise
end after the Termination Date shall end on the
Termination Date.
(c) with respect to each Money Market LIBOR
Loan, the period commencing on the date of borrowing
specified in the applicable Notice of Borrowing and
ending one week, two weeks, three weeks or any whole
number of months thereafter, as the Borrower may elect
in accordance with Section 2.03; provided that:
(i) any Interest Period which would otherwise
end on a day which is not a Euro-Dollar Business
Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar
Business Day falls in another calendar month, in
which case such Interest Period shall end on the
next preceding Euro-Dollar Business Day;
(ii) any Interest Period which begins on the
last Euro-Dollar 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, subject to clause
(iii) below, end on the last Euro-Dollar Business
Day of a calendar month; and
(iii) any Interest Period which would otherwise
end after the Termination Date shall end on the
Termination Date; and
(d) with respect to each Money Market Absolute
Rate Loan, the period commencing on the date of
borrowing specified in the applicable Notice of
Borrowing and ending such number of days thereafter
(but not less than seven days) as the Borrower may
elect in accordance with Section 2.03; provided that:
(i) any Interest Period which would otherwise
end on a day which is not a Euro-Dollar Business
Day shall be extended to the next succeeding
Euro-Dollar Business Day; and
(ii) any Interest Period which would otherwise
end after the Termination Date shall end on the
Termination Date.
"Internal Revenue Code" means the Internal Revenue
Code of 1986, as amended, or any successor statute.
"Investment" means any investment in any Person,
whether by means of share purchase, capital
contribution, loan or otherwise.
"LC Issuing Banks" means ABN-AMRO Bank, N.V., Bank
of America National Trust and Savings Association, The
First National Bank of Chicago and Morgan Guaranty
Trust Company of New York, in their capacities as
issuers of Letters of Credit.
"LC Liabilities" means, at any time, the sum,
without duplication, of (i) the aggregate amount
available for drawing under all Letters of Credit
outstanding at such time plus (ii) the aggregate unpaid
amount at such time of all Reimbursement Obligations in
respect of previous drawings made under Letters of
Credit.
"LC Office" means, with respect to each LC Issuing
Bank, the office at which it books the Letters of
Credit issued by it hereunder.
"LC Payment Date" has the meaning set forth in
Section 2.16(f).
"LC Reimbursement Date" means, with respect to any
Letter of Credit, an LC Payment Date applicable to such
Letter of Credit, or, if later, the Domestic Business
Day next succeeding the Domestic Business Day on which
the Agent shall have notified the Borrower of such LC
Payment Date and of the amount payable by the LC
Issuing Bank under such Letter of Credit on such LC
Payment Date.
"Letter of Credit" means (i) any Existing Letter
of Credit and (ii) any financial stand-by letter of
credit (including without limitation a Workers=
Compensation Letter of Credit) issued hereunder after
the Effective Date.
"LIBOR Auction" means a solicitation of Money
Market Quotes setting forth Money Market Margins based
on the London Interbank Offered Rate pursuant to
Section 2.03.
"Lien" means (i) with respect to any asset
(including without limitation any account receivable),
any mortgage, lien, pledge, charge, security interest
or encumbrance of any kind, or any other type of
preferential arrangement that has the practical effect
of creating a security interest, in respect of such
asset and (ii) with respect to any account receivable,
any sale of such account receivable. For the purposes
of this Agreement, the Borrower or any Subsidiary shall
be deemed (x) to own subject to a Lien any asset which
it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement
relating to such asset and (y) not to own subject to a
Lien any asset which it leases under a lease that is
classified as an operating lease under generally
accepted accounting principles.
"Loan" means a Domestic Loan, a Euro-Dollar Loan
or a Money Market Loan and "Loans" means Domestic
Loans, Euro-Dollar Loans or Money Market Loans or any
combination of the foregoing.
"London Interbank Offered Rate" has the meaning
set forth in Section 2.07(c).
"Material Commitments" means commitments to extend
credit which, if extended, would constitute Debt of the
Borrower and/or one or more of its Subsidiaries in an
aggregate amount exceeding $35,000,000. For purposes
of this definition, any commitment for less than
$1,000,000 shall be excluded, but commitments arising
from one or more related or unrelated transactions
shall be aggregated if each such commitment is for
$1,000,000 or more.
"Material Debt" means Debt (other than the Notes)
of the Borrower and/or one or more of its Subsidiaries
in an aggregate outstanding principal amount exceeding
$35,000,000. For purposes of this definition, if the
Debt arising from any single transaction has an
outstanding principal amount less than $1,000,000, it
shall be excluded, but Debts arising from one or more
related or unrelated transactions shall be aggregated
if the Debt arising from each such transaction has an
outstanding principal amount of $1,000,000 or more.
"Material Plan" means at any time a Plan or Plans
having aggregate Unfunded Liabilities in excess of
$35,000,000.
"Money Market Absolute Rate" has the meaning set
forth in Section 2.03(d).
"Money Market Absolute Rate Loan" means a loan to
be made by a Bank pursuant to an Absolute Rate Auction.
"Money Market Lending Office" means, as to each
Bank, its Domestic Lending Office or such other office,
branch or affiliate of such Bank as it may hereafter
designate as its Money Market Lending Office by notice
to the Borrower and the Agent; provided that any Bank
may from time to time by notice to the Borrower and the
Agent designate separate Money Market Lending Offices
for its Money Market LIBOR Loans, on the one hand, and
its Money Market Absolute Rate Loans, on the other
hand, in which case all references herein to the Money
Market Lending Office of such Bank shall be deemed to
refer to either or both of such offices, as the context
may require.
"Money Market LIBOR Loan" means a loan to be made
by a Bank pursuant to a LIBOR Auction (including such a
loan bearing interest at the Base Rate pursuant to
Section 8.01(a)).
"Money Market Loan" means a Money Market LIBOR
Loan or a Money Market Absolute Rate Loan.
"Money Market Margin" has the meaning set forth in
Section 2.03(d).
"Money Market Quote" means an offer by a Bank to
make a Money Market Loan in accordance with Section
2.03.
"Multiemployer Plan" means at any time an employee
pension benefit plan within the meaning of Section
4001(a)(3) of ERISA to which any member of the ERISA
Group is then making or accruing an obligation to make
contributions or has within the preceding five plan
years made contributions, including for these purposes
any Person which ceased to be a member of the ERISA
Group during such five year period.
"Notes" means promissory notes of the Borrower,
substantially in the form of Exhibit A hereto,
evidencing the obligation of the Borrower to repay the
Loans, and "Note" means any one of such promissory
notes issued hereunder.
"Notice of Borrowing" means a Notice of Committed
Borrowing (as defined in Section 2.02) or a Notice of
Money Market Borrowing (as defined in Section 2.03(f)).
"Notice of Interest Rate Election" has the meaning
set forth in Section 2.10.
"Obligor" means each of the Borrower and the
Subsidiary Guarantors, and "Obligors" means all of the
foregoing.
"Outstanding Credit Exposure" means, as to any
Bank at any time, the sum of (i) the aggregate
principal amount of its Loans outstanding at such time
plus (ii) its Outstanding LC Exposure at such time.
"Outstanding LC Exposure" means, as to any Bank at
any time, an amount equal to its Percentage of the LC
Liabilities at such time.
"Parent" means, with respect to any Bank, any
Person controlling such Bank.
"Participant" has the meaning set forth in Section
9.06(b).
"PBGC" means the Pension Benefit Guaranty
Corporation or any entity succeeding to any or all of
its functions under ERISA.
"Percentage" means, with respect to each Bank, the
percentage that such Bank=s Commitment constitutes of
the aggregate amount of the Commitments.
"Person" means an individual, a corporation, a
limited liability company, a partnership, an
association, a trust or any other entity or
organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension
benefit plan (other than a Multiemployer Plan) which is
covered by Title IV of ERISA or subject to the minimum
funding standards under Section 412 of the Internal
Revenue Code and either (i) is maintained, or
contributed to, by any member of the ERISA Group for
employees of any member of the ERISA Group or (ii) has
at any time within the preceding five years been
maintained, or contributed to, by any Person which was
at such time a member of the ERISA Group for employees
of any Person which was at such time a member of the
ERISA Group.
"Pricing Schedule" means the Pricing Schedule
attached hereto.
"Prime Rate" means the rate of interest publicly
announced by Morgan Guaranty Trust Company of New York
in New York City from time to time as its Prime Rate.
"Quarterly Dates" means each March 31, June 30,
September 30 and December 31.
"Reference Banks" means the CD Reference Banks or
the Euro-Dollar Reference Banks, as the context may
require, and "Reference Bank" means any one of such
Reference Banks.
"Reimbursement Obligations" means, at any time,
the aggregate of all obligations of the Borrower then
outstanding under Section 2.16 to reimburse an LC
Issuing Bank for amounts paid by such LC Issuing Bank
in respect of any drawing under any Letter of Credit.
"Regulation U" means Regulation U of the Board of
Governors of the Federal Reserve System, as in effect
from time to time.
"Required Banks" means at any time Banks having at
least 60% of the aggregate amount of the Commitments
or, if the Commitments shall have been terminated,
having at least 60% of the aggregate amount of the
Outstanding Credit Exposures.
"Spin-Off" means the distribution by the Borrower
to its shareholders of 100% of the capital stock of
Consolidated Freightways Corporation (which will be the
sole shareholder of Consolidated Freightways
Corporation of Delaware and Leland James Service
Corporation) substantially in the manner described in
the Registration Statement on Form 10 filed by
Consolidated Freightways Corporation with the
Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934, as amended.
"Subsidiary" means any corporation or other entity
of which securities or other ownership interests having
ordinary voting power to elect a majority of the board
of directors or other persons performing similar
functions are at the time directly or indirectly owned
by the Borrower.
"Subsidiary Guarantors" means Con-Way
Transportation Services, Inc., a Delaware corporation,
Con-Way Truckload Services, Inc., a Delaware
corporation, Emery Air Freight Corporation, a Delaware
corporation, Emery Worldwide Airlines, Inc., a Nevada
corporation, Menlo Logistics, Inc., a California
corporation, and each other Subsidiary which becomes a
party to the Subsidiary Guaranty Agreement pursuant to
Article 3 thereof, and their respective successors.
"Subsidiary Guaranty Agreement" means a Subsidiary
Guaranty Agreement among the Borrower, the Subsidiary
Guarantors and the Agent, as executed and delivered
pursuant to Section 3.01(c) and as the same may be
amended from time to time in accordance with the terms
thereof.
"TASP Notes" means (i) $55,000,000 aggregate
principal amount of the 8.50% Series A Guaranteed ESOP
Notes due January 1, 2006 and $62,000,000 aggregate
principal amount of the 8.62% Series B Guaranteed ESOP
Notes due January 1, 2009, each issued pursuant to
separate Note Agreements, each dated as of July 17,
1989, among Consolidated Freightways, Inc. Thrift and
Stock Ownership Trust ("TASP"), the Borrower and
certain institutional investors and (ii) $33,000,000
aggregate principal amount of the 9.00% Restructured
Notes due January 1, 2006, issued under separate
Restructured Note Agreements, each dated as of November
3, 1992, among TASP, the Borrower and certain
institutional investors.
"Taxes" has the meaning set forth in Section
8.04(a).
"Terminating Banks" has the meaning set forth in
the recitals hereto.
"Termination Date" means November 21, 2001, or, if
such day is not a Euro-Dollar Business Day, the next
succeeding Euro-Dollar Business Day unless such Euro-
Dollar Business Day falls in another calendar month, in
which case the Termination Date shall be the next
preceding Euro-Dollar Business Day.
"Third Party Affiliate" means (i) any Person or
any group of Persons (within the meaning of Section 13
or 14 of the Securities Exchange Act of 1934, as
amended) that directly, or indirectly through one or
more intermediaries, controls the Borrower (a
"Controlling Person") or (ii) any Person (other than
the Borrower or a Subsidiary) which is controlled by or
is under common control with a Controlling Person. As
used herein, the term "control" means possession,
directly or indirectly, of the power to direct or cause
the direction of the management or policies of a
Person, whether through the ownership of voting
securities, by contract or otherwise.
"Unfunded Liabilities" means, with respect to any
Plan at any time, the amount (if any) by which (i) the
value of all benefit liabilities under such Plan,
determined on a plan termination basis using the
assumptions prescribed by the PBGC for purposes of
Section 4044 of ERISA, exceeds (ii) the fair market
value of all Plan assets allocable to such liabilities
under Title IV of ERISA (excluding any accrued but
unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to
the extent that such excess represents a potential
liability of a member of the ERISA Group to the PBGC or
any other Person under Title IV of ERISA.
"United States" means the United States of
America, including the States and the District of
Columbia, but excluding its territories and
possessions.
"Wholly-Owned Subsidiary" means any Subsidiary all
of the shares of capital stock or other ownership
interests of which (except directors= qualifying
shares) are at the time directly or indirectly owned by
the Borrower.
"Workers= Compensation Letter of Credit" means any
letter of credit which is used to secure obligations of
the Borrower or its Subsidiaries under workers=
compensation or similar laws.
Section 1.2. Accounting Terms and Determinations.
Unless otherwise specified herein, all accounting terms
used herein shall be interpreted, all accounting
determinations hereunder shall be made, and all
financial statements required to be delivered hereunder
shall be prepared in accordance with generally accepted
accounting principles as in effect from time to time,
applied on a basis consistent (except for changes
concurred in by the Borrower=s independent public
accountants) with the most recent audited consolidated
financial statements of the Borrower and its
Consolidated Subsidiaries delivered to the Banks;
provided that, if the Borrower notifies the Agent that
the Borrower wishes to amend any covenant in Article 5
to eliminate the effect of any change in generally
accepted accounting principles on the operation of such
covenant (or if the Agent notifies the Borrower that
the Required Banks wish to amend Article 5 for such
purpose), then the Borrower=s compliance with such
covenant shall be determined on the basis of generally
accepted accounting principles in effect immediately
before the relevant change in generally accepted
accounting principles became effective, until either
such notice is withdrawn or such covenant is amended in
a manner satisfactory to the Borrower and the Required
Banks.
Section 1.3. Types of Borrowings. The term
"Borrowing denotes the aggregation of Loans of one or
more Banks to be made to the Borrower pursuant to
Section 2.01 or 2.03 on the same date, all of which
Loans are of the same type (subject to Article 8) and,
except in the case of Base Rate Loans, have the same
Interest Period or initial Interest Period. Borrowings
are classified for purposes of this Agreement either by
reference to the pricing of Loans comprising such
Borrowing (e.g., a "Euro-Dollar Borrowing" is a
Borrowing comprised of Euro-Dollar Loans) or by
reference to the provisions of Article 2 under which
participation therein is determined (i.e., a "Committed
Borrowing" is a Borrowing under Section 2.01 in which
all Banks participate in proportion to their
Commitments, while a "Money Market Borrowing" is a
Borrowing under Section 2.03 in which the Bank
participants are determined on the basis of their bids
in accordance therewith).
ARTICLE 2
The Credits
Section 2.1. Commitments to Lend. Each Bank
severally agrees, on the terms and conditions set forth
in this Agreement, to make loans to the Borrower
pursuant to this Section from time to time prior to the
Termination Date; provided that, immediately after each
such Loan is made, the sum of (i) the aggregate
outstanding principal amount of all Committed Loans
made by such Bank plus (ii) its Outstanding LC Exposure
shall not exceed its Commitment. Each Borrowing
pursuant to this Section shall be in an aggregate
principal amount of $10,000,000 or any larger integral
multiple of $1,000,000 (except that any such Borrowing
may be in the aggregate amount available in accordance
with Section 3.03(b)) and shall be made from the
several Banks ratably in accordance with their
respective Percentages. Within the foregoing limits,
the Borrower may borrow under this Section, prepay
Loans to the extent permitted by Section 2.12 and
reborrow at any time prior to the Termination Date
under this Section.
Section 2.2. Notice of Committed Borrowing. The
Borrower shall give the Agent notice (a "Notice of
Committed Borrowing") not later than (x) 12:00 Noon
(New York City time) on the date of each Base Rate
Borrowing, (y) 1:00 P.M. (New York City time) on the
second Domestic Business Day before each CD Borrowing
and (z) 1:00 P.M. (New York City time) on the third
Euro-Dollar Business Day before each Euro-Dollar
Borrowing, specifying:
(a) the date of such Borrowing, which shall be
a Domestic Business Day in the case of a Domestic
Borrowing or a Euro-Dollar Business Day in the case
of a Euro-Dollar Borrowing,
(b) the aggregate amount of such Borrowing,
(c) whether the Loans comprising such Borrowing
are to bear interest initially at the Base Rate, a
CD Rate or a Euro-Dollar Rate, and
(d) in the case of a Fixed Rate Borrowing, the
duration of the Interest Period applicable thereto,
subject to the provisions of the definition of
Interest Period;
provided that the Borrower may not deliver a Notice of
Committed Borrowing if after giving effect to the
requested Borrowing there would be more than ten
Committed Fixed Rate Borrowings outstanding.
Section 2.3. Money Market Borrowings.
(a) The Money Market Option. In addition to
Committed Borrowings pursuant to Section 2.01, the
Borrower may, as set forth in this Section, request the
Banks to make offers to make Money Market Loans to the
Borrower on any day prior to the Termination Date. The
Banks may, but shall have no obligation to, make such
offers and the Borrower may, but shall have no
obligation to, accept any such offers in the manner set
forth in this Section.
(b) Money Market Quote Request. When the Borrower
wishes to request offers to make Money Market Loans
under this Section, it shall transmit to the Agent by
telex or facsimile transmission a Money Market Quote
Request substantially in the form of Exhibit B hereto
so as to be received no later than (x) 1:00 P.M. (New
York City time) on the fifth Euro-Dollar Business Day
prior to the date of Borrowing proposed therein, in the
case of a LIBOR Auction or (y) 11:30 A.M. (New York
City time) on the Domestic Business Day next preceding
the date of Borrowing proposed therein, in the case of
an Absolute Rate Auction (or, in either case, such
other time or date as the Borrower and the Agent shall
have mutually agreed and shall have notified to the
Banks not later than the date of the Money Market Quote
Request for the first LIBOR Auction or Absolute Rate
Auction for which such change is to be effective)
specifying:
(i) the proposed date of Borrowing, which
shall be a Euro-Dollar Business Day in the case of
a LIBOR Auction or a Domestic Business Day in the
case of an Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing,
which shall be $10,000,000 or a larger integral
multiple of $1,000,000,
(iii) the duration of the Interest Period
applicable thereto, subject to the provisions of
the definition of Interest Period, and
(iv) whether the Money Market Quotes requested
are to set forth a Money Market Margin or a Money
Market Absolute Rate.
The Borrower may request offers to make Money Market
Loans for more than one Interest Period in a single
Money Market Quote Request. No Money Market Quote
Request shall be given within five Euro-Dollar Business
Days (or such other number of days as the Borrower and
the Agent may agree) of any other Money Market Quote
Request.
(c) Invitation for Money Market Quotes. Promptly
upon receipt of a Money Market Quote Request, the Agent
shall send to the Banks by telex or facsimile
transmission an Invitation for Money Market Quotes
substantially in the form of Exhibit C hereto, which
shall constitute an invitation by the Borrower to each
Bank to submit Money Market Quotes offering to make the
Money Market Loans to which such Money Market Quote
Request relates in accordance with this Section.
(d) Submission and Contents of Money Market Quotes.
(i) Each Bank may submit a Money Market Quote
containing an offer or offers to make Money Market
Loans in response to any Invitation for Money Market
Quotes. Each Money Market Quote must comply with the
requirements of this subsection (d) and must be
submitted to the Agent by telex or facsimile
transmission at its offices specified in or pursuant to
Section 9.01 not later than (x) 2:00 P.M. (New York
City time) on the fourth Euro-Dollar Business Day prior
to the proposed date of Borrowing, in the case of a
LIBOR Auction or (y) 10:15 A.M. (New York City time) on
the proposed date of Borrowing, in the case of an
Absolute Rate Auction (or, in either case, such other
time or date as the Borrower and the Agent shall have
mutually agreed and shall have notified to the Banks
not later than the date of the Money Market Quote
Request for the first LIBOR Auction or Absolute Rate
Auction for which such change is to be effective);
provided that Money Market Quotes submitted by the
Agent (or any affiliate of the Agent) in the capacity
of a Bank may be submitted, and may only be submitted,
if the Agent or such affiliate notifies the Borrower of
the terms of the offer or offers contained therein not
later than (x) one hour prior to the deadline for the
other Banks, in the case of a LIBOR Auction or (y) 15
minutes prior to the deadline for the other Banks, in
the case of an Absolute Rate Auction. Subject to
Articles 3 and 6, any Money Market Quote so made shall
be irrevocable except with the written consent of the
Agent given on the instructions of the Borrower.
(ii) Each Money Market Quote shall be in
substantially the form of Exhibit D hereto and shall in
any case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Money Market
Loan for which each such offer is being made, which
principal amount (w) may be greater than or less
than the Commitment of the quoting Bank, (x) must be
$5,000,000 or a larger integral multiple of
$1,000,000, (y) may not exceed the principal amount
of Money Market Loans for which offers were
requested and (z) may be subject to an aggregate
limitation as to the principal amount of Money
Market Loans for which offers being made by such
quoting Bank may be accepted,
(C) in the case of a LIBOR Auction, the margin
above or below the applicable London Interbank
Offered Rate (the AMoney Market Margin") offered for
each such Money Market Loan, expressed as a
percentage (specified to the nearest 1/10,000 of 1%)
to be added to or subtracted from such base rate,
(D) in the case of an Absolute Rate Auction,
the rate of interest per annum (specified to the
nearest 1/10,000 of 1%) (the AMoney Market Absolute
Rate") offered for each such Money Market Loan, and
(E) the identity of the quoting Bank.
A Money Market Quote may set forth up to five separate
offers by the quoting Bank with respect to each
Interest Period specified in the related Invitation for
Money Market Quotes.
(iii) Any Money Market Quote shall be
disregarded if it:
(A) is not substantially in conformity with
Exhibit D hereto or does not specify all of the
information required by subsection (d)(ii);
(B) contains qualifying, conditional or similar
language;
(C) proposes terms other than or in addition to
those set forth in the applicable Invitation for
Money Market Quotes; or
(D) arrives after the time set forth in
subsection (d)(i).
(e) Notice to Borrower. The Agent shall promptly
notify the Borrower of the terms (x) of any Money
Market Quote submitted by a Bank that is in accordance
with subsection (d) and (y) of any Money Market Quote
that amends, modifies or is otherwise inconsistent with
a previous Money Market Quote submitted by such Bank
with respect to the same Money Market Quote Request.
Any such subsequent Money Market Quote shall be
disregarded by the Agent unless such subsequent Money
Market Quote is submitted solely to correct a manifest
error in such former Money Market Quote. The Agent=s
notice to the Borrower shall specify (A) the aggregate
principal amount of Money Market Loans for which offers
have been received for each Interest Period specified
in the related Money Market Quote Request, (B) the
respective principal amounts and Money Market Margins
or Money Market Absolute Rates, as the case may be, so
offered and (C) if applicable, limitations on the
aggregate principal amount of Money Market Loans for
which offers in any single Money Market Quote may be
accepted.
(f) Acceptance and Notice by Borrower. Not later
than 11:30 A.M. (New York City time) on (x) the third
Euro-Dollar Business Day prior to the proposed date of
Borrowing, in the case of a LIBOR Auction or (y) the
proposed date of Borrowing, in the case of an Absolute
Rate Auction (or, in either case, such other time or
date as the Borrower and the Agent shall have mutually
agreed and shall have notified to the Banks not later
than the date of the Money Market Quote Request for the
first LIBOR Auction or Absolute Rate Auction for which
such change is to be effective), the Borrower shall
notify the Agent of its acceptance or non-acceptance of
the offers so notified to it pursuant to subsection
(e). In the case of acceptance, such notice (a ANotice
of Money Market Borrowing") shall specify the aggregate
principal amount of offers for each Interest Period
that are accepted. The Borrower may accept any Money
Market Quote in whole or in part; provided that:
(i) the aggregate principal amount of each
Money Market Borrowing may not exceed the
applicable amount set forth in the related Money
Market Quote Request,
(ii) the principal amount of each Money Market
Borrowing must be $10,000,000 or a larger integral
multiple of $1,000,000,
(iii) acceptance of offers may only be made on
the basis of ascending Money Market Margins or
Money Market Absolute Rates, as the case may be,
and
(iv) the Borrower may not accept any offer that
is described in subsection (d)(iii) or that
otherwise fails to comply with the requirements of
this Agreement.
(g) Allocation by Agent. If offers are made by two
or more Banks with the same Money Market Margins or
Money Market Absolute Rates, as the case may be, for a
greater aggregate principal amount than the amount in
respect of which such offers are accepted for the
related Interest Period, the principal amount of Money
Market Loans in respect of which such offers are
accepted shall be allocated by the Agent among such
Banks as nearly as possible (in multiples of
$1,000,000, as the Agent may deem appropriate) in
proportion to the aggregate principal amounts of such
offers. Determinations by the Agent of the amounts of
Money Market Loans shall be conclusive in the absence
of manifest error.
Section 2.4. Notice to Banks; Funding of Loans.
(a) Upon receipt of a Notice of Borrowing, the Agent
shall promptly notify each Bank of the contents thereof
and of such Bank=s share (if any) of such Borrowing and
such Notice of Borrowing shall not thereafter be
revocable by the Borrower.
(b) Not later than (x) 12:00 Noon (New York City
time) on the date of each Borrowing other than a Base
Rate Borrowing and (y) 1:00 P.M. (New York City time)
on the date of each Base Rate Borrowing, each Bank
participating therein shall make available its share of
such Borrowing, in Federal or other funds immediately
available in New York City, to the Agent at its address
referred to in Section 9.01. Unless the Agent
determines that any applicable condition specified in
Article 3 has not been satisfied, the Agent will,
promptly upon receipt thereof, make the funds so
received from the Banks available to the Borrower at
the Agent=s aforesaid address.
(c) Unless the Agent shall have received notice
from a Bank prior to the date of any Borrowing that
such Bank will not make available to the Agent such
Bank=s share of such Borrowing, the Agent may assume
that such Bank has made such share available to the
Agent on the date of such Borrowing in accordance with
subsection (b) of this Section 2.04 and the 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 Bank shall not have so made
such share available to the Agent, such Bank and the
Borrower severally agree to repay to the Agent, within
one Domestic Business Day after 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 Agent, at (i) in the case of the
Borrower, a rate per annum equal to the higher of the
Federal Funds Rate and the interest rate applicable
thereto pursuant to Section 2.07 and (ii) in the case
of such Bank, the Federal Funds Rate. If such Bank
shall repay to the Agent such corresponding amount,
such amount so repaid shall constitute such Bank=s Loan
included in such Borrowing for purposes of this
Agreement.
Section 2.5. Notes. (a) The Loans of each Bank
shall be evidenced by a single Note payable to the
order of such Bank for the account of its Applicable
Lending Office in an amount equal to the aggregate
unpaid principal amount of such Bank=s Loans.
(b) Each Bank may, by notice to the Borrower and
the Agent, request that its Loans of a particular type
be evidenced by a separate Note in an amount equal to
the aggregate unpaid principal amount of such Loans.
Each such Note shall be in substantially the form of
Exhibit A hereto with appropriate modifications to
reflect the fact that it evidences solely Loans of the
relevant type. Each reference in this Agreement to the
ANote" of such Bank shall be deemed to refer to and
include any or all of such Notes, as the context may
require.
(c) Upon receipt of each Bank=s Note pursuant to
Section 3.01(b), the Agent shall forward such Note to
such Bank. Each Bank shall record the date, amount and
type of each Loan made by it and the date and amount of
each payment of principal made by the Borrower with
respect thereto, and may, if such Bank so elects in
connection with any transfer or enforcement of its
Note, endorse on the schedule forming a part thereof
appropriate notations to evidence the foregoing
information with respect to each such Loan then
outstanding; provided that the failure of any Bank to
make any such recordation or endorsement, or any error
in the making thereof, shall not affect the obligations
of the Borrower hereunder or under the Notes. Each
Bank is hereby irrevocably authorized by the Borrower
so to endorse its Note and to attach to and make a part
of its Note a continuation of any such schedule as and
when required.
Section 2.6. Maturity of Loans. (a) Each
Committed Loan shall mature, and the principal amount
thereof shall be due and payable, on the Termination
Date.
(b) Each Money Market Loan included in any Money
Market Borrowing shall mature, and the principal amount
thereof shall be due and payable, on the last day of
the Interest Period applicable to such Borrowing.
Section 2.7. Interest Rates. (a) Each Base Rate
Loan shall bear interest on the outstanding principal
amount thereof, for each day from the date such Loan is
made until it becomes due, at a rate per annum equal to
the Base Rate for such day. Such interest shall be
payable quarterly in arrears on each Quarterly Date
and, with respect to the principal amount of any Base
Rate Loan converted to a CD Loan or a Euro-Dollar Loan,
on the date such amount is so converted. Any overdue
principal of or interest on any Base Rate Loan shall
bear interest, payable on demand, for each day until
paid at a rate per annum equal to the sum of 2% plus
the Base Rate for such day.
(b) Each CD Loan shall bear interest on the
outstanding principal amount thereof, for each day
during each Interest Period applicable thereto, at a
rate per annum equal to the sum of the CD Margin for
such day plus the Adjusted CD Rate applicable to such
Interest Period; provided that if any CD Loan or any
portion thereof shall, as a result of clause (b)(ii) of
the definition of Interest Period, have an Interest
Period of less than 30 days, such portion shall bear
interest for each day during such Interest Period at
the Base Rate for such day. Such interest shall be
payable for each Interest Period on the last day
thereof and, if such Interest Period is longer than 90
days, 90 days after the first day thereof. Any overdue
principal of or interest on any CD Loan shall bear
interest, payable on demand, for each day until paid at
a rate per annum equal to the sum of 2% plus the Base
Rate for such day.
The "Adjusted CD Rate" applicable to any Interest
Period means a rate per annum determined pursuant to
the following formula:
[ CDBR ]*
ACDR = [ ---------- ] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
__________
* The amount in brackets being rounded upward, if
necessary, to the next higher 1/100 of 1%
The "CD Base Rate" applicable to any Interest
Period is the rate of interest determined by the Agent
to be the average (rounded upward, if necessary, to the
next higher 1/100 of 1%) of the prevailing rates per
annum bid at 10:00 A.M. (New York City time) (or as
soon thereafter as practicable) on the first day of
such Interest Period by two or more New York
certificate of deposit dealers of recognized standing
for the purchase at face value from each CD Reference
Bank of its certificates of deposit in an amount
comparable to the principal amount of the CD Loan of
such CD Reference Bank to which such Interest Period
applies and having a maturity comparable to such
Interest Period.
"Domestic Reserve Percentage" means for any day
that percentage (expressed as a decimal) which is in
effect on such day, as prescribed by the Board of
Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve
requirement (including without limitation any basic,
supplemental or emergency reserves) for a member bank
of the Federal Reserve System in New York City with
deposits exceeding five billion dollars in respect of
new non-personal time deposits in dollars in New York
City having a maturity comparable to the related
Interest Period and in an amount of $100,000 or more.
The Adjusted CD Rate shall be adjusted automatically on
and as of the effective date of any change in the
Domestic Reserve Percentage.
"Assessment Rate" means for any day the annual
assessment rate in effect on such day which is payable
by a member of the Bank Insurance Fund classified as
adequately capitalized and within supervisory subgroup
AA" (or a comparable successor assessment risk
classification) within the meaning of 12 C.F.R.
' 327.4(a) (or any successor provision) to the Federal
Deposit Insurance Corporation (or any successor) for
such Corporation=s (or such successor=s) insuring time
deposits at offices of such institution in the United
States. The Adjusted CD Rate shall be adjusted
automatically on and as of the effective date of any
change in the Assessment Rate.
(c) Each Euro-Dollar Loan shall bear interest on
the outstanding principal amount thereof, for each day
during each Interest Period applicable thereto, at a
rate per annum equal to the sum of the Euro-Dollar
Margin for such day plus the Adjusted London Interbank
Offered Rate applicable to such Interest Period. Such
interest shall be payable for each Interest Period on
the last day thereof and, if such Interest Period is
longer than three months, three months after the first
day thereof.
The "Adjusted London Interbank Offered Rate"
applicable to any Interest Period means a rate per
annum equal to the quotient obtained (rounded upward,
if necessary, to the next higher 1/100 of 1%) by
dividing (i) the applicable London Interbank Offered
Rate by (ii) 1.00 minus the Euro-Dollar Reserve
Percentage.
The "London Interbank Offered Rate" applicable to
any Interest Period means the average (rounded upward,
if necessary, to the next higher 1/16 of 1%) of the
respective rates per annum at which deposits in dollars
are offered to each of the Euro-Dollar Reference Banks
in the London interbank market at approximately 11:00
A.M. (London time) two Euro-Dollar Business Days before
the first day of such Interest Period in an amount
approximately equal to the principal amount of the
Euro-Dollar Loan of such Euro-Dollar Reference Bank to
which such Interest Period is to apply and for a period
of time comparable to such Interest Period.
"Euro-Dollar Reserve Percentage" means for any day
that percentage (expressed as a decimal) which is in
effect on such day, as prescribed by the Board of
Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve
requirement for a member bank of the Federal Reserve
System in New York City with deposits exceeding five
billion dollars in respect of "Eurocurrency
liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to
which the interest rate on Euro-Dollar Loans is
determined or any category of extensions of credit or
other assets which includes loans by a non-United
States office of any Bank to United States residents).
The Adjusted London Interbank Offered Rate shall be
adjusted automatically on and as of the effective date
of any change in the Euro-Dollar Reserve Percentage.
(d) Any overdue principal of or interest on any
Euro-Dollar Loan shall bear interest, payable on
demand, for each day from and including the date
payment thereof was due to but excluding the date of
actual payment, at a rate per annum equal to the sum of
2% plus the higher of (i) the sum of the Euro-Dollar
Margin for such day plus the Adjusted London Interbank
Offered Rate applicable to such Loan on the day before
such payment was due and (ii) the Euro-Dollar Margin
for such day plus the quotient obtained (rounded
upward, if necessary, to the next higher 1/100 of 1%)
by dividing (x) the average (rounded upward, if
necessary, to the next higher 1/16 of 1%) of the
respective rates per annum at which one day (or, if
such amount due remains unpaid more than three
Euro-Dollar Business Days, then for such other period
of time not longer than three months as the Agent may
select) deposits in dollars in an amount approximately
equal to such overdue payment due to each of the
Euro-Dollar Reference Banks are offered to such
Euro-Dollar Reference Bank in the London interbank
market for the applicable period determined as provided
above by (y) 1.00 minus the Euro-Dollar Reserve
Percentage (or, if the circumstances described in
clause (a) or (b) of Section 8.01 shall exist, at a
rate per annum equal to the sum of 2% plus the Base
Rate for such day).
(e) Subject to Section 8.01(a), each Money Market
LIBOR Loan shall bear interest on the outstanding
principal amount thereof, for the Interest Period
applicable thereto, at a rate per annum equal to the
sum of the London Interbank Offered Rate for such
Interest Period (determined in accordance with Section
2.07(c) as if the related Money Market LIBOR Borrowing
were a Committed Euro-Dollar Borrowing) plus (or minus)
the Money Market Margin quoted by the Bank making such
Loan in accordance with Section 2.03. Each Money
Market Absolute Rate Loan shall bear interest on the
outstanding principal amount thereof, for the Interest
Period applicable thereto, at a rate per annum equal to
the Money Market Absolute Rate quoted by the Bank
making such Loan in accordance with Section 2.03. Such
interest shall be payable for each Interest Period on
the last day thereof and, if such Interest Period is
longer than three months, at intervals of three months
after the first day thereof. Any overdue principal of
or interest on any Money Market Loan shall bear
interest, payable on demand, for each day until paid at
a rate per annum equal to the sum of 2% plus the Base
Rate for such day.
(f) The Agent shall determine each interest rate
applicable to the Loans hereunder. The Agent shall
give prompt notice to the Borrower and the
participating Banks of each rate of interest so
determined, and its determination thereof shall be
conclusive in the absence of manifest error.
(g) Each Reference Bank agrees to use its best
efforts to furnish quotations to the Agent as
contemplated by this Section. If any Reference Bank
does not furnish a timely quotation, the Agent shall
determine the relevant interest rate on the basis of
the quotation or quotations furnished by the remaining
Reference Bank or Banks or, if none of such quotations
is available on a timely basis, the provisions of
Section 8.01 shall apply.
Section 2.8. Facility Fee. The Borrower shall
pay to the Agent, for the account of the Banks ratably
in accordance with their respective Percentages, a
facility fee for each day at the Facility Fee Rate for
such day (determined in accordance with the Pricing
Schedule). Such facility fee shall accrue for each day
(i) from and including the Effective Date to but
excluding the Termination Date (or earlier date of
termination of the Commitments in their entirety), on
the aggregate amount of the Commitments (whether used
or unused) on such day and (ii) if any Committed Loans
or LC Liabilities remain outstanding after the
Commitments terminate in their entirety, then for each
day from and including the date on which the
Commitments terminate in their entirety to but
excluding the first day thereafter on which no
Committed Loans or LC Liabilities remain outstanding,
on the aggregate outstanding amount of the Committed
Loans and the LC Liabilities on such day. Fees accrued
under this Section shall be payable quarterly on each
Quarterly Date and on the date on which the Commitments
terminate in their entirety (and, if later, the first
day thereafter on which no Committed Loans or LC
Liabilities remain outstanding).
Section 2.9. Optional Termination or Reduction of
Commitments. The Borrower may, upon at least three
Domestic Business Days= notice to the Agent, (i)
terminate the Commitments at any time, if no Loans or
LC Liabilities are outstanding at such time, or (ii)
ratably reduce from time to time by an aggregate amount
of $5,000,000 or any larger integral multiple of
$1,000,000, the aggregate amount of the Commitments in
excess of the Aggregate Usage.
Section 2.10. Method of Electing Interest Rates.
(a) The Loans included in each Committed Borrowing
shall bear interest initially at the type of rate
specified by the Borrower in the applicable Notice of
Committed Borrowing. Thereafter, the Borrower may from
time to time elect to change or continue the type of
interest rate borne by each Group of Loans (subject in
each case to the provisions of Article 8), as follows:
(i) if such Loans are Base Rate Loans, the
Borrower may elect to convert such Loans to CD
Loans as of any Domestic Business Day or to
Euro-Dollar Loans as of any Euro-Dollar Business
Day;
(ii) if such Loans are CD Loans, the Borrower
may elect to convert such Loans to Base Rate Loans
or Euro-Dollar Loans or elect to continue such
Loans as CD Loans for an additional Interest
Period, in each case effective on the last day of
the then current Interest Period applicable to
such Loans; and
(iii) if such Loans are Euro-Dollar Loans, the
Borrower may elect to convert such Loans to Base
Rate Loans or CD Loans or elect to continue such
Loans as Euro-Dollar Loans for an additional
Interest Period, in each case effective on the
last day of the then current Interest Period
applicable to such Loans.
Each such election shall be made by delivering a notice
(a "Notice of Interest Rate Election") to the Agent at
least three Euro-Dollar Business Days before the
conversion or continuation selected in such notice is
to be effective (unless the relevant Loans are to be
converted from Domestic Loans of one type to Domestic
Loans of the other type or continued as Domestic Loans
of the same type for an additional Interest Period, in
which case such notice shall be delivered to the Agent
at least three Domestic Business Days before such
conversion or continuation is to be effective). A
Notice of Interest Rate Election may, if it so
specifies, apply to only a portion of the aggregate
principal amount of the relevant Group of Loans;
provided that (i) such portion is allocated ratably
among the Loans comprising such Group and (ii) the
portion to which such Notice applies, and the remaining
portion to which it does not apply, are each
$10,000,000 or any larger multiple of $1,000,000.
(b) Each Notice of Interest Rate Election shall
specify:
(i) the Group of Loans (or portion thereof) to
which such notice applies;
(ii) the date on which the conversion or
continuation selected in such notice is to be
effective, which shall comply with the applicable
clause of subsection (a) above;
(iii) if the Loans comprising such Group are to
be converted, the new type of Loans and, if such
new Loans are Fixed Rate Loans, the duration of
the initial Interest Period applicable thereto;
and
(iv) if such Loans are to be continued as CD
Loans or Euro-Dollar Loans for an additional
Interest Period, the duration of such additional
Interest Period.
Each Interest Period specified in a Notice of Interest
Rate Election shall comply with the provisions of the
definition of Interest Period.
(c) Upon receipt of a Notice of Interest Rate
Election from the Borrower pursuant to subsection (a)
above, the Agent shall promptly notify each Bank of the
contents thereof and such notice shall not thereafter
be revocable by the Borrower. If the Borrower fails to
deliver a timely Notice of Interest Rate Election to
the Agent for any Group of Fixed Rate Loans, such Loans
shall be converted to Base Rate Loans on the last day
of the then current Interest Period applicable thereto.
Section 2.11. Mandatory Termination of
Commitments. Unless previously terminated, the
Commitments shall terminate on the Termination Date,
and any Loans then outstanding (together with accrued
interest thereon) shall be due and payable on such
date.
Section 2.12. Optional Prepayments. (a) The
Borrower may (i) upon at least one Domestic Business
Day=s notice to the Agent, prepay any Base Rate Loans
(or any Money Market Borrowing bearing interest at the
Base Rate pursuant to Section 8.01(a)), (ii) upon at
least three Domestic Business Days= notice to the
Agent, prepay any Group of CD Loans or (iii) upon at
least three Euro-Dollar Business Days= notice to the
Agent, prepay any Group of Euro-Dollar Loans, in each
case in whole at any time, or from time to time in part
in amounts aggregating $5,000,000 or any larger
integral multiple of $1,000,000, by paying the
principal amount to be prepaid together with accrued
interest thereon to the date of prepayment. Each such
optional prepayment shall be applied to prepay ratably
the Loans of the several Banks included in such Group
or Borrowing. In connection with any such prepayment
of any Fixed Rate Loan, the Borrower shall comply with
the provisions of Section 2.14.
(b) Except as provided in subsection (a)
above, the Borrower may not prepay all or any portion
of the principal amount of any Money Market Loan prior
to the maturity thereof.
(c) Upon receipt of a notice of prepayment pursuant
to this Section, the Agent shall promptly notify each
Bank of the contents thereof and of such Bank=s ratable
share (if any) of such prepayment and such notice shall
not thereafter be revocable by the Borrower.
Section 2.13. General Provisions as to Payments.
(a) The Borrower shall make each payment of principal
of, and interest on, the Loans and of fees hereunder,
not later than 1:00 P.M. (New York City time) on the
date when due, in Federal or other funds immediately
available in New York City, to the Agent at its address
referred to in Section 9.01. The Agent will promptly
distribute to each Bank its ratable share of each such
payment received by the Agent for the account of the
Banks. Whenever any payment of principal of, or
interest on, the Domestic Loans or of fees shall be due
on a day which is not a Domestic Business Day, the date
for payment thereof shall be extended to the next
succeeding Domestic Business Day. Whenever any payment
of principal of, or interest on, the Euro-Dollar Loans
shall be due on a day which is not a Euro-Dollar
Business Day, the date for payment thereof shall be
extended to the next succeeding Euro-Dollar Business
Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case the date for
payment thereof shall be the next preceding Euro-Dollar
Business Day. Whenever any payment of principal of, or
interest on, the Money Market Loans shall be due on a
day which is not a Euro-Dollar Business Day, the date
for payment thereof shall be extended to the next
succeeding Euro-Dollar Business Day. If the date for
any payment of principal is extended in accordance with
this Section 2.13, by operation of law or otherwise,
interest thereon shall be payable for such extended
time.
(b) Unless the Agent shall have received notice
from the Borrower prior to the date on which any
payment is due to the Banks hereunder that the Borrower
will not make such payment in full, the Agent may
assume that the Borrower has made such payment in full
to the Agent on such date and the Agent may, in
reliance upon such assumption, cause to be distributed
to each Bank on such due date an amount equal to the
amount then due such Bank. If and to the extent that
the Borrower shall not have so made such payment, each
Bank shall repay to the Agent forthwith on demand such
amount distributed to such Bank together with interest
thereon, for each day from the date such amount is
distributed to such Bank until the date such Bank
repays such amount to the Agent, at the Federal Funds
Rate.
Section 2.14. Funding Losses. If the Borrower
makes any payment of principal with respect to any
Fixed Rate Loan or any Fixed Rate Loan is converted to
another type of Loan (whether such payment or
conversion is pursuant to Article 2, 6 or 8 or
otherwise) on any day other than the last day of an
Interest Period applicable thereto, or the last day of
an applicable period fixed pursuant to Section 2.07(d),
or if the Borrower fails to borrow, prepay, convert or
continue any Fixed Rate Loans after notice has been
given to any Bank in accordance with Section 2.04(a) or
2.10(a), the Borrower shall pay to each Bank within 15
days after demand an amount calculated as provided in
Exhibit I hereto to compensate such Bank for any loss
incurred by it (or by an existing or scheduled
Participant in the related Loan) in obtaining,
liquidating or employing deposits from third parties,
provided that such Bank shall have delivered to the
Borrower a certificate setting forth such amount and
the calculation thereof in reasonable detail.
Section 2.15. Computation of Interest and Fees.
Interest based on the Prime Rate hereunder shall be
computed on the basis of a year of 365 days (or 366
days in a leap year) and paid for the actual number of
days elapsed (including the first day but excluding the
last day). All other interest and all letter of credit
fees and facility fees shall be computed on the basis
of a year of 360 days and paid for the actual number of
days elapsed (including the first day but excluding the
last day).
Section 2.16. Letters of Credit. (a) On the
Effective Date, each LC Issuing Bank that has issued an
Existing Letter of Credit on or before the Effective
Date shall be deemed, without further action by any
party hereto, to have sold to each Bank, and each Bank
shall be deemed, without further action by any party
hereto, to have purchased from such LC Issuing Bank, a
participation in such Existing Letter of Credit and the
related LC Liabilities in proportion to its Percentage.
Concurrently with such sale, the participations in the
Existing Letters of Credit sold to the Existing Banks
under the Existing Agreement shall be automatically
cancelled without further action by any of the parties
thereto.
(b) Subject to the terms and conditions set forth
in this Agreement (including without limitation the
condition set forth in Section 3.03(b)),
(i) ABN-AMRO Bank, N.V., as LC Issuing Bank,
agrees to issue Letters of Credit hereunder from
time to time after the Effective Date and before
the Termination Date upon the request of the
Borrower, provided that immediately after each
such Letter of Credit is issued, the aggregate
outstanding amount of LC Liabilities in respect of
all Letters of Credit issued by ABN-AMRO Bank,
N.V., as LC Issuing Bank, shall not exceed
$100,000,000;
(ii) Bank of America National Trust and Savings
Association, as LC Issuing Bank, agrees to issue
Letters of Credit hereunder from time to time
after the Effective Date and before the
Termination Date upon the request of the Borrower,
provided that, immediately after each such Letter
of Credit is issued, the aggregate outstanding
amount of LC Liabilities in respect of all Letters
of Credit issued by Bank of America National Trust
and Savings Association, as LC Issuing Bank, shall
not exceed $100,000,000;
(iii) The First National Bank of Chicago, as LC
Issuing Bank, agrees to issue Letters of Credit
hereunder from time to time after the Effective
Date and before the Termination Date upon the
request of the Borrower, provided that (x)
immediately after each such Letter of Credit is
issued, the aggregate outstanding amount of LC
Liabilities in respect of all Letters of Credit
issued by The First National Bank of Chicago, as
LC Issuing Bank, shall not exceed $100,000,000 and
(y) The First National Bank of Chicago, as LC
Issuing Bank, shall not issue any Letter of Credit
in respect of any obligation under the Borrower=s
public debt or the TASP Notes; and
(iv) Morgan Guaranty Trust Company of New York,
as LC Issuing Bank, agrees to issue Letters of
Credit hereunder from time to time after the
Effective Date and before the Termination Date
upon the request of the Borrower, provided that
immediately after each such Letter of Credit is
issued, the aggregate outstanding amount of LC
Liabilities in respect of all Letters of Credit
issued by Morgan Guaranty Trust Company of New
York, as LC Issuing Bank, shall not exceed
$125,000,000.
Upon the issuance by an LC Issuing Bank of a Letter of
Credit in accordance with this subsection (b), such LC
Issuing Bank shall be deemed, without further action by
any party hereto, to have sold to each Bank, and each
Bank shall be deemed, without further action by any
party hereto, to have purchased from such LC Issuing
Bank, a participation in such Letter of Credit and the
related LC Liabilities in proportion to its Percentage.
(c) No Letter of Credit issued on or after the
Effective Date shall have an original expiry date later
than one year after the issuance thereof. No Letter of
Credit shall be extended on or after the Effective Date
unless (i) such extension is for a period not exceeding
one year and (ii) the LC Issuing Bank agrees to so
extend such Letter of Credit (or, in the case of an
"evergreen" Letter of Credit, its ability to give a
notice to prevent such extension expires) no earlier
than three months before the then existing expiry date.
No Letter of Credit shall have an original or extended
expiry date later than the fifth Domestic Business Day
prior to the Termination Date.
(d) The Borrower shall give the relevant LC Issuing
Bank at least three Domestic Business Days= prior
notice of (x) the issuance of each Letter of Credit to
be issued by it after the Effective Date and (y) each
extension of a Letter of Credit issued by it,
specifying in each case (i) the date of such issuance
or extension, (ii) the expiry date or extended expiry
date of such Letter of Credit (which shall comply with
subsection (c) above), (iii) the proposed terms of such
Letter of Credit and (iv) the nature of the
transactions proposed to be supported thereby. The
issuance of any Letter of Credit after the Effective
Date shall be subject to the conditions precedent set
forth in Article 3 (the LC Issuing Bank having no duty
to ascertain whether such conditions precedent are
satisfied, other than to confirm with the Agent on the
date of issuance that such issuance will not cause the
Aggregate Usage to exceed the aggregate amount of the
Commitments) and subject to the additional conditions
precedent that such Letter of Credit shall be
satisfactory to such LC Issuing Bank and that the
Borrower shall have executed and delivered such other
instruments and agreements relating to such Letter of
Credit as such LC Issuing Bank shall have reasonably
requested. The extension of any Letter of Credit shall
be subject to the conditions precedent set forth in
Article 3 (the LC Issuing Bank having no duty to
ascertain whether such conditions precedent are
satisfied). Upon issuing or extending any Letter of
Credit, the LC Issuing Bank shall promptly notify the
Agent of such issuance or extension, and the Agent
shall promptly notify each Bank thereof and of the
amount of such Bank=s participation in such Letter of
Credit.
(e) The Borrower shall pay to the Agent, for the
account of the Banks ratably in accordance with their
respective Percentages, a letter of credit fee at (i)
the LC Fee Rate on the aggregate amount available for
drawings under each Letter of Credit (other than
Workers= Compensation Letters of Credit) outstanding
from time to time and (ii) the LC Fee Rate minus 0.05%
per annum on the aggregate amount available for
drawings under each Workers= Compensation Letter of
Credit outstanding from time to time. Each such fee
shall be payable in arrears on the last day of each
fiscal quarter of the Borrower for so long as such
Letter of Credit is outstanding and on the expiry date
thereof. The Borrower shall pay to each LC Issuing
Bank additional fronting fees and expenses in the
amounts and at the times agreed between the Borrower
and such LC Issuing Bank. The LC Issuing Banks shall
furnish to the Agent upon request such information as
the Agent shall require in order to calculate the
amount of any fee payable under this subsection (e).
"LC Fee Rate" means, for any day, a rate per annum
equal to the Euro-Dollar Margin for such day.
(f) Upon receipt from the beneficiary of any Letter
of Credit of any demand for payment under such Letter
of Credit, the relevant LC Issuing Bank shall notify
the Agent and the Agent shall promptly notify the
Borrower and each other Bank as to the amount to be
paid by the Issuing Bank as a result of such demand and
the proposed payment date (the "LC Payment Date"). The
responsibility of such LC Issuing Bank to the Borrower
and each Bank shall be only to determine that the
documents (including each demand for payment) delivered
under each Letter of Credit issued by it in connection
with such presentment shall be in conformity in all
material respects with such Letter of Credit. Each LC
Issuing Bank shall endeavor to exercise the same care
in the issuance and administration of the Letters of
Credit issued by it as it does with respect to letters
of credit in which no participations are granted, it
being understood that in the absence of any gross
negligence or willful misconduct by such LC Issuing
Bank, each Bank shall be unconditionally and
irrevocably liable without regard to the occurrence of
any Event of Default or any condition precedent
whatsoever, to reimburse such LC Issuing Bank on demand
for (i) such Bank=s Percentage of the amount of each
payment made by such LC Issuing Bank under each Letter
of Credit issued by it to the extent such amount is not
reimbursed by the Borrower pursuant to subsection (g)
below plus (ii) interest on the foregoing amount to be
reimbursed by such Bank, for each day from the date of
such LC Issuing Bank=s demand for such reimbursement
(or, if such demand is made after 11:00 A.M. (New York
City time) on such date, from the next succeeding
Domestic Business Day) to the date on which such Bank
pays the amount to be reimbursed by it, at a rate of
interest per annum equal to the Federal Funds Rate for
such day.
(g) The Borrower shall be irrevocably and
unconditionally obligated to reimburse each LC Issuing
Bank on or by the applicable LC Reimbursement Date for
any amounts paid by such LC Issuing Bank upon any
drawing under any Letter of Credit issued by it,
without presentment, demand, protest or other
formalities of any kind; provided that neither the
Borrower nor any Bank shall hereby be precluded from
asserting any claim for direct (but not consequential)
damages suffered by the Borrower or such Bank to the
extent, but only to the extent, caused by (i) the
willful misconduct or gross negligence of such LC
Issuing Bank in determining whether a request presented
under any Letter of Credit issued by it complied with
the terms of such Letter of Credit or (ii) such LC
Issuing Bank=s failure to pay under any Letter of
Credit issued by it after the presentation to it of a
request strictly complying with the terms and
conditions of such Letter of Credit. All such amounts
paid by such LC Issuing Bank and remaining unpaid by
the Borrower shall bear interest, payable on demand,
for each day until paid at a rate per annum equal to
(x) the Base Rate for such day if such day falls on or
before the applicable LC Reimbursement Date and (y) the
sum of 2% plus the Base Rate for such day if such day
falls after such LC Reimbursement Date. Each LC
Issuing Bank will pay to each Bank ratably in
accordance with its Percentage all amounts received
from the Borrower for application in payment, in whole
or in part, of the Reimbursement Obligations in respect
of any Letter of Credit issued by such LC Issuing Bank,
but only to the extent such Bank has made payment to
such LC Issuing Bank in respect of such Letter of
Credit pursuant to subsection (f).
(h) If, after the date hereof, the adoption of any
applicable law, rule or regulation, or any change in
any applicable law, rule or regulation, or any change
in the interpretation or administration thereof by any
governmental authority, central bank or comparable
agency charged with the interpretation or
administration thereof, or compliance by any Bank or LC
Issuing Bank with any request or directive (whether or
not having the force of law) of any such authority,
central bank or comparable agency shall impose, modify
or deem applicable any tax, reserve, special deposit or
similar requirement against or with respect to or
measured by reference to Letters of Credit issued or to
be issued hereunder or participations therein, and the
result shall be to increase the cost to any Bank or LC
Issuing Bank of issuing or maintaining any Letter of
Credit or any participation therein, or reduce any
amount receivable by any Bank or LC Issuing Bank
hereunder in respect of any Letter of Credit (which
increase in cost, or reduction in amount receivable,
shall be the result of such Bank=s or LC Issuing Bank=s
reasonable allocation of the aggregate of such
increases or reductions resulting from such event),
then, upon demand by such Bank or LC Issuing Bank, the
Borrower agrees to pay to such Bank or LC Issuing Bank,
from time to time as specified by such Bank or LC
Issuing Bank, such additional amounts as shall be
sufficient to compensate such Bank or LC Issuing Bank
for such increased costs or reductions in amount
incurred by such Bank or LC Issuing Bank. A
certificate of such Bank or LC Issuing Bank submitted
by such Bank or LC Issuing Bank to the Borrower shall
be conclusive as to the amount thereof in the absence
of manifest error.
(i) The Borrower=s obligations under this Section
2.16 shall be absolute and unconditional under any and
all circumstances and irrespective of any setoff,
counterclaim or defense to payment which the Borrower
may have or have had against any LC Issuing Bank, any
Bank or any beneficiary of a Letter of Credit. The
Borrower further agrees with the LC Issuing Banks and
the Banks that the LC Issuing Banks and the Banks shall
not be responsible for, and the Borrower=s
Reimbursement Obligations in respect of any Letter of
Credit shall not be affected by, among other things,
the validity or genuineness of documents or of any
endorsements thereon, even if such documents should in
fact prove to be in any or all respects invalid,
fraudulent or forged, or any dispute between or among
the Borrower, any of its Subsidiaries, the beneficiary
of any Letter of Credit or any financing institution or
other party to whom any Letter of Credit may be
transferred or any claims or defenses whatsoever of the
Borrower or any of its Subsidiaries against the
beneficiary of any Letter of Credit or any such
transferee. No LC Issuing Bank shall be liable for any
error, omission, interruption or delay in transmission,
dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit
issued, extended or renewed by it. The Borrower agrees
that any action taken or omitted by an LC Issuing Bank
or any Bank under or in connection with each Letter of
Credit and the related drafts and documents, if done in
good faith and without gross negligence, shall be
binding upon the Borrower and shall not put such LC
Issuing Bank or any Bank under any liability to the
Borrower.
(j) To the extent not inconsistent with subsection
(i) above, each LC Issuing Bank shall be entitled to
rely, and shall be fully protected in relying upon, any
Letter of Credit, draft, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message,
statement, order or other document 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, independent
accountants and other experts selected by such LC
Issuing Bank. Each LC Issuing Bank shall be fully
justified in failing or refusing to take any action
under this Agreement unless it shall first have
received such advice or concurrence of the Required
Banks as it reasonably deems appropriate or it shall
first be indemnified to its reasonable satisfaction by
the Banks against any and all liability and expense
which may be incurred by it by reason of taking or
continuing to take any such action. Notwithstanding
any other provision of this Section 2.16, each LC
Issuing Bank shall in all cases be fully protected in
acting, or in refraining from acting, under this
Agreement in accordance with a request of the Required
Banks, and such request and any action taken or failure
to act pursuant thereto shall be binding upon the Banks
and all future holders of participations in any Letters
of Credit.
(k) The Borrower hereby agrees to indemnify and
hold harmless each Bank, each LC Issuing Bank and the
Agent, and their respective directors, officers, agents
and employees from and against any and all claims and
damages, losses, liabilities, costs or expenses which
such Bank, such LC Issuing Bank or the Agent may incur
(or which may be claimed against such Bank, such LC
Issuing Bank or the Agent by any Person whatsoever) by
reason of or in connection with the execution and
delivery or transfer of or payment or failure to pay
under any Letter of Credit or any actual or proposed
use of any Letter of Credit, including, without
limitation, any claims, damages, losses, liabilities,
costs or expenses which an LC Issuing Bank may incur by
reason of or in connection with the failure of any
other Bank to fulfill or comply with its obligations to
such LC Issuing Bank hereunder (but nothing herein
contained shall affect any rights the Borrower may have
against any defaulting Bank); provided that the
Borrower shall not be required to indemnify any Bank,
any LC Issuing Bank or the Agent for any claims,
damages, losses, liabilities, costs or expenses to the
extent, but only to the extent, caused by (i) the
willful misconduct or gross negligence of an LC Issuing
Bank in determining whether a request presented under
any Letter of Credit issued by it complied with the
terms of such Letter of Credit or (ii) an LC Issuing
Bank=s failure to pay under any Letter of Credit issued
by it after the presentation to it of a request
strictly complying with the terms and conditions of
such Letter of Credit; and provided further that the
foregoing indemnity shall not apply with respect to any
costs or expenses arising out of any claim by any
Person other than the beneficiary or account party
under the relevant Letter of Credit unless such costs
and expenses shall have been reasonably incurred.
Nothing in this subsection (k) is intended to limit the
obligations of the Borrower under any other provision
of this Agreement.
(l) Each Bank shall, ratably in accordance with its
Percentage, indemnify each LC Issuing Bank, its
affiliates and their respective directors, officers,
agents and employees (to the extent not reimbursed by
the Borrower) against any cost, expense (including
reasonable counsel fees and disbursements), claim,
demand, action, loss or liability (except such as
result from such indemnitees= gross negligence or
willful misconduct or such LC Issuing Bank=s failure to
pay under any Letter of Credit issued by it after the
presentation to it of a request strictly complying with
the terms and conditions of the Letter of Credit) that
such indemnitees may suffer or incur in connection with
this Section 2.16 or any action taken or omitted by
such indemnitees hereunder.
(m) In its capacity as a Bank, each LC Issuing Bank
shall have the same rights and obligations as any other
Bank. The obligations of the LC Issuing Banks under
the Financing Documents are several and not joint.
Section 2.17. Maximum Interest Rate. (a)
Nothing contained in this Agreement or the Notes shall
require the Borrower to pay interest for the account of
any Bank at a rate exceeding the maximum rate permitted
by applicable law.
(b) If the amount of interest payable for the
account of any Bank on any interest payment date in
respect of the immediately preceding interest
computation period, computed pursuant to Section 2.07,
would exceed the maximum amount permitted by applicable
law to be charged by such Bank, the amount of interest
payable for its account on such interest payment date
shall be automatically reduced to such maximum
permissible amount.
(c) If the amount of interest payable for the
account of any Bank in respect of any interest
computation period is reduced pursuant to subsection
(b) of this Section and the amount of interest payable
for its account in respect of any subsequent interest
computation period, computed pursuant to Section 2.07,
would be less than the maximum amount permitted by
applicable law to be charged by such Bank, then the
amount of interest payable for its account in respect
of such subsequent interest computation period shall be
automatically increased to such maximum permissible
amount; provided that at no time shall the aggregate
amount by which interest paid for the account of any
Bank has been increased pursuant to this subsection (c)
exceed the aggregate amount by which interest paid for
its account has theretofore been reduced pursuant to
subsection (b) of this Section.
ARTICLE 3
Conditions
Section 3.1. Conditions to Effectiveness. This
Agreement shall become effective on the date on which
all of the following conditions to effectiveness shall
be satisfied (but shall not become effective unless
such date is on or before January 2, 1997):
(a) the Agent shall have received counterparts
hereof signed by each of the parties hereto (or, in
the case of any party as to which an executed
counterpart shall not have been received, the Agent
shall have received in form satisfactory to it
facsimile or other written confirmation from such
party that it has executed a counterpart hereof);
(b) the Agent shall have received a duly
executed Note for the account of each Bank dated on
or before the Effective Date complying with the
provisions of Section 2.05;
(c) the Agent shall have received counterparts
of a Subsidiary Guaranty Agreement, substantially in
the form of Exhibit H hereto, duly executed by each
of the Obligors listed on the signature pages
thereof;
(d) the Borrower shall have paid in full (or
made arrangements satisfactory to the Agent for
paying in full) on the Effective Date all loans
outstanding under the Existing Agreement, all
interest and fees accrued under the Existing
Agreement to but excluding the Effective Date and
all other amounts (if any) then due and payable by
the Borrower thereunder;
(e) the Agent shall have received an opinion of
Eberhard G.H. Schmoller, Esq., general counsel for
the Borrower, substantially in the form of Exhibit E
hereto and covering such additional matters relating
to the transactions contemplated hereby as the
Required Banks may reasonably request;
(f) the Agent shall have received an opinion of
Davis Polk & Wardwell, special counsel for the
Agent, substantially in the form of Exhibit F hereto
and covering such additional matters relating to the
transactions contemplated hereby as the Required
Banks may reasonably request;
(g) the Agent shall have received a certificate
of an officer of the Borrower stating that the
distribution of the capital stock of Consolidated
Freightways Corporation to the Borrower=s
shareholders pursuant to the Spin-Off has commenced;
(h) the Agent shall have received a copy of a
favorable private letter ruling from the Internal
Revenue Service to the effect that the Spin-Off will
be "tax free" to the Borrower; and
(i) the Agent shall have received all documents
the Agent may reasonably request relating to the
existence of the Obligors, the corporate authority
for and the validity of the Financing Documents and
any other matters relevant hereto, all in form and
substance satisfactory to the Agent.
The Agent shall promptly notify the Borrower, the Banks
and the LC Issuing Banks of the Effective Date, and
such notice shall be conclusive and binding on all
parties hereto.
Section 3.2. Consequence of Effectiveness. (a)
On the Effective Date, without further action by any of
the parties thereto, (i) the Existing Agreement will
be automatically amended and restated to read as this
Agreement reads, (ii) the rights and obligations of the
Terminating Banks under the Existing Agreement will
terminate, provided that their rights under Sections
2.13, 8.04, and 9.03(b) of the Existing Agreement will
survive, and (iii) the obligations of the Subsidiary
Guarantors under the existing Subsidiary Guaranty
Agreement dated as of January 10, 1995 will terminate.
(b) On and after the Effective Date, the rights and
obligations of the parties hereto shall be governed by
the provisions hereof, and the rights and obligations
of the parties hereto that are also parties to the
Existing Agreement with respect to the period prior to
the Effective Date shall continue to be governed by the
provisions thereof as in effect prior to the Effective
Date, except that all interest and fees accrued under
the Existing Agreement to but excluding the Effective
Date shall be paid on the Effective Date.
Section 3.3. Credit Extensions. The obligation
of any Bank to make a Loan on the occasion of any
Borrowing and the obligation of an LC Issuing Bank to
issue or extend a Letter of Credit on the occasion of a
request therefor by the Borrower (or to permit an
automatic extension of an "evergreen" Letter of Credit)
are each subject to the satisfaction of the following
conditions (in addition to those set forth in Section
2.16(d), if applicable):
(a) receipt (i) by the Agent of a Notice of
Borrowing as required by Section 2.02 or 2.03, as
the case may be, in the case of a Borrowing or (ii)
by such LC Issuing Bank of a notice as required by
Section 2.16, in the case of a Letter of Credit;
(b) the fact that, after giving effect to such
Credit Extension, the Aggregate Usage will not
exceed the aggregate amount of the Commitments;
(c) the fact that, immediately before and after
such Credit Extension, no Default shall have
occurred and be continuing; and
(d) the fact that the representations and
warranties of the Borrower contained in this
Agreement shall be true on and as of the date of
such Credit Extension.
Each Credit Extension hereunder shall be deemed to be a
representation and warranty by the Borrower on the date
of such Credit Extension as to the facts specified in
clauses (b), (c) and (d) of this Section.
ARTICLE 4
Representations and Warranties
The Borrower represents and warrants that:
Section 4.1. Corporate Existence and Power. The
Borrower is a corporation duly incorporated, validly
existing and in good standing under the laws of
Delaware, and has all corporate powers and all material
governmental licenses, authorizations, consents and
approvals required to carry on its business as now
conducted.
Section 4.2. Corporate and Governmental
Authorization; No Contravention. The execution,
delivery and performance by each Obligor of the
Financing Documents to which it is a party are within
its corporate powers, have been duly authorized by all
necessary corporate action, require no action by or in
respect of, or filing with, any governmental body,
agency or official and do not contravene, or constitute
a default under, any provision of applicable law or
regulation or of the certificate of incorporation or
by-laws of such Obligor or of any agreement, judgment,
injunction, order, decree or other instrument binding
upon such Obligor or any Subsidiary or result in the
creation or imposition of any Lien on any asset of such
Obligor or any Subsidiary.
Section 4.3. Binding Effect. This Agreement
constitutes a valid and binding agreement of the
Borrower and the Notes, when executed and delivered in
accordance with this Agreement, will constitute valid
and binding obligations of the Borrower, in each case
enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency or similar laws
affecting creditors= rights generally and general
principles of equity. The Subsidiary Guaranty
Agreement, when executed and delivered by each Obligor,
will constitute a valid and binding agreement of such
Obligor, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency or similar
laws affecting creditors= rights generally and general
principles of equity.
Section 4.4. Financial Information. (a) The
consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of December 31, 1995 and
the related statements of consolidated income,
consolidated cash flows and consolidated shareholders=
equity for the fiscal year then ended, reported on by
Arthur Andersen LLP and set forth in the Borrower=s
1995 Annual Report to Shareholders, a copy of which has
been delivered to each of the Banks, fairly present, in
conformity with generally accepted accounting
principles, the consolidated financial position of the
Borrower and its Consolidated Subsidiaries as of such
date and their consolidated results of operations and
cash flows for such fiscal year.
(b) The unaudited condensed consolidated balance
sheet of the Borrower and its Consolidated Subsidiaries
as of June 30, 1996 and the related unaudited condensed
statements of consolidated income and consolidated cash
flows for the six months then ended, set forth in the
Borrower=s quarterly report for the fiscal quarter
ended June 30, 1996 as filed with the Securities and
Exchange Commission on Form 10-Q, a copy of which has
been delivered to each of the Banks, fairly present, on
a basis consistent with the financial statements
referred to in subsection (a) of this Section, the
consolidated financial position of the Borrower and its
Consolidated Subsidiaries as of such date and their
consolidated results of operations and cash flows for
such six-month period (subject to normal year-end
adjustments).
(c) Excluding the effects of the Spin-Off, as such
effects were projected in the Borrower=s current report
on Form 8-K dated August 26, 1996, there has been no
material adverse change since June 30, 1996 in the
business, financial position, results of operations or
prospects of the Borrower and its Consolidated
Subsidiaries, considered as a whole.
Section 4.5. Litigation. There is no action,
suit or proceeding pending against, or to the knowledge
of the Borrower threatened against or affecting, the
Borrower or any of its Subsidiaries before any court or
arbitrator or any governmental body, agency or official
(i) in which there is a reasonable possibility that a
final judgment in excess of $30,000,000 will be entered
or filed against the Borrower or any of its
Subsidiaries, (ii) in which there is a reasonable
possibility of an adverse decision which could, in a
manner not involving the payment of damages, materially
adversely affect the business of the Borrower and its
Subsidiaries, considered as a whole, or (iii) which in
any manner draws into question the validity of any
Financing Document.
Section 4.6. Compliance with ERISA. Each member
of the ERISA Group has fulfilled its obligations under
the minimum funding standards of ERISA and the Internal
Revenue Code with respect to each Plan and is in
compliance in all respects with the presently
applicable provisions of ERISA and the Internal Revenue
Code with respect to each Plan, except to the extent
that noncompliance could not materially adversely
affect the business, consolidated financial position or
consolidated results of operations of the Borrower and
its Consolidated Subsidiaries. No member of the ERISA
Group has (i) sought a waiver of the minimum funding
standard under Section 412 of the Internal Revenue Code
in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer
Plan or in respect of any Benefit Arrangement, or made
any amendment to any Plan or Benefit Arrangement, which
has resulted or could result in the imposition of a
Lien or the posting of a bond or other security under
ERISA or the Internal Revenue Code or (iii) incurred
any liability under Title IV of ERISA other than a
liability to the PBGC for premiums under Section 4007
of ERISA.
Section 4.7. Environmental Matters. In the
ordinary course of its business, the Borrower conducts
periodic reviews of the effect of Environmental Laws on
the business, operations and properties of the Borrower
and its Subsidiaries, in the course of which it
identifies and evaluates associated liabilities and
costs (including, without limitation, any capital or
operating expenditures required for clean-up or closure
of properties presently or previously owned, any
capital or operating expenditures required to achieve
or maintain compliance with environmental protection
standards imposed by law or as a condition of any
license, permit or contract, any related constraints on
operating activities, including any periodic or
permanent shutdown of any facility or reduction in the
level of or change in the nature of operations
conducted thereat, any costs or liabilities in
connection with off-site disposal of wastes or
Hazardous Substances, and any actual or potential
liabilities to third parties, including employees, and
any related costs and expenses). On the basis of such
reviews, the Borrower has reasonably concluded that
such associated liabilities and costs, including the
costs of compliance with Environmental Laws, are
unlikely (after taking into account the Borrower=s
reserves for such liabilities and costs) to have a
material adverse effect on the business, financial
condition, results of operations or prospects of the
Borrower and its Consolidated Subsidiaries, considered
as a whole.
Section 4.8. Taxes. United States Federal income
tax returns of the Borrower and its Subsidiaries have
been examined and closed through the fiscal year ended
December 31, 1983. The Borrower and its Subsidiaries
have filed all United States Federal income tax returns
and all other material tax returns which are required
to be filed by them and have paid all taxes due
pursuant to such returns or pursuant to any assessment
received by the Borrower or any Subsidiary. The
charges, accruals and reserves on the books of the
Borrower and its Subsidiaries in respect of taxes or
other governmental charges are, in the opinion of the
Borrower, adequate.
Section 4.9. Subsidiaries. Each of the
Borrower=s corporate Subsidiaries is a corporation duly
incorporated, validly existing and in good standing
under the laws of its jurisdiction of incorporation,
and has all corporate powers and all material
governmental licenses, authorizations, consents and
approvals required to carry on its business as now
conducted. Each Subsidiary Guarantor is a Wholly-Owned
Subsidiary of the Borrower.
Section 4.10. Not an Investment Company. The
Borrower is not an "investment company" within the
meaning of the Investment Company Act of 1940, as
amended.
Section 4.11. Full Disclosure. All information
heretofore furnished by the Borrower to the Agent or
any Bank for purposes of or in connection with this
Agreement or any transaction contemplated hereby is,
and all such information hereafter furnished by the
Borrower to the Agent or any Bank will be, true and
accurate in all material respects on the date as of
which such information is stated or certified. The
Borrower has disclosed to the Banks in writing any and
all facts which materially and adversely affect or may
affect (to the extent the Borrower can now reasonably
foresee) the business, operations or financial
condition of the Borrower and its Consolidated
Subsidiaries, taken as a whole, or the ability of the
Borrower to perform its obligations under this
Agreement.
Section 4.12. Spin-Off. The Spin-Off will be
"tax free" to the Borrower as described in the ruling
referred to in Section 3.01(h).
ARTICLE 5
Covenants
The Borrower agrees that, so long as any Bank has
any Commitment or any Outstanding LC Exposure hereunder
or any amount payable under any Note remains unpaid:
Section 5.1. Information. The Borrower will
deliver to each of the Banks:
(a) as soon as available and in any event
within 120 days after the end of each fiscal year of
the Borrower, the audited consolidated balance sheet
of the Borrower and its Consolidated Subsidiaries as
of the end of such fiscal year and the related
audited statements of consolidated income,
consolidated cash flows and consolidated
shareholders= equity for such fiscal year, setting
forth in each case in comparative form the figures
for the previous fiscal year, all reported on in a
manner acceptable to the Securities and Exchange
Commission by Arthur Andersen LLP or other
independent public accountants of nationally
recognized standing;
(b) 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 Borrower,
the condensed consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as of the
end of such quarter, the related condensed statement
of income for such quarter and the related condensed
statements of income and consolidated cash flows for
the portion of the Borrower=s fiscal year ended at
the end of such quarter, setting forth in the case
of such statements of consolidated income and
consolidated cash flows in comparative form the
figures for the corresponding periods of the
Borrower=s previous fiscal year, all certified
(subject to normal year-end adjustments) as to
fairness of presentation and consistency by the
chief financial officer or the chief accounting
officer of the Borrower;
(c) simultaneously with the delivery of each
set of financial statements referred to in clauses
(a) and (b) above, a certificate of the chief
financial officer or the chief accounting officer of
the Borrower (i) setting forth in reasonable detail
the calculations required to establish whether the
Borrower was in compliance with the requirements of
Sections 5.07, 5.08, 5.09 and 5.12 on the date of
such financial statements and (ii) stating whether
any Default exists on the date of such certificate
and, if any Default then exists, setting forth the
details thereof and the action which the Borrower is
taking or proposes to take with respect thereto;
(d) simultaneously with the delivery of each
set of financial statements referred to in clause
(a) above, a statement of the firm of independent
public accountants which reported on such statements
(i) whether anything has come to their attention to
cause them to believe that any Default existed on
the date of such statements and (ii) confirming the
calculations set forth in the officer=s certificate
delivered simultaneously therewith pursuant to
clause (c) above;
(e) within five Domestic Business Days after
any officer of the Borrower obtains knowledge of any
Default, if such Default is then continuing, a
certificate of the chief financial officer or the
chief accounting officer of the Borrower setting
forth the details thereof and the action which the
Borrower is taking or proposes to take with respect
thereto;
(f) promptly upon the mailing thereof to the
shareholders of the Borrower generally, copies of
all financial statements, reports and proxy
statements so mailed;
(g) promptly upon the filing thereof, copies of
all registration statements (other than the exhibits
thereto and any registration statements on Form S-8
or its equivalent) and reports on Forms 10-K, 10-Q
and 8-K (or their equivalents) which the Borrower
shall have filed with the Securities and Exchange
Commission;
(h) if and when any member of the ERISA Group
(i) gives or is required to give notice to the PBGC
of any "reportable event" (as defined in Section
4043 of ERISA) with respect to any Plan which might
constitute grounds for a termination of such Plan
under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required
to give notice of any such reportable event, a copy
of the notice of such reportable event given or
required to be given to the PBGC; (ii) receives
notice of complete or partial withdrawal liability
under Title IV of ERISA or notice that any
Multiemployer Plan is in reorganization, is
insolvent or has been terminated, which could, when
aggregated with any liability incurred after June
30, 1996 by any member of the ERISA Group as a
result of any other such withdrawal liability,
reorganization, insolvency or termination, give rise
to aggregate liabilities of the ERISA Group in
excess of $5,000,000, a copy of such notice; (iii)
receives notice from the PBGC under Title IV of
ERISA of an intent to terminate, impose liability
(other than for premiums under Section 4007 of
ERISA) in respect of, or appoint a trustee to
administer any Plan, a copy of such notice; (iv)
applies for a waiver of the minimum funding standard
under Section 412 of the Internal Revenue Code, a
copy of such application; (v) gives notice of intent
to terminate any Plan under Section 4041(c) of
ERISA, a copy of such notice and other information
filed with the PBGC; (vi) gives notice of withdrawal
from any Plan pursuant to Section 4063 of ERISA,
which could, when aggregated with any liability
incurred after June 30, 1996 by any member of the
ERISA Group as a result of any other such
withdrawal, give rise to aggregate liabilities of
the ERISA Group in excess of $5,000,000, a copy of
such notice; or (vii) fails to make any payment or
contribution to any Plan or Multiemployer Plan or in
respect of any Benefit Arrangement or makes any
amendment to any Plan or Benefit Arrangement which
has resulted or could result in the imposition of a
Lien or the posting of a bond or other security, a
certificate of the chief financial officer or the
chief accounting officer of the Borrower setting
forth details as to such occurrence and action, if
any, which the Borrower or applicable member of the
ERISA Group is required or proposes to take; and
(i) from time to time such additional
information regarding the financial position or
business of the Borrower and its Subsidiaries as the
Agent, at the request of any Bank, may reasonably
request.
Section 5.2. Payment of Obligations. The
Borrower will pay and discharge, and will cause each
Subsidiary to pay and discharge, at or before maturity,
all their respective material obligations and
liabilities, including, without limitation, tax
liabilities, except where the same are contested in
good faith by appropriate proceedings, and will
maintain, and will cause each Subsidiary to maintain,
in accordance with generally accepted accounting
principles, appropriate reserves for the accrual of any
of the same.
Section 5.3. Maintenance of Property; Insurance.
(a) The Borrower will keep, and will cause each
Subsidiary to keep, all property useful and necessary
in its business in good working order and condition,
ordinary wear and tear excepted.
(b) The Borrower will maintain, and will cause each
Subsidiary to maintain, with financially sound and
reputable insurers, insurance against liabilities to
third parties, casualties affecting property used in
its business and other risks of the kinds customarily
insured against by corporations of established
reputation engaged in the same or similar business and
similarly situated, of such types and in such amounts
as are customarily carried under similar circumstances
by such other corporations; provided that, in lieu of
any such insurance, the Borrower or any Subsidiary may
maintain a system or systems of self-insurance and
reinsurance which will accord with sound practices of
similarly situated corporations maintaining such
systems and with respect to which the Borrower or such
Subsidiary will maintain adequate insurance reserves,
all in accordance with generally accepted accounting
principles and in accordance with sound insurance
principles or practice.
Section 5.4. Conduct of Business and Maintenance
of Existence. The Borrower will continue, and will
cause each Subsidiary to continue, to engage in
business of the same general type as now conducted by
the Borrower and its Subsidiaries, and will preserve,
renew and keep in full force and effect, and will cause
each Subsidiary to preserve, renew and keep in full
force and effect their respective corporate existence
and their respective rights, privileges and franchises
necessary or desirable in the normal conduct of
business; provided that nothing in this Section 5.04
shall prohibit (i) any merger or consolidation
permitted by Section 5.10 or (ii) the termination of
the corporate existence of any Subsidiary (other than a
Subsidiary Guarantor) if the Borrower in good faith
determines that such termination is in the best
interest of the Borrower and is not materially
disadvantageous to the Banks.
Section 5.5. Compliance with Laws. The Borrower
will comply, and will cause each Subsidiary to comply,
in all material respects with all applicable laws,
ordinances, rules, regulations, and requirements of
governmental authorities (including, without
limitation, Environmental Laws and ERISA and the rules
and regulations thereunder), except where (i) the
necessity of compliance therewith is contested in good
faith by appropriate proceedings or (ii) failures to
comply therewith could not, in the aggregate, have a
material adverse effect on the business, consolidated
financial position or consolidated results of
operations of the Borrower and its Consolidated
Subsidiaries.
Section 5.6. Inspection of Property, Books and
Records. The Borrower will keep, and will cause each
Subsidiary to keep, proper books of record and account
in which full, true and correct entries shall be made
of all dealings and transactions in relation to its
business and activities. The Borrower will permit, and
will cause its Subsidiaries (except Insignificant
Subsidiaries) to permit, representatives of any Bank,
at such Bank=s expense, to visit and inspect any of
their respective properties, to examine and make
abstracts from any of their respective books and
records and to discuss their respective affairs,
finances and accounts with their respective officers,
employees and independent accountants, in each case to
the extent reasonably requested by such Bank to enable
it to evaluate the credit of the Borrower and the
Subsidiary Guarantors, confirm the Borrower=s
compliance with the provisions of the Financing
Documents, exercise and enforce such Bank=s rights
under the Financing Documents or otherwise make
decisions relating thereto, but subject to any
limitations imposed by law or by confidentiality
agreements binding on the Borrower or the relevant
Subsidiary. Such visits, inspections, examinations and
discussions shall be conducted at such reasonable times
and as often as the relevant Bank or Banks may
reasonably request.
Section 5.7. Debt. (a) The ratio of
Consolidated Debt to Consolidated Net Worth shall not
at any time exceed 1.65 to 1.
(b) Total Debt of all Subsidiaries will at no time
exceed $50,000,000; provided that, for purposes of this
subsection (b), such total Debt shall not include:
(i) Debt of a Subsidiary owing to the Borrower;
(ii) Debt of a Subsidiary owing to another
Subsidiary (except, in the case of Debt held by a
Subsidiary that is not wholly owned, directly or
indirectly, by the Borrower, the portion of such
Debt allocable, on a pro rata basis, to the minority
interest);
(iii) Guarantees by a Subsidiary of Debt of the
Borrower or Debt of another Subsidiary;
(iv) Debt of a Subsidiary outstanding on June
30, 1996 or any refinancing of such Debt, provided
that the principal amount of refinancing Debt
excluded from total Debt pursuant to this clause
(iv) shall not exceed the principal amount of the
Debt refinanced thereby;
(v) Debt of a Subsidiary secured by a purchase
money Lien permitted by Section 5.09(c); provided
that the aggregate outstanding principal amount of
all Debt excluded from total Debt pursuant to this
clause (v) shall not at any time exceed
$150,000,000;
(vi) for a period of 90 days after the
Effective Date (but not thereafter), Debt
outstanding under the Emery Receivables Facility not
exceeding $35,000,000 in aggregate outstanding
principal amount; and
(vii) Guarantees by a Subsidiary of Debt of an
ESOP Trust.
As used herein, the term "ESOP Trust" means a trust
created under an employee stock ownership plan as
defined in Section 407(d)(6) of ERISA which purchases
capital stock of the relevant Subsidiary for the
benefit of employees of such Subsidiary and its
subsidiaries.
Section 5.8. Minimum Consolidated Net Worth.
Consolidated Net Worth shall not at any time be less
than $350,000,000; provided that such amount shall be
increased (i) as of December 31, 1996 by an amount
equal to 50% of the consolidated net income of the
Borrower and its Consolidated Subsidiaries for the six
months then ended, if such consolidated net income is
positive, and (ii) as of the last day of each fiscal
year thereafter by an amount equal to 50% of the
consolidated net income of the Borrower and its
Consolidated Subsidiaries for such fiscal year, if such
consolidated net income is positive.
Section 5.9. Negative Pledge. Neither the
Borrower nor any Subsidiary will create, assume or
suffer to exist any Lien on any asset now owned or
hereafter acquired by it, except:
(a) Liens existing on the date of this
Agreement securing Debt outstanding on the date of
this Agreement in an aggregate principal amount not
exceeding $115,000,000;
(b) any Lien existing on any asset of any
corporation at the time such corporation becomes a
Subsidiary and not created in contemplation of such
event at the request of the Borrower or any of its
Subsidiaries or for the benefit of any of their
respective creditors;
(c) any purchase money Lien on any property
constituting a fixed asset or a surface or air
transportation vehicle used in the freight business
hereafter acquired by the Borrower or any Subsidiary
or hereafter constructed or improved by the Borrower
or any Subsidiary, to secure or provide for the
payment of all or a part of the purchase price
thereof, or any Debt incurred to finance the
purchase thereof or cost of construction or cost of
improvement of such property and for which a bona
fide firm commitment in writing was executed prior
to, contemporaneously with or within 180 days after
acquisition of such property, or the completion of
construction or improvement thereof, as the case may
be, provided that no such Lien shall extend to any
other property of the Borrower or any Subsidiary;
(d) any Lien on any asset of any corporation
existing at the time such corporation is merged or
consolidated with or into the Borrower or a
Subsidiary and not created in contemplation of such
event at the request of the Borrower or any of its
Subsidiaries or for the benefit of any of their
respective creditors;
(e) any Lien existing on any asset prior to the
acquisition thereof by the Borrower or a Subsidiary
and not created in contemplation of such acquisition
at the request of the Borrower or any of its
Subsidiaries or for the benefit of any of their
respective creditors;
(f) any Lien arising out of the refinancing,
extension, renewal or refunding of any Debt secured
by any Lien permitted by any of the foregoing
clauses of this Section, provided that such Debt is
not increased and is not secured by any additional
assets;
(g) any Lien on (i) the common stock of any
Subsidiary Guarantor, but only if after giving
effect to such Lien, the Borrower would own,
directly or indirectly, at least 80% of the common
stock of such Subsidiary Guarantor free and clear of
Liens or (ii) the common stock of any other
Subsidiary;
(h) Liens arising in the ordinary course of its
business which (i) do not secure Debt, (ii) do not
secure any obligation in an amount exceeding
$50,000,000 and (iii) do not in the aggregate
materially detract from the value of its assets or
materially impair the use thereof in the operation
of its business;
(i) Liens securing the Emery Receivables
Facility;
(j) any Lien (other than Liens securing the
Emery Receivables Facility) on accounts receivable
if, immediately after such Lien arises, the
aggregate uncollected balance of all accounts
receivable sold or subjected to Liens (other than
Liens securing the Emery Receivables Facility) by
the Borrower and its Subsidiaries (excluding
accounts receivable charged off in accordance with
the charge-off policies applicable to the unsold
accounts receivable of the Borrower and its
Subsidiaries) would not exceed 10% of the
consolidated accounts receivable of the Borrower and
its Subsidiaries as of the end of its then most
recently ended fiscal quarter; and
(k) Liens not otherwise permitted by the
foregoing clauses of this Section securing Debt or
other obligations in an aggregate principal amount
at any time outstanding not to exceed the sum of
$15,000,000 plus 10% of Consolidated Net Worth as of
the end of the immediately preceding fiscal quarter
of the Borrower.
Section 5.10. Consolidations, Mergers and Sales
of Assets. The Borrower will not, and will not permit
any Subsidiary to, consolidate or merge with, or sell,
lease or otherwise transfer any of its assets to, any
Person, except that nothing in this Section 5.10 shall
prohibit:
(a) the merger of a Subsidiary into the
Borrower,
(b) the merger or consolidation of a Subsidiary
with or into another Person if the corporation
surviving such consolidation or merger is a
Subsidiary,
(c) the sale, lease or other transfer of any
aircraft either (i) in the ordinary course of
business or (ii) for fair value if after giving
effect thereto, the aggregate consideration received
for all aircraft sold, leased or otherwise
transferred under this clause (ii) during any fiscal
year of the Borrower does not exceed $150,000,000;
(d) any sale, lease or other transfer of any
asset (including aircraft not permitted to be sold,
leased or otherwise transferred pursuant to clause
(c) above) either (i) in the ordinary course of
business or (ii) for fair value if after giving
effect thereto, the aggregate consideration received
for all of their assets sold, leased or otherwise
transferred under this clause (ii) during any fiscal
year of the Borrower does not exceed $100,000,000;
or
(e) the Spin-Off;
provided that, in the case of (x) any such merger or
consolidation or (y) any such sale, lease or other
transfer of any asset not in the ordinary course of
business, no Default shall have occurred and be
continuing after giving effect thereto.
Section 5.11. Use of Proceeds. The proceeds of
the Loans made under this Agreement will be used by the
Borrower for general corporate purposes. None of such
proceeds will be used, directly or indirectly, for the
purpose, whether immediate, incidental or ultimate, of
buying or carrying any "margin stock" within the
meaning of Regulation U.
Section 5.12. Fixed Charge Coverage. The ratio
of Consolidated EBITDAR to Consolidated Fixed Charges
will not, for any period of four consecutive fiscal
quarters, be less than 1.875 to 1.
Section 5.13. Transactions with Third Party
Affiliates. The Borrower will not, and will not
permit any Subsidiary to, directly or indirectly, pay
any funds to or for the account of, make any investment
(whether by acquisition of stock or indebtedness, by
loan, advance, transfer of property, guarantee or other
agreement to pay, purchase or service, directly or
indirectly, any Debt, or otherwise) in, lease, sell,
transfer or otherwise dispose of any assets, tangible
or intangible, to, or participate in, or effect any
transaction in connection with any joint enterprise or
other joint arrangement with, any Third Party
Affiliate; provided that nothing in this Section 5.13
shall prohibit:
(a) the Borrower from declaring or paying any
lawful dividend so long as, after giving effect
thereto, no Default shall have occurred and be
continuing;
(b) the Borrower or any Subsidiary from making
sales to or purchases from any Third Party Affiliate
and, in connection therewith, extending credit or
making payments, or from making payments for
services rendered by any Third Party Affiliate, if
such sales or purchases are made or such services
are rendered in the ordinary course of business and
on an arm=s-length basis;
(c) the Borrower or any Subsidiary from making
payments of principal, interest and premium on any
Debt of the Borrower or such Subsidiary held by a
Third Party Affiliate if the terms of such Debt are
established on an arm=s-length basis; or
(d) the Borrower or any Subsidiary from
participating in, or effecting any transaction in
connection with, any joint enterprise or other joint
arrangement with any Third Party Affiliate if the
Borrower or such Subsidiary participates in the
ordinary course of its business and on a basis no
less advantageous than the basis on which such Third
Party Affiliate participates.
ARTICLE 6
Defaults
Section 6.1. Events of Default. If one or more
of the following events ("Events of Default") shall
have occurred and be continuing:
(a) the Borrower shall fail to pay any
principal of any Loan or Reimbursement Obligation
when due, or shall fail to pay within three Domestic
Business Days of the due date thereof any interest,
fees or other amount payable hereunder;
(b) the Borrower shall fail to observe or
perform any covenant contained in Sections 5.07 to
5.12, inclusive, or in Section 3.01 of the
Subsidiary Guaranty Agreement;
(c) the Borrower shall fail to observe or
perform any covenant or agreement contained in any
Financing Document (other than those covered by
clause (a) or (b) above) for 30 days after written
notice thereof has been given to the Borrower by the
Agent at the request of any Bank;
(d) any representation, warranty, certification
or statement made by the Borrower in any Financing
Document or any amendment thereof or in any
certificate, financial statement or other document
delivered pursuant to any Financing Document shall
prove to have been incorrect in any material respect
when made (or deemed made);
(e) the Borrower or any Subsidiary shall fail
to make any payment in respect of any Material Debt
within three Domestic Business Days after such
payment is due or, if longer, within any grace
period otherwise applicable to such payment;
(f) any event or condition shall occur which
results in the acceleration of the maturity of
Material Debt or enables the holders of Material
Debt or any Person acting on their behalf to
accelerate the maturity thereof, or any default by
the Borrower or any Subsidiary shall occur which
results in the termination of Material Commitments
prior to the scheduled termination thereof or
enables Persons extending Material Commitments to
terminate such Material Commitments prior to the
scheduled termination thereof;
(g) the Borrower or any Subsidiary (except
Insignificant Subsidiaries) shall commence a
voluntary case or other proceeding seeking
liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar
official of it or any substantial part of its
property, or shall consent to any such relief or to
the appointment of or taking possession by any such
official in an involuntary case or other proceeding
commenced against it, or shall make a general
assignment for the benefit of creditors, or shall
fail generally to pay its debts as they become due,
or shall take any corporate action to authorize any
of the foregoing;
(h) an involuntary case or other proceeding
shall be commenced against the Borrower or any
Subsidiary (except Insignificant Subsidiaries)
seeking liquidation, reorganization or other relief
with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of
its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for
a period of 60 days; or an order for relief shall be
entered against the Borrower or any Subsidiary
(except Insignificant Subsidiaries) under the
federal bankruptcy laws as now or hereafter in
effect;
(i) any member of the ERISA Group shall fail to
pay when due an amount or amounts aggregating in
excess of $35,000,000 which it shall have become
liable to pay under Title IV of ERISA; or notice of
intent to terminate a Material Plan shall be filed
under Title IV of ERISA by any member of the ERISA
Group, any plan administrator or any combination of
the foregoing; or the PBGC shall institute
proceedings under Title IV of ERISA to terminate, to
impose liability (other than for premiums under
Section 4007 of ERISA) in respect of, or to cause a
trustee to be appointed to administer any Material
Plan; or a condition shall exist by reason of which
the PBGC would be entitled to obtain a decree
adjudicating that any Material Plan must be
terminated; or there shall occur a complete or
partial withdrawal from, or a default, within the
meaning of Section 4219(c)(5) of ERISA, with respect
to, one or more Multiemployer Plans which could
cause one or more members of the ERISA Group to
incur a current payment obligation in excess of
$35,000,000;
(j) a final judgment or order for the payment
of money in excess of $35,000,000 shall be entered
or filed against the Borrower or any Subsidiary and
such judgment or order shall continue unsatisfied,
unvacated and unstayed for a period of 30 days;
(k) any person or group of persons (within the
meaning of Section 13 or 14 of the Securities
Exchange Act of 1934, as amended) shall have
acquired beneficial ownership (within the meaning of
Rule 13d-3 promulgated by the Securities and
Exchange Commission under said Act) of 30% or more
of the outstanding shares of common stock of the
Borrower, or Continuing Directors shall cease to
constitute a majority of the Borrower=s board of
directors;
(l) the Borrower shall cease to own, directly
or indirectly, at least 80% of the common stock of
each Subsidiary Guarantor free and clear of all
Liens; or
(m) the Borrower or any Subsidiary Guarantor
shall take any action that causes the guarantee by
any Subsidiary Guarantor set forth in the Subsidiary
Guaranty Agreement to be revoked or invalidated, or
to cease to be in full force and effect (other than
pursuant to Section 4.03 of the Subsidiary Guaranty
Agreement), or the Borrower or any Subsidiary
Guarantor (or any Person acting on behalf of the
Borrower or any Subsidiary Guarantor) shall deny or
disaffirm any of the obligations of any Subsidiary
Guarantor set forth in the Subsidiary Guaranty
Agreement;
then, and in every such event, the Agent shall (i) if
requested by the Required Banks, by notice to the
Borrower terminate the Commitments and they shall
thereupon terminate and (ii) if requested by Banks
holding Notes evidencing at least 60% in aggregate
principal amount of the Loans outstanding, by notice to
the Borrower declare the Notes (together with accrued
interest thereon) to be, and the Notes shall thereupon
become, immediately due and payable without
presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Borrower;
provided that in the case of any of the Events of
Default specified in clause (g) or (h) above with
respect to any Obligor, without any notice to the
Obligors or any other act by the Agent or the Banks,
the Commitments shall thereupon terminate and the Notes
(together with accrued interest thereon) shall become
immediately due and payable without presentment,
demand, protest or other notice of any kind, all of
which are hereby waived by the Borrower.
Section 6.2. Notice of Default. The Agent shall
give notice to the Borrower under Section 6.01(c)
promptly upon being requested to do so by any Bank and
shall thereupon notify all the Banks thereof.
Section 6.3. Cash Cover. The Borrower agrees, in
addition to the provisions of Section 6.01 hereof, that
upon the occurrence and during the continuance of any
Event of Default, it shall, if requested by the Agent
upon instruction from Banks having at least 60% of the
aggregate amount of the Outstanding LC Exposures, pay
(and, in the case of any of the Events of Default
specified in clause (g) or (h) above with respect to
any Obligor, forthwith, without any demand or the
taking of any other action by the Agent or any Bank, it
shall pay) to the Agent an amount in immediately
available funds equal to the then aggregate amount of
the LC Liabilities to be held as security therefor for
the benefit of the Banks and the LC Issuing Banks.
ARTICLE 7
The Agent and the Co-Agents
Section 7.1. Appointment and Authorization. Each
Bank irrevocably appoints and authorizes the Agent to
take such action as agent on its behalf and to exercise
such powers under the Financing Documents as are
delegated to the Agent by the terms thereof, together
with all such powers as are reasonably incidental
thereto.
Section 7.2. Agent and Affiliates. Morgan
Guaranty Trust Company of New York and each Bank
identified as a Co-Agent herein shall have the same
rights and powers under the Financing Documents as any
other Bank and may exercise or refrain from exercising
the same as though it were not the Agent or a Co-Agent.
Morgan Guaranty Trust Company of New York and each Bank
identified as a Co-Agent herein and their respective
affiliates may accept deposits from, lend money to, and
generally engage in any kind of business with the
Borrower or any Subsidiary or affiliate of the Borrower
as if it were not the Agent or a Co-Agent hereunder.
Section 7.3. Action by Agent. The obligations of
the Agent under the Financing Documents are only those
expressly set forth therein. Without limiting the
generality of the foregoing, the Agent shall not be
required to take any action with respect to any Default
(except as expressly provided in Article 6) and shall
not have a fiduciary relationship with any Bank.
Section 7.4. Consultation with Experts. The
Agent may consult with legal counsel (who may be
counsel for an Obligor), independent public accountants
and other experts selected by it and shall not be
liable for any action taken or omitted to be taken by
it in good faith in accordance with the advice of such
counsel, accountants or experts.
Section 7.5. Liability of Agent. Neither the
Agent nor any of its affiliates nor any of their
respective directors, officers, agents or employees
shall be liable for any action taken or not taken by it
in connection herewith (i) with the consent or at the
request of the Required Banks or (ii) in the absence of
its own gross negligence or willful misconduct.
Neither the Agent nor any of its affiliates nor any of
their respective directors, officers, agents or
employees shall be responsible for or have any duty to
ascertain, inquire into or verify (i) any statement,
warranty or representation made in connection with the
Financing Documents or any borrowing hereunder; (ii)
the performance or observance of any of the covenants
or agreements of the Borrower; (iii) the satisfaction
of any condition specified in Article 3, except receipt
of items required to be delivered to the Agent; or (iv)
the validity, effectiveness or genuineness of the
Financing Documents or any other instrument or writing
furnished in connection therewith. The Agent shall not
incur any liability by acting in reliance upon any
notice, consent, certificate, statement, or other
writing (which may be a bank wire, telex or similar
writing) believed by it to be genuine or to be signed
by the proper party or parties.
Section 7.6. Indemnification. Each Bank shall,
ratably in accordance with its Percentage, indemnify
the Agent, its affiliates and their respective
directors, officers, agents and employees (to the
extent not reimbursed by the Borrower) against any
cost, expense (including counsel fees and
disbursements), claim, demand, action, loss or
liability (except such as result from such indemnitees=
gross negligence or willful misconduct) that such
indemnitees may suffer or incur in connection with this
Agreement or any action taken or omitted by such
indemnitees hereunder.
Section 7.7. Credit Decision. Each Bank
acknowledges that it has, independently and without
reliance upon the Agent, the Co-Agents or any other
Bank, and based on such documents and information as it
has deemed appropriate, made its own credit analysis
and decision to enter into this Agreement. Each Bank
also acknowledges that it will, independently and
without reliance upon the Agent, the Co-Agents or any
other Bank, 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
any action under the Financing Documents.
Section 7.8. Successor Agent. The Agent may
resign at any time by giving notice thereof to the
Banks and the Borrower. Upon any such resignation, the
Required Banks shall have the right, after consultation
with the Borrower, to appoint a successor Agent. If no
successor Agent shall have been so appointed by the
Required Banks, and shall have accepted such
appointment, within 30 days after the retiring Agent
gives notice of resignation, then the retiring Agent
may, on behalf of the Banks, appoint a successor Agent,
which shall be a commercial bank organized or licensed
under the laws of the United States of America or of
any State thereof and having a combined capital and
surplus of at least $1,000,000,000. Upon the
acceptance of its appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights and
duties of the retiring Agent, and the retiring Agent
shall be discharged from its duties and obligations
hereunder. After any retiring Agent=s resignation
hereunder as Agent, the provisions of this Article
shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent.
Section 7.9. Agent=s Fee. The Borrower shall pay
to the Agent for its own account fees in the amounts
and at the times previously agreed upon between the
Borrower and the Agent.
Section 7.10. Co-Agents. No Bank identified as a
"Co-Agent" herein shall have any right, power,
obligation, liability, responsibility or duty of any
kind under the Financing Documents (except those
applicable to it in its capacity as a Bank) or any
fiduciary relationship with any other Bank.
ARTICLE 8
Change in Circumstances
Section 8.1. Basis for Determining Interest Rate
Inadequate or Unfair . If on or prior to the first day
of any Interest Period for any Fixed Rate Borrowing:
(a) the Agent is advised by the Reference Banks
that deposits in dollars (in the applicable amounts)
are not being offered to the Reference Banks in the
relevant market for such Interest Period, or
(b) in the case of CD Loans or Euro-Dollar
Loans, Banks having 50% or more of the aggregate
principal amount of the affected Loans advise the
Agent that the Adjusted CD Rate or the Adjusted
London Interbank Offered Rate, as the case may be,
as determined by the Agent will not adequately and
fairly reflect the cost to such Banks of funding
their CD Loans or Euro-Dollar Loans, as the case may
be, for such Interest Period,
the Agent shall forthwith give notice thereof to the
Borrower and the Banks, whereupon until the Agent
notifies the Borrower that the circumstances giving
rise to such suspension no longer exist, (i) the
obligations of the Banks to make CD Loans or
Euro-Dollar Loans, as the case may be, or to continue
or convert outstanding Loans as or into CD Loans or
Euro-Dollar Loans, as the case may be, shall be
suspended and (ii) each outstanding CD Loan or Euro-
Dollar Loan, as the case may be, shall be converted
into a Base Rate Loan on the last day of the then
current Interest Period applicable thereto, unless the
Borrower shall have elected pursuant to Section 2.10 to
convert such CD Loan or Euro-Dollar Loan into a Fixed
Rate Loan of the other type and the circumstances
described in Sections 8.01(a) and 8.01(b) do not exist
with respect to such other type. Unless the Borrower
notifies the Agent at least two Domestic Business Days
before the date of any Fixed Rate Borrowing for which a
Notice of Borrowing has previously been given that it
elects not to borrow on such date, (i) if such Fixed
Rate Borrowing is a Committed Borrowing, such Borrowing
shall instead be made as a Base Rate Borrowing and (ii)
if such Fixed Rate Borrowing is a Money Market LIBOR
Borrowing, the Money Market LIBOR Loans comprising such
Borrowing shall bear interest on the unpaid principal
amount thereof for each day from and including the
first day to but excluding the last day of the Interest
Period applicable thereto at the Base Rate for such
day.
Section 8.2. Illegality. If, on or after the
date hereof, the adoption of any applicable law, rule
or regulation, or any change in any applicable law,
rule or regulation, or any change in the interpretation
or administration thereof by any governmental
authority, central bank or comparable agency charged
with the interpretation or administration thereof, or
compliance by any Bank (or its Euro-Dollar Lending
Office) with any request or directive (whether or not
having the force of law) of any such authority, central
bank or comparable agency shall make it unlawful or
impossible for any Bank (or its Euro-Dollar Lending
Office) to make, maintain or fund its Euro-Dollar Loans
and such Bank shall so notify the Agent, the Agent
shall forthwith give notice thereof to the other Banks
and the Borrower, whereupon until such Bank notifies
the Borrower and the Agent that the circumstances
giving rise to such suspension no longer exist, the
obligation of such Bank to make Euro-Dollar Loans, or
to continue or convert outstanding Loans as or into
Euro-Dollar Loans, shall be suspended. Before giving
any notice to the Agent pursuant to this Section, such
Bank shall designate a different Euro-Dollar Lending
Office if such designation will avoid the need for
giving such notice and will not, in the judgment of
such Bank, be otherwise disadvantageous to such Bank.
If such notice is given, each Euro-Dollar Loan of such
Bank then outstanding shall be converted to a Base Rate
Loan either (a) on the last day of the then current
Interest Period applicable to such Euro-Dollar Loan if
such Bank may lawfully continue to maintain and fund
such Loan as a Euro-Dollar Loan to such day or (b)
immediately if such Bank shall determine that it may
not lawfully continue to maintain and fund such Loan as
a Euro-Dollar Loan to such day.
Section 8.3. Increased Cost and Reduced Return.
(a) If on or after (x) the date hereof, in the case of
any Committed Loan or any obligation to make Committed
Loans or (y) the date of the related Money Market
Quote, in the case of any Money Market Loan, the
adoption of any applicable law, rule or regulation, or
any change in any applicable law, rule or regulation,
or any change in the interpretation or administration
thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or
its Applicable Lending Office) with any request or
directive (whether or not having the force of law) of
any such authority, central bank or comparable agency
shall impose, modify or deem applicable any reserve
(including, without limitation, any such requirement
imposed by the Board of Governors of the Federal
Reserve System, but excluding (i) with respect to any
CD Loan any such requirement included in an applicable
Domestic Reserve Percentage and (ii) with respect to
any Euro-Dollar Loan any such requirement included in
an applicable Euro-Dollar Reserve Percentage), special
deposit, insurance assessment (excluding, with respect
to any CD Loan, any such requirement reflected in an
applicable Assessment Rate) or similar requirement
against assets of, deposits with or for the account of,
or credit extended by, any Bank (or its Applicable
Lending Office) or shall impose on any Bank (or its
Applicable Lending Office) or on the United States
market for certificates of deposit or the London
interbank market any other condition affecting its
Fixed Rate Loans, its Note or its obligation to make
Fixed Rate Loans and the result of any of the foregoing
is to increase the cost to such Bank (or its Applicable
Lending Office) of making or maintaining any Fixed Rate
Loan, or to reduce the amount of any sum received or
receivable by such Bank (or its Applicable Lending
Office) under this Agreement or under its Note with
respect thereto, by an amount deemed by such Bank to be
material, then, within 30 days after demand by such
Bank (with a copy to the Agent), the Borrower shall pay
to such Bank such additional amount or amounts as will
compensate such Bank for such increased cost or
reduction.
(b) If any Bank shall have determined that, after
the date hereof, the adoption of any applicable law,
rule or regulation regarding capital adequacy, or any
change in any such law, rule or regulation, or any
change in the interpretation or administration thereof
by any governmental authority, central bank or
comparable agency charged with the interpretation or
administration thereof, or any request or directive
regarding capital adequacy (whether or not having the
force of law) of any such authority, central bank or
comparable agency, has or would have the effect of
reducing the rate of return on capital of such Bank (or
its Parent) as a consequence of such Bank=s obligations
hereunder to a level below that which such Bank (or its
Parent) could have achieved but for such adoption,
change, request or directive (taking into consideration
its policies with respect to capital adequacy) by an
amount deemed by such Bank to be material, then from
time to time, within 30 days after demand by such Bank
(with a copy to the Agent), the Borrower shall pay to
such Bank such additional amount or amounts as will
compensate such Bank (or its Parent) for such
reduction.
(c) Each Bank will use its best efforts promptly to
notify the Borrower and the Agent of any event of which
it has knowledge, occurring after the date hereof,
which will entitle such Bank to compensation pursuant
to this Section and will designate a different
Applicable Lending Office if such designation will
avoid the need for, or reduce the amount of, such
compensation and will not, in the judgment of such
Bank, be otherwise disadvantageous to such Bank. A
certificate of any Bank claiming compensation under
this Section and setting forth the additional amount or
amounts to be paid to it hereunder shall be conclusive
in the absence of manifest error. In determining such
amount, such Bank may use any reasonable averaging and
attribution methods.
Section 8.4. Taxes. (a) Any and all payments by
the Borrower to or for the account of any Bank or the
Agent hereunder or under any Note shall be made free
and clear of and without deduction for any and all
present or future taxes, duties, levies, imposts,
deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the
case of each Bank and the Agent, taxes imposed on its
income, and franchise taxes imposed on it, by the
jurisdiction under the laws of which such Bank or the
Agent (as the case may be) is organized or any
political subdivision thereof and, in the case of each
Bank, taxes imposed on its income, and franchise or
similar taxes imposed on it, by the jurisdiction of
such Bank=s Applicable Lending Office or any political
subdivision thereof (all such non-excluded taxes,
duties, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred
to as "Taxes"). If the Borrower shall be required by
law to deduct any Taxes from or in respect of any sum
payable hereunder or under any Note to any Bank or the
Agent, (i) the sum payable shall be increased as
necessary so that after making all required deductions
(including deductions applicable to additional sums
payable under this Section 8.04) such Bank or the Agent
(as the case may be) receives an amount equal to the
sum it would have received had no such deductions been
made, (ii) the Borrower shall make such deductions,
(iii) the Borrower shall pay the full amount deducted
to the relevant taxation authority or other authority
in accordance with applicable law and (iv) the Borrower
shall furnish to the Agent, at its address referred to
in Section 9.01, the original or a certified copy of a
receipt evidencing payment thereof.
(b) In addition, the Borrower agrees to pay any
present or future stamp or documentary taxes and any
other excise or property taxes, or charges or similar
levies which arise from any payment made hereunder or
under any Note or from the execution or delivery of, or
otherwise with respect to, this Agreement or any Note
(hereinafter referred to as "Other Taxes").
(c) The Borrower agrees to indemnify each Bank and
the Agent for the full amount of Taxes or Other Taxes
(including, without limitation, any Taxes or Other
Taxes imposed or asserted by any jurisdiction on
amounts payable under this Section 8.04) paid by such
Bank or the Agent (as the case may be) and any
liability (including penalties, interest and expenses)
arising therefrom or with respect thereto. This
indemnification shall be made within 30 days from the
date such Bank or the Agent (as the case may be) makes
demand therefor.
(d) Each Bank 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 Bank listed on the
signature pages hereof and on or prior to the date on
which it becomes a Bank in the case of each other Bank,
and from time to time thereafter if requested in
writing by the Borrower (but only so long as such Bank
remains lawfully able to do so), shall provide the
Borrower with Internal Revenue Service form 1001 or
4224, as appropriate, or any successor form prescribed
by the Internal Revenue Service, certifying that such
Bank is entitled to benefits under an income tax treaty
to which the United States is a party which reduces the
rate of withholding tax on payments of interest or
certifying that the income receivable pursuant to this
Agreement is effectively connected with the conduct of
a trade or business in the United States. If the form
provided by a Bank at the time such Bank 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" as defined in Section 8.04(a).
(e) For any period with respect to which a Bank has
failed to provide the Borrower with the appropriate
form pursuant to Section 8.04(d) (unless such failure
is due to a change in treaty, law or regulation, or any
change in the interpretation or administration thereof
by any governmental authority, occurring subsequent to
the date on which a form originally was required to be
provided), such Bank shall not be entitled to
indemnification under Section 8.04(a) with respect to
Taxes imposed by the United States; provided that
should a Bank, which is otherwise exempt from or
subject to a reduced rate of withholding tax, become
subject to Taxes because of its failure to deliver a
form required hereunder, the Borrower shall take such
steps as such Bank shall reasonably request to assist
such Bank to recover such Taxes.
(f) If the Borrower is required to pay additional
amounts to or for the account of any Bank pursuant to
this Section 8.04, then such Bank will change the
jurisdiction of its Applicable Lending Office so as to
eliminate or reduce any such additional payment which
may thereafter accrue if such change, in the judgment
of such Bank, is not otherwise disadvantageous to such
Bank.
Section 8.5. Base Rate Loans Substituted for
Affected Fixed Rate Loans. (a) If (i) the obligation
of any Bank to make, or continue or convert outstanding
Loans as or into, Euro-Dollar Loans has been suspended
pursuant to Section 8.02 or (ii) any Bank has demanded
compensation under Section 8.03 or 8.04 with respect to
its CD Loans or Euro-Dollar Loans and the Borrower
shall, by at least five Euro-Dollar Business Days=
prior notice to such Bank through the Agent, have
elected that the provisions of this Section 8.05(a)
shall apply to such Bank, then, unless and until such
Bank notifies the Borrower that the circumstances
giving rise to such suspension or demand for
compensation no longer exist, all Loans which would
otherwise be made by such Bank as (or continued as or
converted into) CD Loans or Euro-Dollar Loans, as the
case may be, shall be made instead as Base Rate Loans
(on which interest and principal shall be payable
contemporaneously with the related Fixed Rate Loans of
the other Banks). If such Bank notifies the Borrower
that the circumstances giving rise to such notice no
longer exist, the principal amount of each such Base
Rate Loan shall be converted into a CD Loan or
Euro-Dollar Loan, as the case may be, on the first day
of the next succeeding Interest Period applicable to
the related CD Loans or Euro-Dollar Loans of the other
Banks.
(b) If (i) any Bank has demanded compensation under
Section 8.03 with respect to its CD Loans or Euro-
Dollar Loans or (ii) the Borrower has become obligated
to pay any Taxes or other amounts to or for the account
of any Bank pursuant to Section 8.04, and the Borrower
shall, by at least five Euro-Dollar Business Days=
prior notice to the Banks through the Agent, have
elected that the provisions of this Section 8.05(b)
shall apply to all of the Banks, then the Borrower
shall, on the fifth Euro-Dollar Business Day following
such notice, prepay in full the then outstanding
principal amount of each outstanding Euro-Dollar Loan
or CD Loan, as the case may be, of each Bank, together
with accrued interest thereon.
Section 8.6. Substitution of Banks. If (i) any
Bank has demanded compensation under Section 8.03 or
(ii) the Borrower has become obligated to pay any Taxes
or other amounts to or for the account of any Bank
pursuant to Section 8.04 (such Bank, in either case,
being called a "Selling Bank"), the Borrower shall have
the right, with the assistance of the Agent, to seek
one or more banks or other institutions satisfactory to
the Borrower, the LC Issuing Banks and the Agent
(collectively, the "Purchasing Banks") willing to
purchase the Selling Bank=s Note and its share of any
unpaid Reimbursement Obligations and assume the
Commitment of the Selling Bank, all on the terms
specified in this Section 8.06. The Selling Bank shall
be obligated to sell its Note and its share of any
unpaid Reimbursement Obligations to such Purchasing
Bank or Banks (which may include one or more of the
Banks) within 15 days after receiving notice from the
Borrower requiring it to do so, at an aggregate price
equal to the outstanding principal amount thereof, plus
unpaid interest accrued thereon to but excluding the
date of sale. In connection with any such sale, and as
a condition thereof, the Borrower shall pay to the
Selling Bank all fees accrued for its account hereunder
to but excluding the date of such sale, plus, if
demanded by the Selling Bank at least two Domestic
Business Days prior to such sale, (i) the amount of any
compensation which would be due to the Selling Bank
under Section 2.14 if the Borrower had prepaid the
outstanding Fixed Rate Loans of the Selling Bank on the
date of such sale and (ii) any additional compensation,
Taxes or other amounts accrued for its account under
Section 8.03 or 8.04, as applicable, to but excluding
said date (it being understood that the Selling Bank
shall retain its right to be compensated after the date
of such sale for any such accrued amounts remaining
unpaid). Upon such sale, the Purchasing Bank or Banks
shall assume the Commitment of the Selling Bank, and
the Selling Bank shall be released from its obligations
hereunder to a corresponding extent. If any Purchasing
Bank is not already one of the Banks, the Selling Bank,
as assignor, such Purchasing Bank, as assignee, the
Borrower, the LC Issuing Banks and the Agent shall
enter into an assignment and assumption agreement
substantially in the form of Exhibit G hereto,
whereupon such Purchasing Bank shall be a Bank party to
this Agreement, shall be deemed to be an Assignee
hereunder and shall have all the rights and obligations
of a Bank with a Commitment equal to its ratable share
of the Commitment of the Selling Bank. Upon the
consummation of any sale pursuant to this Section 8.06,
the Selling Bank, the Agent and the Borrower shall make
appropriate arrangements so that, if required, each
Purchasing Bank receives a new Note. If the Selling
Bank is also an LC Issuing Bank, its obligation to
issue or extend Letters of Credit (or permit an
automatic extension of an "evergreen" Letter of Credit)
shall terminate concurrently with such sale and its
status as an LC Issuing Bank (but not its right to
indemnification hereunder) shall terminate when the LC
Liabilities relating to all Letters of Credit issued by
it have been reduced to zero.
ARTICLE 9
Miscellaneous
Section 9.1. Notices. All notices, requests and
other communications to any party hereunder shall be in
writing (including bank wire, telex, facsimile
transmission or similar writing) and shall be given to
such party: (x) in the case of the Borrower, an LC
Issuing Bank, a Co-Agent or the Agent, at its address
or telex number or facsimile number set forth on the
signature pages hereof, (y) in the case of any Bank, at
its address or telex number or facsimile number set
forth in its Administrative Questionnaire or (z) in the
case of any party, such other address or telex number
or facsimile number as such party may hereafter specify
for the purpose by notice to the Agent and the
Borrower. Each such notice, request or other
communication shall be effective (i) if given by telex,
when such telex is transmitted to the telex number
specified in this Section and the appropriate
answerback is received, (ii) if given by facsimile
transmission, when such facsimile is transmitted to the
facsimile transmission number specified in or pursuant
to this Section 9.01 and telephonic confirmation of
receipt thereof is received, (iii) if given by mail, 72
hours after such communication is deposited in the
mails with first class postage prepaid, addressed as
aforesaid or (iv) if given by any other means, when
delivered at the address specified in this Section;
provided that notices to the Agent or the LC Issuing
Banks under Article 2 or Article 8 shall not be
effective until received.
Section 9.2. No Waivers. No failure or delay by
the Agent, any Bank or any LC Issuing Bank in
exercising any right, power or privilege under any
Financing Document shall operate as a waiver thereof
nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative
and not exclusive of any rights or remedies provided by
law.
Section 9.3. Expenses; Indemnification. (a) The
Borrower shall pay (i) all out-of-pocket expenses of
the Agent, including fees and disbursements of special
counsel for the Agent, in connection with the
preparation and administration of the Financing
Documents, any waiver or consent thereunder or any
amendment thereof or any Default thereunder or any
event or condition reasonably alleged by any Bank to be
a possible Default thereunder and (ii) if an Event of
Default occurs, all out-of-pocket expenses incurred by
the Agent and each Bank, including fees and
disbursements of counsel, in connection with such Event
of Default and collection, bankruptcy, insolvency and
other enforcement proceedings resulting therefrom.
(b) The Borrower agrees to indemnify the Agent,
each Co-Agent and each Bank, their respective
affiliates and the respective directors, officers,
agents and employees of the foregoing (each an
"Indemnitee") and hold each Indemnitee harmless from
and against any and all liabilities, losses, damages,
costs and expenses of any kind, including, without
limitation, the reasonable fees and disbursements of
counsel, which may be incurred by such Indemnitee in
connection with any investigative, administrative or
judicial proceeding (whether or not such Indemnitee
shall be designated a party thereto) brought or
threatened relating to or arising out of the Financing
Documents (other than the provisions thereof relating
to Letters of Credit as to which indemnification is
provided in Section 2.16(k)) or any actual or proposed
use of proceeds of Loans hereunder; provided that no
Indemnitee shall have the right to be indemnified
hereunder for such Indemnitee=s own gross negligence or
willful misconduct as determined by a court of
competent jurisdiction.
Section 9.4. Sharing of Set-offs. Each Bank
agrees that if it shall, by exercising any right of
set-off or counterclaim or otherwise, receive (i)
payment of a proportion of the aggregate amount of
principal and interest due with respect to any Note
held by it which is greater than the proportion
received by any other Bank in respect of the aggregate
amount of principal and interest due with respect to
any Note held by such other Bank or (ii) payment of a
proportion of its participation in the LC Liabilities
which is greater that the proportion received by any
other Bank in respect of its participation in the LC
Liabilities, the Bank receiving such proportionately
greater payment shall purchase such participations in
the Notes or the LC Liabilities (as the case may be)
held by the other Banks, and such other adjustments
shall be made, as may be required so that all such
payments of principal and interest with respect to the
Notes held by the Banks shall be shared by the Banks
pro rata and all such payments with respect to the LC
Liabilities shall be shared pro rata by the Banks
participating therein; provided that nothing in this
Section shall impair the right of any Bank to exercise
any right of set-off or counterclaim it may have and to
apply the amount subject to such exercise to the
payment of indebtedness of the Borrower other than its
indebtedness under the Notes and the LC Liabilities.
The Borrower agrees, to the fullest extent it may
effectively do so under applicable law, that any holder
of a participation in a Note or the LC Liabilities,
whether or not acquired pursuant to the foregoing
arrangements, may exercise rights of set-off or
counterclaim and other rights with respect to such
participation as fully as if such holder of a
participation were a direct creditor of the Borrower in
the amount of such participation.
Section 9.5. Amendments and Waivers. Any
provision of this Agreement or the Notes may be amended
or waived if, but only if, such amendment or waiver is
in writing and is signed by the Borrower and the
Required Banks (and, if the rights or duties of the
Agent or any LC Issuing Bank are affected thereby, by
the Agent or such LC Issuing Bank, as the case may be);
provided that no such amendment or waiver shall, unless
signed by all the Banks, (i) increase or decrease the
Commitment of any Bank (except for a ratable decrease
in the Commitments of all Banks) or subject any Bank to
any additional obligation, (ii) reduce the principal of
or rate of interest on any Loan or any fees hereunder,
(iii) postpone the date fixed for any payment of
principal of or interest on any Loan, any Reimbursement
Obligation or any fees hereunder or for any termination
of any Commitment or (iv) change any provision of this
Section or change the percentage of the Commitments,
the Outstanding Credit Exposures or the Outstanding LC
Exposures or of the aggregate unpaid principal amount
of the Notes, or the number of Banks, which shall be
required for the Banks or any of them to take any
action under this Section or any other provision of the
Financing Documents.
Section 9.6. Successors and Assigns. (a) The
provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their
respective successors and assigns, except that the
Borrower may not assign or otherwise transfer any of
its rights under this Agreement without the prior
written consent of all Banks.
(b) Any Bank may at any time grant to one or more
banks or other institutions (each a "Participant")
participating interests in its Commitment or any or all
of its Loans or its Outstanding LC Exposure. Within
five Domestic Business Days after such grant, unless
such grant consists solely of a participating interest
in the Money Market Loans of such Bank, such Bank shall
notify the Borrower of the name of such Participant and
the amount of its participating interest. In the event
of any such grant by a Bank of a participating interest
to a Participant, whether or not upon notice to the
Borrower or the Agent, such Bank shall remain
responsible for the performance of its obligations
hereunder, and the Borrower and the Agent shall
continue to deal solely and directly with such Bank in
connection with such Bank=s rights and obligations
under this Agreement. Any agreement pursuant to which
any Bank may grant such a participating interest shall
provide that such Bank shall retain the sole right and
responsibility to enforce the obligations of the
Borrower hereunder including, without limitation, the
right to approve any amendment, modification or waiver
of any provision of this Agreement; provided that such
participation agreement may provide that such Bank will
not agree to any modification, amendment or waiver of
this Agreement described in clause (i), (ii) or (iii)
of Section 9.05 without the consent of the Participant.
The Borrower agrees that each Participant shall, to the
extent provided in its participation agreement, be
entitled to the benefits of Article 8 with respect to
its participating interest. An assignment or other
transfer which is not permitted by subsection (c) or
(d) below shall be given effect for purposes of this
Agreement only to the extent of a participating
interest granted in accordance with this subsection
(b).
(c) Any Bank may at any time assign to one or more
banks or other institutions (each an "Assignee") all,
or, subject to the next sentence, a proportionate part
of all, of its rights and obligations under this
Agreement and the Notes, and such Assignee shall assume
such rights and obligations, pursuant to an Assignment
and Assumption Agreement in substantially the form of
Exhibit G hereto (an "Assignment and Assumption
Agreement") executed by such Assignee and such
transferor Bank, with (and subject to) the subscribed
consent of the Borrower (which shall not be
unreasonably withheld), the LC Issuing Banks and the
Agent; provided that if an Assignee is another Bank or
an affiliate of such transferor Bank, the consent of
the Borrower and the Agent shall not be required; and
provided further that such assignment may, but need
not, include rights of the transferor Bank in respect
of outstanding Money Market Loans. No assignment of
only a proportionate part of the rights and obligations
of a Bank under this Agreement and the Notes may be
made unless each of (i) the part assigned (i.e., the
"Assigned Amount" set forth in the related Assignment
and Assumption Agreement) and (ii) the part retained by
the transferor Bank equals or exceeds $10,000,000.
Upon execution and delivery of an Assignment and
Assumption Agreement and payment by such Assignee to
such transferor Bank of an amount equal to the purchase
price agreed between such transferor Bank and such
Assignee, such Assignee shall be a Bank party to this
Agreement and shall have all the rights and obligations
of a Bank with a Commitment as set forth in such
Assignment and Assumption Agreement, and the transferor
Bank shall be released from its obligations hereunder
to a corresponding extent, and no further consent or
action by any party shall be required. Upon the
consummation of any assignment pursuant to this
subsection (c), the transferor Bank, the Agent and the
Borrower shall make appropriate arrangements so that,
if required, a new Note is issued to the Assignee. In
connection with any such assignment, the transferor
Bank shall pay to the Agent an administrative fee for
processing such assignment in the amount of $2,500. If
the Assignee is not incorporated under the laws of the
United States of America or a state thereof, it shall
deliver to the Borrower and the Agent certification as
to exemption from deduction or withholding of any
United States federal income taxes in accordance with
Section 8.04.
(d) Any Bank may at any time assign all or any
portion of its rights under this Agreement and its Note
to a Federal Reserve Bank. No such assignment shall
release the transferor Bank from its obligations
hereunder.
(e) No Assignee, Participant or other transferee of
any Bank=s rights shall be entitled to receive any
greater payment under Section 8.03 or 8.04 than such
Bank would have been entitled to receive with respect
to the rights transferred, unless such transfer is made
with the Borrower=s prior written consent or by reason
of the provisions of Section 8.02, 8.03 or 8.04
requiring such Bank to designate a different Applicable
Lending Office under certain circumstances or at a time
when the circumstances giving rise to such greater
payment did not exist.
Section 9.7. Collateral. Each of the Banks
represents to the Agent and each of the other Banks
that it in good faith is not relying upon any Amargin
stock" (as defined in Regulation U) as collateral in
the extension or maintenance of the credit provided for
in this Agreement.
Section 9.8. Governing Law; Submission to
Jurisdiction. This Agreement and each Note shall be
governed by and construed in accordance with the laws
of the State of New York. The Borrower hereby submits
to the nonexclusive jurisdiction of the United States
District Court for the Southern District of New York
and of any New York State court sitting in New York
City for purposes of all legal proceedings arising out
of or relating to the Financing Documents or the
transactions contemplated thereby. The Borrower
irrevocably waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have
to the laying of the venue of any such proceeding
brought in such a court and any claim that any such
proceeding brought in such a court has been brought in
an inconvenient forum.
Section 9.9. Counterparts; Integration. This
Agreement may be signed in any number of counterparts,
each of which shall be an original, with the same
effect as if the signatures thereto and hereto were
upon the same instrument. This Agreement constitutes
the entire agreement and understanding among the
parties hereto and supersedes any and all prior
agreements and understandings, oral or written,
relating to the subject matter hereof.
Section 9.10. Waiver of Jury Trial. EACH OF THE
BORROWER, THE AGENT, THE CO-AGENTS, THE LC ISSUING
BANKS AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THE FINANCING DOCUMENTS
OR THE TRANSACTIONS CONTEMPLATED THEREBY.
Section 9.11. Confidentiality. The Agent, each
LC Issuing Bank and each Bank agrees to keep
confidential any proprietary or financial information
obtained by the Agent, such LC Issuing Bank or such
Bank, as the case may be, based on a review of the
books and records of the Borrower or any Subsidiary
pursuant to Section 5.06 and any other information to
the extent such information has been stated by the
Borrower to be confidential; provided that nothing
herein shall prevent the Agent, any LC Issuing Bank or
any Bank from disclosing such information (i) to the
Agent, any LC Issuing Bank or any other Bank in
connection with the transactions contemplated by the
Financing Documents, (ii) to the officers, directors,
employees, agents, attorneys and accountants of such
party and its affiliates who have a need to know such
information in accordance with customary banking
practices and who receive such information having been
made aware of the restrictions set forth in this
Section, (iii) upon the order of any court or
administrative agency, (iv) upon the request or demand
of any regulatory agency or authority having
jurisdiction over such party, (v) which has been
publicly disclosed, (vi) which has been obtained from
any Person other than the Borrower and its
Subsidiaries, provided that such Person is not known to
it to be bound by a confidentiality agreement with the
Borrower or its Subsidiaries or known to it to be
otherwise prohibited from transmitting the information
to it by a contractual, legal or fiduciary obligation,
(vii) in connection with the exercise of any remedy
under the Financing Documents or (viii) to any actual
or proposed participant or assignee of all or any of
its rights under the Financing Documents, provided that
such proposed participant or assignee shall have agreed
in writing, for the benefit of the Borrower as a third-
party beneficiary, to be bound by the provisions of
this Section.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed by their respective
authorized officers as of the day and year first above
written.5
CONSOLIDATED FREIGHTWAYS, INC.
By /s/ R. Guy Kraines
Title: Assistant Treasurer
3240 Hillview Avenue
Palo Alto, California 94304
Facsimile number: (415) 813-
0158
Telephone number: (415) 813-
5321
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Diana H. Imhof
Title: Vice President
ABN-AMRO BANK, N.V.
By /s/ Jeffrey A. French
Title: Group Vice President
& Director
By /s/ L.T. Osborne
Title: Group Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By /s/ James P. Johnson
Title: Vice President
THE FIRST NATIONAL BANK OF
CHICAGO
By /s/ David Dixon
Title: Authorized Agent
MELLON BANK, N.A.
By /s/ Mack Clapp
Title: First Vice President
THE BANK OF NEW YORK
By /s/ Elizabeth T. Ying
Title: Vice President
CREDIT SUISSE
By /s/ Maria N. Gaspara
Title: Associate
By /s/ Marilou Palenzuela
Title: Member of Senior
Management
THE INDUSTRIAL BANK OF JAPAN,
LIMITED, SAN FRANCISCO AGENCY
By /s/ Yoh Nakahara
Title: General Manager
NATIONSBANK OF TEXAS, N.A.
By /s/ Chas A. McDonell
Title: Vice President
PNC BANK, NATIONAL ASSOCIATION
By /s/ Phil Liebscher
Title: Vice President
UNION BANK OF CALIFORNIA, N.A.
By /s/ Robert John Vernagallo
Title: Vice President
UNITED STATES NATIONAL BANK OF OREGON
By /s/ Dale Parshall
Title: Assistant Vice President
ABN-AMRO BANK, N.V.,
as LC Issuing Bank
101 California Street
Suite 4550
San Francisco, CA 94111-5612
Attn:Jeffrey A. French
Telex number: 278137 ABNSF UR
Facsimile number: (415) 362-3524
Telephone number: (415) 984-3703
By /s/ Jeffrey A. French
Title: Group Vice President & Director
By /s/ L.T. Osborne
Title: Group Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as LC Issuing Bank
By /s/ James P. Johnson
Title: Vice President
555 California Street
San Francisco, CA 94104
Attn:James P. Johnson
Facsimile number: (415) 622-4585
Telephone number: (415) 622-2126
with a copy to:
Bank of America National Trust and
Savings Association
1850 Gateway Boulevard
Concord, CA 94520
Attn:Jill Wilson
Customer Services Officer
Global Payment Operations
Domestic Account Administration 5693
Facsimile number: (510) 885-7531
Telephone number: (510) 885-7040
THE FIRST NATIONAL BANK OF
CHICAGO, as LC Issuing Bank
By /s/ David Dixon
Title: Authorized Agent
One First National Plaza
10th Floor, Suite 0374
Chicago, Illinois 60670
Attention:David Dixon
Facsimile number: (312) 732-3885
Telephone number: (312) 732-8142
with a copy to:
The First National Bank of Chicago
300 South Riverside Plaza
7th Floor
Chicago, Illinois 60670
Attention:Mark Klatt
Facsimile number: (312) 954-1963
Telephone number: (312) 954-1906
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as LC Issuing Bank
By /s/ Diana H. Imhof
Title: Vice President
J.P. Morgan Services Inc.
Attention: International Trade Services
500 Stanton Christiana Road
Newark, Delaware 19713
Facsimile number: (302) 634-1838
Telephone number: (302) 634-1825
with a copy to:
60 Wall Street
New York, New York 10260-0060
Attention:Diana Imhof
Telex number: 177615
Facsimile number: (212) 648-5018
Telephone number: (212) 648-6948
ABN-AMRO BANK, N.V.,
as Co-Agent
101 California Street
Suite 4550
San Francisco, CA 94111-5612
Attn:Jeffrey A. French
Telex number: 278137 ABNSF UR
Facsimile number: (415) 362-3524
Telephone number: (415) 984-3703
By /s/ Jeffrey A. French
Title: Group Vice President & Director
By /s/ L.T. Osborne
Title: Group Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Co-Agent
555 California Street
San Francisco, CA 94104
Attn:James P. Johnson
Credit Products 3838
Facsimile number: (415) 622-4585
Telephone number: (415) 622-2126
By /s/ James P. Johnson
Title: Vice President
THE FIRST NATIONAL BANK OF
CHICAGO, as Co-Agent
By /s/ David Dixon
Title: Authorized Agent
One First National Plaza
10th Floor, Suite 0374
Chicago, Illinois 60670
Attention:David Dixon
Facsimile number: (312) 732-3885
Telephone number: (312) 732-8142
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By /s/ Diana H. Imhof
Title: Vice President
J.P. Morgan Services Inc.
500 Stanton Christiana Road
Newark, Delaware 19713
Attention:Jeannie Mattson
Facsimile number: (302) 634-1092
Telephone number: (302) 634-1938
with a copy to:
60 Wall Street
New York, New York 10260-0060
Attention:Diana Imhof
Telex number: 177615
Facsimile number: (212) 648-5018
Telephone number: (212) 648-6948
The undersigned Terminating Banks sign this amendment
and restatement of the Existing Agreement solely for the purpose
of satisfying the provisions of Section 9.05 thereof requiring
such an amendment to be signed by all Banks party thereto. The
signatures of the undersigned Terminating Banks shall be
effective when, and only when, the Agent receives for their
account payment of all principal of and accrued interest on
their respective loans outstanding under the Existing Credit
Agreement on the Effective Date.
THE LONG-TERM CREDIT BANK OF JAPAN, LTD.,
LOS ANGELES AGENCY
By /s/ Motokazu Uematsu
Title: Deputy General Manager
FIRST INTERSTATE BANK OF OREGON, N.A.
By /s/ Daniel S. Park
Title: Vice President
COMMITMENT SCHEDULE
bank commitment
Morgan Guaranty Trust Company of New York $35,000,000
ABN-AMRO Bank N.V. $35,000,000
Bank of America National Trust and Savings $35,000,000
Association
The First National Bank of Chicago $35,000,000
Mellon Bank, N.A. $35,000,000
The Bank of New York $25,000,000
Credit Suisse $25,000,000
The Industrial Bank of Japan, Limited $25,000,000
San Francisco Agency
NationsBank of Texas, N.A. $25,000,000
PNC Bank, National Association $25,000,000
Union Bank of California, N.A. $25,000,000
United States National Bank of Oregon $25,000,000
TOTAL $350,000,000
EXHIBIT 10.33
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EMPLOYEE BENEFIT MATTERS AGREEMENT
This EMPLOYEE BENEFIT MATTERS AGREEMENT (the
"Agreement") is made as of this 2nd of December, 1996 by and
between CONSOLIDATED FREIGHTWAYS, INC., a Delaware
corporation ("CFI") and CONSOLIDATED FREIGHTWAYS
CORPORATION, a Delaware corporation (the "Company").
RECITALS
WHEREAS, CFI is the holder of all of the issued
and outstanding shares of common stock of the Company;
WHEREAS, the employees of the Company and its
Subsidiaries are covered by various employee benefit plans
sponsored by CFI which are limited to employees of CFI and
its Subsidiaries; and
WHEREAS, CFI has determined that it will
distribute all of the shares of the Company's common stock
to the holders of the common stock of CFI, which will cause
the Company and its Subsidiaries to no longer be
Subsidiaries of CFI;
NOW, THEREFORE, CFI and the Company agree as
follows:
ARTICLE I
DEFINITIONS
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:
ADR Agreement. The Alternative Dispute Resolution
Agreement entered into between CFI and the Company dated the
same date as this Agreement, the form of which is attached
as Annex 1 to the Distribution Agreement.
Company Employee. A person described in 2.3.
Distribution. The distribution of Company common
stock pursuant to the Distribution Agreement.
Distribution Agreement. The Distribution
Agreement entered into between CFI and the Company dated
November 25, 1996 and governing the distribution of Company
common stock to the holders of CFI common stock.
Distribution Date. The date on which all the
shares of Company common stock are delivered to the
distribution agent pursuant to the Distribution Agreement.
Subsidiary. A corporation that is a member of a
controlled group of corporations, within the meaning of
Internal Revenue Code Section 1563, with CFI or with the
Company, except that the Company and its Subsidiaries shall
not be treated as Subsidiaries of CFI.
ARTICLE II
SEPARATION OF BENEFIT PLANS
2.1 Adoption of Company Plans. The Company and its
Subsidiaries shall, as of the Distribution Date, cease
participating in the employee benefit plans sponsored by
CFI. As of the Distribution Date, the Company shall adopt
employee benefit plans covering Company Employees that are
substantially the same as the employee benefit plans
sponsored by CFI covering Company Employees prior to the
Distribution Date except as follows. The Company shall not
be obligated to duplicate or replace the CFI employee
benefit plans that are limited to executive employees and
may adopt such new executive employee benefit plans as it
shall decide in its absolute discretion.
2.2 Separate Responsibilities. CFI and the Company
agree that CFI shall have sole responsibility for its
employee benefit plans, arrangements and policies for
employees of CFI and its Subsidiaries and that the Company
shall have sole responsibility for its employee benefit
plans, arrangements and policies for Company Employees. CFI
and the Company intend that, to the extent possible, Company
Employees shall look solely to the Company and its plans,
arrangements and policies for the provision of employee
benefits, except certain executive benefits discussed in
this Agreement, and that employees of CFI and its
Subsidiaries shall look solely to CFI and its plans,
arrangements and policies for the provision of employee
benefits.
2.3 Identification of Company Employees. "Company
Employees" shall be determined as follows:
(a) All persons actively employed by the
Company or a Subsidiary of the Company on the
Distribution Date shall be Company Employees,
unless described in (b).
(b) Persons who accept employment with CNF
Service Company, Inc. as of the Distribution Date
shall not be Company Employees.
(c) The persons formerly employed by the
Company or a Subsidiary of the Company who are
listed on a schedule attached hereto shall be
Company Employees.
ARTICLE III
TAX QUALIFIED RETIREMENT PLANS
3.1 Adoption of Company SASP. The Company shall adopt
a Stock and Savings Plan (the "Company SASP") as follows:
(a) The Company SASP shall be effective
as of the Distribution Date.
(b) Subject to Section 2.1, and to (c),
(d) and (e) below, the Company SASP shall be in
a form satisfactory to the Company in its sole
discretion.
(c) The Company SASP shall be qualified
under Sections 401(a) and 401(k) of the Code and
shall have a related trust qualified under Section
501(a) of the Code. The Company shall file, or
cause the administrator of the Company SASP to
file, with the Internal Revenue Service an
Application for Determination with respect to the
Company SASP within the remedial amendment period
prescribed by applicable law and regulations. The
Company shall amend the Company SASP as may be
required by the Internal Revenue Service as a
condition for receipt of a favorable determination
letter within the time required by the Internal
Revenue Service for adoption of such amendment.
(d) The Company SASP shall credit
service performed before the Distribution Date for
CFI and its Subsidiaries under applicable service
crediting rules as if such service were performed
for the Company.
(e) The Company SASP shall provide for
matching contributions invested in Company common
stock, but need not include an employee stock
ownership plan with Company stock purchased by
borrowing.
3.2 TASP Spinoff. The Consolidated Freightways, Inc.
Thrift and Stock Plan (the "TASP" consists of two plans: a
401(k) plan (the "TASP 401(k)") and an employee stock
ownership plan (the "TASP ESOP"). Accounts under the TASP
401(k) are invested at the direction of participants in
several funds, including a fund for common stock of CFI (the
"CFI Stock Fund"). The TASP ESOP is invested primarily in a
special class of convertible preferred stock of CFI (the
"Preferred Stock") and in common stock of CFI. The TASP
ESOP holds shares of Preferred Stock in a suspense account
that secures loans to the TASP ESOP. Preferred Stock is
converted to common stock of CFI before distribution to
participants or upon transfer to a person other than the
trustee of the TASP. On the Distribution Date, the TASP
will receive common stock of the Company with respect to its
shares of CFI common stock. As soon as practicable after
the Distribution Date, and in any event within 180 days
after such date, CFI and the Company shall cause the portion
of the TASP that covers Company Employees to be spun off
from the TASP and to be merged into the Company SASP. In
connection with the spinoff and merger, the following shall
apply:
(a) CFI shall direct the trustee of
the TASP to transfer assets held for the benefit
of Company Employees under the TASP to the trustee
of the Company SASP. The trustee of the TASP
shall make such transfer even though the Company
SASP has not yet received a favorable
determination letter from the Internal Revenue
Service with respect to the qualification of the
Company SASP under Section 401(a) of the Code if
the Company demonstrates to CFI's reasonable
satisfaction that the Company has preserved its
right to make remedial amendments required by the
Internal Revenue Service as a condition of a
favorable determination.
(b) CFI shall cause the fiduciaries of
the TASP to provide an accounting to the
fiduciaries of the Company SASP with respect to
all assets and accounts transferred to the Company
SASP. The accounting shall be reasonably
satisfactory to the Company for purposes of proper
allocation of assets, earnings, gains and losses
to the accounts of participants under the Company
SASP.
(c) CFI shall cause IRS Form 5310A to
be filed with the Internal Revenue Service, giving
notice of the spinoff and merger, at least 30 days
before the date of the spinoff and merger.
(d) The Company SASP shall include a
CFI Stock Fund and an investment fund for common
stock of the Company (the "Company Stock Fund")
for participant-directed investment of accounts.
Common stock of CFI held in accounts of Company
Employees in the TASP 401(k) and the TASP ESOP
shall be transferred in kind in the spinoff and
merger and shall be placed initially in the CFI
Stock Fund of the Company SASP, credited to the
participant-directed accounts of such Company
Employees. Common stock of the Company held in
accounts of Company Employees in the TASP 401(k)
as a result of the Distribution shall be
transferred in kind in the spinoff and merger and
shall be placed initially in the Company Stock
Fund of the Company SASP, credited to the
participant-directed accounts of such Company
Employees. Common stock of the Company held in
accounts of Company Employees in the TASP ESOP as
a result of the Distribution shall be transferred
in kind in the spinoff and merger and shall be
placed in the matching accounts of such Company
Employees in the Company SASP and shall not be
subject to participant-directed investment. The
Company SASP shall provide that participants may
direct the sale of shares out of the CFI Stock
Fund but may not direct investment of any
additional amounts into it. As of the next
calendar quarter end following the third
anniversary of the Distribution Date, the CFI
Stock Fund shall be closed and its assets moved
into another investment fund selected by each
participant or, for participants who fail to make
a selection, by the Administrative Committee for
the Company SASP.
(e) The TASP 401(k) shall include a
Company Stock Fund, in addition to the existing
CFI Stock Fund, for participant-directed
investment of accounts. The Company common stock
distributed on shares of CFI common stock held for
TASP participants who are not Company Employees in
the CFI Stock Fund and in the TASP ESOP shall
become the assets of the Company Stock Fund. The
TASP shall provide that participants may direct
the sale of shares out of the Company Stock Fund
but may not direct investment of any additional
amounts into it. As of the next calendar quarter
end following the third anniversary of the
Distribution Date, the Company Stock Fund shall
be closed and its remaining assets moved into
another investment fund selected by each
participant or, for participants who fail to make
a selection, by the Administrative Committee for
the TASP.
(f) The accounts to be transferred
from the TASP ESOP to the Company SASP will
include accounts holding Preferred Stock. Such
Preferred Stock will be automatically converted to
Common Stock of CFI upon transfer to the trustee
of the Company SASP and shall be placed in the CFI
Stock Fund of the Company SASP as provided in (d).
(g) After the spinoff and merger,
the TASP will allocate to Company Employees
dividends and distributions on CFI capital stock
that are paid after the spinoff to holders as of a
date before the spinoff and matching contributions
on their elective deferrals for the partial
quarter before the Distribution. For purposes of
determining the right to such matching
contributions, Company Employees shall be credited
with service for CFC and its Subsidiaries after
the Distribution as though it were performed for
CFI and its Subsidiaries. Post-spinoff
allocations of such dividends, distributions and
matching contributions shall be transferred to the
trustee of the Company SASP as soon as practicable
after they are made.
3.3 Adoption of Company Pension Plan. The Company
shall adopt a defined benefit pension plan (the "Company
Pension Plan") to cover Company Employees as follows:
(a) The Company Pension Plan shall be
effective as of the Distribution Date. Company
Employees shall start to accrue benefits under the
Company Pension Plan and shall cease to accrue
benefits under the Consolidated Freightways, Inc.
Retirement Plan (the "CFI Retirement Plan") as of
the Distribution Date.
(b) Subject to Section 2.1, and to (c),
(d) and (e) below, the Company Pension Plan shall
be in a form satisfactory to the Company in its
sole discretion.
(c) The Company Pension Plan shall be
qualified under Section 401(a) of the Code and
have a related trust qualified under Section
501(a) of the Code. The Company shall file, or
cause the administrator of the Company Pension
Plan to file with the Internal Revenue Service an
Application for Determination with respect to the
Company Pension Plan within the remedial amendment
period prescribed by applicable law and
regulations. The Company shall amend the Company
Pension Plan as may be required by the Internal
Revenue Service as a condition for receipt of a
favorable determination letter within the time
required by the Internal Revenue Service for
adoption of any such amendment.
(d) Benefits with respect to the
transfer described in Section 3.4 below shall be
preserved in accordance with applicable law,
including but not limited to the requirements of
Section 411(d)(6) of the Internal Revenue Code.
(e) Subject to the transfer of assets
and liabilities provided for under Section 3.4,
the Company Pension Plan shall credit service
performed before the Distribution Date for CFI and
its Subsidiaries under applicable service
crediting rules as if such service were performed
for the Company.
(f) After the transfer described in
Section 3.4, the CFI Retirement Plan shall have no
obligation to Company Employees. The Company
Pension Plan shall be a continuation of the CFI
Retirement Plan with respect to benefits accrued
by Company Employees under the CFI Retirement
Plan. The transfer described in Section 3.4 shall
not be a plan termination.
3.4 Retirement Plan Spinoff. On the Distribution
Date, CFI and the Company shall cause the portion of the CFI
Retirement Plan consisting of the liability for benefits of
Company Employees accrued through the Distribution Date to
be spun off from the CFI Retirement Plan along with related
assets, to become the initial liabilities and assets of the
Company Pension Plan. In connection with the spinoff and
merger, the following shall apply:
(a) The assets of the CFI Retirement
Plan to be transferred to the Company Pension Plan
will be equal to the lump sum present value of
such liability as of the date of the spinoff and
merger. Present value shall be based on the
accumulated benefit obligation for benefits
already accrued and on an interest rate selected
by CFI with the approval of the actuary who
performed the most recent annual valuation of the
CFI Retirement Plan. CFI shall direct the trustee
of the CFI Retirement Plan to transfer such assets
to the trustee of the Company Pension Plan.
(b) If the Pension Benefit Guaranty
Corporation ("PBGC") asserts that the interest
rate selected pursuant to (a) is not acceptable
for calculating the amount of assets to be
transferred from the CFI Retirement Plan to the
Company Pension Plan, the parties shall make
commercially reasonable efforts to reach an
agreement with the PBGC on the interest rate to be
used. In the event that a lower interest rate
than the rate selected pursuant to (a) is used in
response to such an agreement or to other actions
of the PBGC, the Company shall pay CFI an amount
equal to the increase in the amount of assets
transferred resulting from use of such lower
interest rate. The Company shall pay such amount
in cash in five equal annual installments
including interest at the prevailing commercial
prime lending rate of the bank with which CFI has
its principal banking relationship on the date of
the transfer of CFI Retirement Plan assets. Such
installments shall commence with the first
anniversary of the date of such transfer.
(c) CFI shall file IRS Form 5310A with
the Internal Revenue Service, giving notice of the
spinoff and merger, at least 30 days before the
date of the spinoff and merger.
(d) The trustee of the CFI Retirement
Plan shall make the transfer of assets under (a)
even though the Company Pension Plan has not yet
received a favorable determination letter with
respect to qualification under Section 401(a) of
the Internal Revenue Code if the Company
demonstrates to CFI's reasonable satisfaction that
the Company has preserved its right to make
remedial amendments required by the Internal
Revenue Service as a condition of a favorable
determination.
(e) The trustee of the CFI Retirement
Plan and any other fiduciary under the CFI
Retirement Plan with applicable responsibility
shall determine and identify the assets of the CFI
Retirement Plan that shall be transferred to the
Company Pension Plan. After the transfer, the
fiduciaries of the Company Pension Plan shall be
responsible for the custody and investment of
Company Pension Plan assets.
(f) If any employees of CNF Service
Company, Inc. (or an affiliate) become employed by
Leland James Service Corporation within three
years after the Distribution Date immediately
following termination of employment with CNF
Service Company, Inc. (or such affiliate), with no
intervening period, as a result of termination of
any services under the
Transition Services Agreement between CNF Service
Company, Inc. and the Company dated the same date
as this Agreement, an additional transfer of
assets and liabilities shall be made from the CFI
Retirement Plan to the Company Retirement Plan.
Such transfer shall consist of the liability for
benefits accrued for such employees under the CFI
Retirement Plan through the date of the employment
termination together with assets equal to the
present value of such liability determined on the
basis described in (a) above. Such transfer of
assets and liabilities shall be completed within
90 days after the end of such three year period.
(g) On the date of the transfer of
assets and liabilities, the trustee of the CFI
Retirement Plan shall transfer to the trustee of
the CFC Pension Plan assets equal to a
conservative estimate by the actuary for the CFI
Retirement Plan of the amount provided in (a)
above. When a final determination of the amount
of the transfer is made, the amount necessary to
adjust from the estimate to the final amount shall
be transferred between the trustees of the plans.
The investment risk with respect to the estimated
assets shall pass from the CFI Retirement Plan to
the CFC Pension Plan on the date they are
transferred. The amount to be transferred in an
adjustment to the final amount shall be credited
with interest for the period from the date of the
transfer of assets and liabilities to the date of
the adjustment transfer at the rate of interest
selected under (a) above.
3.5 Adoption of Company Common Stock Fund. The
Company shall adopt a frozen defined contribution plan (the
"Company Common Stock Fund") as follows:
(a) The Company Common Stock Fund shall
be effective as of the Distribution Date.
(b) Subject to Section 2.1, and to (c)
below, the Company Common Stock Fund shall be in a
form satisfactory to the Company in its sole
discretion.
(c) The Company Common Stock Fund shall
be qualified under Section 401(a) of the Code and
have a related trust qualified under section
501(a) of the Code. The Company shall file, or
cause the administrator of the Company Common
Stock Fund to file, with the Internal Revenue
Service an Application for Determination with
respect to the Company Common Stock Fund within
the remedial amendment period prescribed by
applicable law and regulations. The Company shall
amend the Company Common Stock Fund as may be
required by the Internal Revenue Service as a
condition for receipt of a favorable determination
letter within the time required by the Internal
Service for the adoption of any such amendment.
(d) Assets of the Company Common Stock Fund
shall be invested in accordance with provisions of the
plan document and the related trust.
3.6 Common Stock Fund Spinoff. On the Distribution
Date, CFI and the Company shall cause the accounts in the
Consolidated Freightways, Inc. Common Stock Fund (the "CFI
Common Stock Fund") to be spun off from the CFI Common Stock
Fund, to become the accounts of the Company Common Stock
Fund. In connection with the spinoff and merger, the
following shall apply:
(a) CFI shall direct the trustee of the
CFI Common Stock Fund to transfer assets equal in
value on the transfer date to the balance of the
accounts for the Company Employees to the trustee
for the Company Common Stock Fund. The trustee
shall transfer a combination of CFI common stock
and the Company common stock received on the
plan's shares of CFI common stock on the
Distribution Date. The CFI Common Stock Fund
shall sell the stock of the Company held after the
spinoff and merger at a time selected by the
appropriate fiduciary for such plan in its
absolute discretion and use the proceeds of sale
to acquire stock of CFI.
(b) CFI shall cause the fiduciaries of
the CFI Common Stock Fund to provide an accounting
to the fiduciaries of the Company Common Stock
Fund with respect to all assets and accounts
transferred to the Company Common Stock Fund. The
accounting shall be reasonably satisfactory to the
Company for purposes of proper allocation of
assets, earnings, gains and losses to the accounts
of participants under the Company Common Stock
Fund.
(c) CFI shall file IRS Form 5310A with
the Internal Revenue Service, giving notice of the
spinoff and merger, at least 30 days before the
date of the spinoff and merger.
ARTICLE IV
EXECUTIVE BENEFIT PLANS
4.1 Top-Hat Plans. CFI shall retain the obligation to
pay Company Employees the accounts in the Consolidated
Freightways, Inc. Executive Deferred Compensation Plan (the
"CFI Deferral Plan") accumulated from compensation deferred
up to the Distribution Date. CFI shall retain the
obligation to pay Company Employees benefits accrued under
the Consolidated Freightways, Inc. Supplemental Retirement
and Excess Benefit Plan (the "CFI SERP") as of the
Distribution Date based on service and compensation up to
that date and the offsetting CFI Retirement Plan benefits
accrued as of that date. Assets in the trust related to the
CFI Deferral Plan and the CFI SERP shall remain in such
trust. CFI shall amend the CFI Deferral Plan and the CFI
SERP to provide that events, such as termination of
employment or retirement, triggering distribution of
benefits from the CFI Deferral Plan and the CFI SERP shall
be determined for Company Employees on the basis of
employment with and retirement from the Company and its
Subsidiaries. The Company shall provide CFI with
information about such events after the Distribution Date to
assist CFI in the administration of the CFI Deferral Plan
and the CFI SERP.
4.2 Stock Option Plans. The existing stock options
on CFI common stock shall be handled as follows:
(a) Each outstanding option ("CFI Option")
as of the Distribution Date shall be adjusted with
respect to both the number of shares subject to such
option and the exercise price per share so that (i) the
ratio of exercise price to stock price remains constant
and (ii) the aggregate "spread" (i.e., the excess of
the fair market value of a share of CFI common stock
subject to such option and the per share exercise
price) inherent in such option after giving effect to
the Distribution, is equal to the aggregate "spread"
inherent in such option prior to giving effect to the
Distribution ("CFI Spread").
(b) Each outstanding option held by Company
Employees ("CFI-CFC Option") provides generally that
following a termination of employment from CFI or any
of its affiliates, an optionee will have 90 days to
exercise his or her options before they expire. Prior
to the Distribution Date, the stock option agreements
under the Consolidated Freightways, Inc. Stock Option
Plan of 1988 (the "CFI Stock Plan") that are held by
Company Employees shall be amended to provide that all
options shall become fully vested and exercisable 30
days prior to the Distribution. Accordingly, effective
as of the Distribution Date, each Company Employee who
will be considered a terminated employee under the CFI
Stock Plan shall have 90 days after such termination of
employment (the "90 Day Period") to exercise his or her
CFI-CFC Options to purchase CFI stock. After the 90
Day Period such options shall expire.
(c) For purposes of determining the CFI
Spread: (1) the fair market value of a share of CFI
common stock prior to the Distribution (the "CFI Pre-
Distribution Value") shall be deemed to be equal to the
average of the daily closing prices for a share of CFI
common stock on the NYSE for the five trading days
immediately preceding (and includingbut excluding) the
Distribution Date; (2) the fair market value of a share
of CFI common stock following the Distribution shall be
equal to (A) the CFI Pre-Distribution Value minus (B)
the fair market value of a share of Company common
stock; and (3) the fair market value of a share of
Company common stock shall be deemed to be equal to the
average of the daily closing prices for a share of
Company common stock in "when issued" trading on NASDAQ
for the five trading days immediately preceding (and
includingbut excluding) the Distribution Date.
ARTICLE V
Welfare Benefit Plans
5.1 Medical and Dependant Care Account Benefits. As
of the Distribution Date, the Company shall establish a
Welfare Benefits Plan (the "Company Welfare Plan") qualified
under Section 125 of the Code to provide medical and
dependent care account benefits to Company Employees covered
under the Consolidated Freightways, Inc. Welfare Benefits
Plan (the "CFI Welfare Plan") in 1996 before the
Distribution Date, and the following shall apply:
(a) Subject to 2.1, and to (b) and (c)
below, the Company Welfare Plan shall be in a form
satisfactory to the Company in its sole
discretion.
(b) The Company Welfare Plan shall have
a first plan year that is a short plan year
beginning on the Distribution Date and ending
December 31, 1996. Compensation reduction
elections by participants under the CFI Welfare
Plan for the 1996 plan year shall continue in
effect as to the Company Welfare Plan.
(c) For 1996, the Company Welfare Plan
shall provide for medical spending accounts and
dependent care spending accounts under
substantially the same terms as the CFI Welfare
Plan. CFI shall transfer to the Company the
unused account balances of Company Employees under
the CFI Welfare Plan. The Company shall credit
the amounts transferred with respect to each
participant and each account to corresponding
accounts under the Company Welfare Plan. Claims
for reimbursement from medical and dependent care
spending accounts under the CFI Welfare Plan by
Company Employees that have not been paid as of
the Distribution Date shall be paid by the Company
under the Company Welfare Plan. The fiduciary of
the Company Welfare Plan shall have the authority
to determine whether or not claims under the
Company Welfare Plan are properly submitted or are
payable. Upon request, CFI or the administrator
of the CFI Welfare Plan shall deliver or make
available to the Company and the administrator of
the Company Welfare Plan all records of
participants that are relevant to administration
of the Company Welfare Plan.
5.2 Health Plan Deductibles and Coverage Limits, COBRA
Coverage. The Company shall adopt health plans to cover
Company Employees effective as of the Distribution Date and
the following shall apply:
(a) On and after the Distribution Date
neither CFI nor any of the welfare benefit plans
sponsored by CFI shall provide coverage to Company
Employees.
(b) For the period from the
Distribution Date to December 31, 1996, Company
Employees who were participants under the
Consolidated Freightways, Inc. Health Plan (the
"CFI Health Plan") as of the Distribution Date
shall be credited with amounts paid under the CFI
Health Plan for plan deductibles against any
corresponding deductibles under a Company plan
health or medical plan. Benefits provided under
the CFI Health Plan to a Company Employee with
respect to 1996 claims will be counted toward any
coverage limits applicable to a Company Employee
under any Company health or medical plan for the
coverage period ending December 31, 1996. For
purposes of this paragraph (b), deductibles and
benefits paid for eligible dependants of Company
Employees shall be taken into account.
(c) The Company shall provide group
health plan continuation coverage as required
under Sections 601 through 607 of ERISA ("COBRA
coverage") for Company Employees and related
"qualified beneficiaries" for "qualifying events"
that occur before or after the Distribution Date.
5.3 Retiree Health Benefits. The Company and its
Subsidiaries shall be obligated to provide health benefits
to retired Company Employees, with the obligation applying
to the entity that employed the retiree at the time of
retirement. To the extent permitted by the Company's
Health Plan and applicable law, the Company may eliminate or
change retiree health benefits.
5.4 Long-Term Disability Benefits. The Company and
its Subsidiaries shall be obligated to provide long-term
disability benefits to disabled Company Employees, with the
obligation applying to the entity the disabled individual
was employed by at the time of disability.
5.5 Severance Benefits. A termination of employment
with the Company, CFI, or any subsidiary of the Company or
CFI immediately followed by employment with any other such
entity shall not be deemed a severance of employment for
purposes of any policy, plan, program or agreement that
provides for the payment of severance, salary continuation
or similar benefits. If any person employed by Leland
James Service Corporation immediately prior to the
Distribution Date loses such employment simultaneously with
the Distribution Date as a direct result of the transaction
provided for by the Distribution Agreement and for no other
reason and is not employed by CNF Service Company, Inc. or
another CFI Subsidiary, CFI shall be responsible for any
severance, salary continuation or similar benefits payable
upon such loss of employment.
5.6 Other Welfare Benefits. Except as otherwise
provided in 2.1 and this Article V, welfare benefits
provided by CFI and its Subsidiaries and by the Company and
its Subsidiaries for their respective employees after the
Distribution Date shall not be affected by each other and
each company may provide or elect not to provide benefits in
its sole discretion.
ARTICLE VI
Miscellaneous
6.1 Rights of Employees. This Agreement is not
intended to give any individual employee or former employee
of CFI or the Company or any of their Subsidiaries any
personal right or interest. No employee, shall have any
right under this Agreement to maintain employment with CFI,
the Company or any Subsidiary, become employed by CFI, the
Company or any Subsidiary or accrue any benefit with respect
to employment. No employee, former employee, beneficiary or
dependent shall have any right to be designated as a Company
Employee or to be retained as the responsibility of CFI.
6.2 Entire Agreement. This Agreement, together with
the Distribution Agreement, embodies the entire Agreement
and understanding of the parties with respect to the matters
provided for herein and shall supersede any and all prior
agreements, arrangements and understanding relating to such
matters. No amendment, waiver of compliance with any
provision or condition hereof or consent pursuant to this
Agreement shall be effective unless evidenced by an
instrument in writing signed by the parties.
6.3 Governing Law. The interpretation and performance
of the Agreement shall be governed by the laws of the state
of California without regard to the choice of law provisions
thereof.
6.4 Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and
shall be delivered by hand, mailed by registered or
certified mail (return receipt requested), or sent by cable,
telegram, telecopy (confirmed by regular, first-class mail),
to the parties at the following addresses (or at such other
addresses for a party as shall be specified by like notice)
and shall be deemed given on the date on which such notice
is received:
if to CFI:
Consolidated Freightways, Inc.
3240 Hillview Avenue
Palo Alto, California 94304
Attn: General Counsel
if to the Company:
Consolidated Freightways Corporation
175 Linfield Drive
Menlo Park, California 94025
Attn: General Counsel
6.5 Counterparts. This Agreement may be executed in
one or more counterparts, each of which will be deemed an
original but all of which together will constitute one and
the same instrument.
6.6 Termination. This Agreement shall be terminated
if the Distribution Agreement is terminated or if the
distribution of Company stock fails to occur. If the
Agreement terminates under this Section 6.6, no party shall
have any liability to any person under the Agreement.
6.7 Successors and Assigns. This Agreement and all of
the provisions hereof shall be binding upon and inure to the
benefit of the parties and their respective successors and
permitted assigns.
6.8 Titles and Headings. Titles and headings to
sections herein are inserted for the convenience of
reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
6.9 Legal Enforceability. Any provision of this
Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof. Any
such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision
in any other jurisdiction. Without prejudice to any rights
or remedies otherwise available to any party hereto, each
party hereto acknowledges that damages would be an
inadequate remedy for any breach of the provisions of this
Agreement and agrees that the obligations of the parties
hereunder shall be specifically enforceable.
6.10 Further Assurances. In addition to the actions
specifically provided for elsewhere in this Agreement, each
of the parties hereto will use its reasonable efforts to:
(a) Execute and deliver such
further documents and take such other
actions as any other party may
reasonably request in order to
effectuate the purposes of this
Agreement and to carry out the terms
hereof, and
(b) Take, or cause to be taken, all
actions, and to do, or cause to be done,
all things, reasonably necessary, proper
or advisable under applicable laws,
regulations and agreements or otherwise
to consummate and make effective the
transactions contemplated by this
Agreement, including, without
limitation, using its reasonable efforts
to obtain any consents and approvals and
make any filings and applications
necessary or desirable in order to
consummate the transactions contemplated
by this Agreement.
6.11 Dispute Resolution. Any dispute between the
parties concerning the performance of this Agreement shall
be resolved in accordance with the provisions of the ADR
Agreement.
CFI CONSOLIDATED FREIGHTWAYS, INC.
By /S/D.E. MOFFIT
President and CEO
Executed: November 25, 1996
Company CONSOLIDATED FREIGHTWAYS
CORPORATION
By /S/S.D. RICHARDS
Executed: December 2, 1996
EXHIBIT 10.34
-------------
DISTRIBUTION AGREEMENT
between
CONSOLIDATED FREIGHTWAYS, INC.
and
CONSOLIDATED FREIGHTWAYS CORPORATION
TABLE OF CONTENTS
ARTICLE I DEFINITIONS
1.1 General 1
ARTICLE II THE DISTRIBUTION
2.1 Cooperation Prior to the Distribution 5
2.2 Conditions to Distribution 5
2.3 The Distribution 6
2.4 Sale of Fractional Shares 6
2.5 Odd-Lot Program 7
ARTICLE III TRANSACTIONS RELATING TO THE DISTRIBUTION
3.1 The Reorganization 7
3.2 Company Board 13
3.3 Company Charter and Bylaws 13
3.4 Other Agreements 13
3.5 Operation in the Ordinary Course of
Business 13
3.6 Insurance 14
3.7 Collections and Payments after the
Distribution Date 14
3.8 Certain Post-Distribution Transactions 14
ARTICLE IV INDEMNIFICATION
4.1 Indemnification by CFI 15
4.2 Indemnification by the Company 15
4.3 Limitations on Indemnification
Obligations 16
4.4 Procedures for Indemnification 17
4.5 Releases 19
4.6 Environmental Liabilities 20
ARTICLE V ACCESS TO INFORMATION; SERVICES
5.1 Access to Information 20
5.2 Production of Witnesses 21
5.3 Provision of Services 21
5.4 Reimbursement 21
5.5 Retention of Records 22
5.6 Confidentiality 22
5.7 Provision of Corporate Records 23
5.8 Privileged Matters 23
ARTICLE VI REPRESENTATIONS, WARRANTIES AND COVENANTS
6.1 Financial Statements 24
6.2 Form 10 and Information Statement 24
6.3 Marks 24
ARTICLE VII SHARED CLAIMS
7.1 Acknowledgment. 25
7.2 Notification. 25
7.3 Cooperation. 25
7.4 Liability. 26
7.5 Non-Shared Liabilities. 26
ARTICLE VIII MISCELLANEOUS
8.1 Complete Agreement; Construction 26
8.2 Expenses 26
8.3 Governing Law 27
8.4 Notices 27
8.5 Amendments and Waivers 27
8.6 Counterparts 28
8.7 Successors and Assigns 28
8.8 Termination 28
8.9 No Third-Party Beneficiaries 28
8.10 Titles and Headings 28
8.11 Legal Enforceability 28
8.12 Further Assurances 29
8.13 No Solicitation of Employees 29
8.14 Dispute Resolution 30
DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT (the "Agreement") is
made as of this 25th of November, 1996 by and between
CONSOLIDATED FREIGHTWAYS, INC., a Delaware corporation
("CFI"), and CONSOLIDATED FREIGHTWAYS CORPORATION, a
Delaware corporation (the "Company").
RECITALS
WHEREAS, CFI is the holder of all of the issued
and outstanding shares of common stock, $.01 par value per
share, of the Company (the "Company Common Stock");
WHEREAS, the Board of Directors of CFI (the "CFI
Board") has determined that it is advisable to distribute
(the "Distribution") all of the shares of Company Common
Stock to the holders of the common stock, $.01 par value per
share, of CFI (the "CFI Common Stock");
WHEREAS, CFI and the Company have determined that
it is necessary and desirable to set forth the principal
corporate transactions required to effect the Distribution
and certain other agreements that will govern certain
matters relating to the Distribution and the relationships
thereafter between CFI and the Company;
NOW, THEREFORE, in consideration of the mutual
promises hereinafter set forth and other good and valuable
consideration, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 General. 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):
Action: any action, suit, arbitration, inquiry,
proceeding or investigation by or before any court, any
governmental or other regulatory or administrative agency or
commission or any arbitration tribunal.
ADR Agreement: the Alternative Dispute Resolution
Agreement to be entered into by CFI and the Company as of
the Distribution Date, the form of which is attached hereto
as Annex 1.
Affiliate: as defined in Rule 12b-2 under the
Exchange Act.
CFI Group: At any time following the
Distribution, CFI and all entities which are Affiliates of
CFI at such time.
Code: the Internal Revenue Code of 1986, as
amended.
Commission: the Securities and Exchange
Commission.
Company Group: at any time following the
Distribution, the Company and all entities which are
Affiliates of the Company at such time.
Distribution Agent: The Bank of New York.
Distribution Date: the date as determined by the
CFI Board or a committee thereof on which the Distribution
takes place by delivery of the shares of Company Common
Stock to the Distribution Agent.
Distribution Ratio: the ratio of CFI Common Stock
to Company Common Stock to be distributed in the
Distribution.
Employee Benefit Matters Agreement: the Employee
Benefit Matters Agreement to be entered into by CFI and the
Company as of the Distribution Date, the form of which is
attached hereto as Annex 2.
Environmental Liabilities: means any Liabilities
arising from, under or relating to any environmental, health
or safety law, rule, regulation, Action, threatened Action,
order or consent decree.
Exchange Act: the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder.
Form 10: the registration statement on Form 10
filed by the Company with the Commission to effect the
registration of the Company Common Stock under the Exchange
Act.
Information Statement: the Information Statement
on Form 14C filed by the Company with the Commission and
included in the Form 10 at the time of its effectiveness.
Insurance Proceeds: those monies (i) received by
an insured from an insurance carrier on an insurance claim
or (ii) paid by an insurance carrier on behalf of an insured
on an insurance claim, in either case net of any applicable
deductibles, retentions, or costs paid by such insured, but
such term does not refer to proceeds received from an
insurer on an employee benefits group insurance policy.
IRS: the Internal Revenue Service.
Liabilities: any and all debts, liabilities,
obligations, absolute or contingent, asserted or unasserted,
matured or unmatured, liquidated or unliquidated, accrued or
unaccrued, known or unknown, direct or indirect, whenever
arising, including all costs and expenses relating thereto,
and including, without limitation, those debts, liabilities
and obligations arising under any law, rule, regulation,
Action, threatened Action, order or consent decree of any
governmental entity or any award of any arbitrator of any
kind, and those arising under any contract, commitment or
undertaking including those arising under this Agreement.
LJSC: Leland James Service Corporation, a
Delaware Corporation.
Losses: any and all debts, losses, Liabilities,
claims, damages, obligations, payments or costs and
expenses, absolute or contingent, matured or unmatured,
liquidated or unliquidated, accrued or unaccrued, known or
unknown, direct or indirect (including, without limitation,
the costs and expenses of any and all Actions, threatened
Actions, demands, assessments, judgments, settlements and
compromises relating thereto and attorneys' fees and any and
all expenses whatsoever reasonably incurred in
investigating, preparing or defending against any such
Actions or threatened Actions).
Other Agreements: the ADR Agreement, the Employee
Benefit Matters Agreement, the Reimbursement Agreement, the
Services Agreement, the Tax Sharing Agreement and the
Maintenance, License and Easement Agreement to be entered
into by CFCD (as defined) and CF Properties (as defined) as
of the Distribution Date, the form of which is attached
hereto as Annex 8.
Record Date: the close of business on the date to
be determined by the CFI Board or a committee thereof as the
record date for the determination of stockholders of record
of CFI entitled to receive the Distribution.
Reimbursement Agreement: the Reimbursement and
Indemnification Agreement to be entered into between CFI and
Consolidated Freightways Corporation of Delaware ("CFCD") as
of October 1, 1996, the form of which is attached hereto as
Annex 3.
Securities Act: the Securities Act of 1933, as
amended.
Services Agreement: the Transition Services
Agreement to be entered into by CNF Service Company, Inc.
and the Company as of the Distribution Date, the form of
which is attached hereto as Annex 4.
Subsidiaries: the term "Subsidiaries" as used
herein with respect to any entity shall, unless otherwise
indicated, be deemed to refer to both direct and indirect
subsidiaries of such entity.
Tax Sharing Agreement: the Tax Sharing Agreement
to be entered into by CFI and the Company as of the
Distribution Date, the form of which is attached hereto as
Annex 5.
ARTICLE II
THE DISTRIBUTION
2.1 Cooperation Prior to the Distribution. Prior
to the Distribution:
(a) CFI and the Company shall prepare, and
the Company shall file with the Commission, the Form 10.
CFI and the Company shall prepare, and CFI shall mail,
promptly after the effectiveness of the Form 10, to the
holders of CFI Common Stock, the Information Statement,
which shall set forth appropriate disclosure concerning the
Company, the Distribution and other matters. The Company
shall use reasonable efforts to cause the Form 10 to become
effective under the Exchange Act.
(b) CFI and the Company shall cooperate in
preparing, filing with the Commission and causing to become
effective any registration statements or amendments thereto
that are appropriate to reflect the establishment of or
amendments to any employee benefit and other plans
contemplated by the Employee Benefit Matters Agreement.
(c) The Company shall prepare, file and
pursue an application to permit listing of the Company
Common Stock on the Nasdaq National Market (and/or such
other exchange as the Company deems appropriate), under the
symbol "CFWY" (or such other symbol as the Company deems
appropriate).
2.2 Conditions to Distribution. The CFI Board
shall in its discretion establish the Record Date and the
Distribution Date and all appropriate procedures in
connection with the Distribution. The Distribution shall be
subject to satisfaction of each of the following conditions,
among other things: (i) the consummation of certain
internal corporate reorganizations; (ii) the successful
renegotiation of certain CFI credit facilities and debt
instruments, including the execution of certain consents,
waivers and amendments thereto by lenders, and the
maintenance of CFI's investment grade debt ratings; (iii)
the establishment of a separate credit facility for CFCD;
(iv) the receipt of certain third-party consents relating to
certain contracts, licenses and other agreements; (v) the
receipt of rulings from the IRS or an opinion of special tax
counsel to CFI to the effect that, among other things, the
Distribution will generally qualify as a tax-free
distribution under Section 355 of the Internal Revenue Code
of 1986, as amended; (vi) the receipt of a letter from the
staff of the Commission confirming that it will take no
action with respect to certain matters relating to the
Distribution; (vii) the Form 10 having become effective and
no stop order being in effect; (viii) there not being in
effect any statute, rule, regulation or order of any court,
governmental or regulatory body that prohibits or makes
illegal the transactions contemplated by the Distribution;
(ix) approval for listing of the Company Common Stock on the
Nasdaq National Market; and (x) declaration of the special
dividend by the CFI Board. The CFI Board reserves the right
in its discretion, other than with respect to those set
forth in clauses (i), (v), (vi), (vii) and (x), to waive the
satisfaction of any condition to the Distribution; provided,
however, that the CFI Board may abandon, defer or modify the
Distribution and the related transactions at any time prior
to the Distribution Date.
2.3 The Distribution. On the Distribution Date,
subject to the conditions set forth in this Agreement, CFI
shall deliver to the Distribution Agent a certificate or
certificates representing the number of then outstanding
shares of Company Common Stock to be distributed in the
Distribution, endorsed in blank, and shall instruct the
Distribution Agent to distribute to each holder of record of
CFI Common Stock on the Record Date a certificate or
certificates representing one share of Company Common Stock
for every two shares of CFI Common Stock so held. The
Company agrees to provide all certificates for shares of
Company Common Stock that the Distribution Agent shall
require in order to effect the Distribution.
2.4 Sale of Fractional Shares. The Distribution
Agent shall not distribute any fractional shares of Company
Common Stock ("Fractional Shares") to any holder of CFI
Common Stock. The Distribution Agent shall be instructed to
aggregate all such Fractional Shares and sell them in an
orderly manner after the Distribution Date in the open
market at then-prevailing prices and, after completion of
all such sales, distribute a pro rata portion of the
proceeds from such sales to each holder of CFI Common Stock
who would otherwise have received a Fractional Share. CFI
will bear the cost of brokerage commissions incurred in
connection with such sales.
2.5 Odd-Lot Program. In connection with the
Distribution, the Company shall offer to holders of CFI
Common Stock who would otherwise receive fewer than 100
shares of Company Common Stock in the Distribution a program
by which such holders may instruct the Distribution Agent to
sell such shares of Company Common Stock on their behalf.
The Company shall cause such program to be conducted in
accordance with the terms and conditions described in the
Information Statement.
ARTICLE III
TRANSACTIONS RELATING TO THE DISTRIBUTION
3.1 The Reorganization.
(a) Prior to the Distribution Date, CFI
shall take all steps necessary to establish CFCD as a wholly
owned subsidiary of the Company.
(b) Prior to the Distribution Date, CFI
shall take all steps necessary to establish LJSC as a wholly
owned subsidiary of the Company; provided, however, that
immediately prior to the Distribution or simultaneously
therewith, the LJSC administrative service departments
identified on Schedule 3.1(b) shall be transferred to CNF
Service Company, Inc., a wholly owned subsidiary of CFI.
(c) Prior to the Distribution Date, CFI
shall take all steps necessary to merge Vantage Parts into
CFI.
(d) Prior to the Distribution Date, CFI
shall take all steps necessary to establish Milne &
Craighead as a wholly owned, indirect subsidiary of CFCD.
(e) Prior to the Distribution Date, CFI
shall take all steps necessary to effect the transfer of all
real property owned by CFCD and/or LJSC and set forth on
Schedule 3.1(e) to CF Properties, Inc., a wholly owned
subsidiary of CFI ("CF Properties"), and to effect the
transfer of CFI's Gresham terminal and land under CFI's
Santa Fe Springs and Hayward Terminals to CFCD. In
consideration of such transfers, the Company hereby agrees
to continue to use Con-Way rail services until January 1,
1997.
(f) The Company acknowledges that any and
all rights in the software programs (including without
limitation all source and object code and all documentation
therefor, and all versions thereof) developed by, or on
behalf of, the Company, CFI or its Affiliates prior to the
Distribution Date, and all other intellectual property
rights, including without limitation all copyrights, patent
rights, know-how and trade secret rights, and including,
without limitation, the right to sue for any past, present
or future infringement of any of the foregoing, are vested
in CFI. The Company will execute and deliver any
instruments or take such other actions as CFI may reasonably
request in order to confirm such assignment and to otherwise
effectuate the purposes and terms of this Agreement.
(g) CFI hereby grants to the Company,
effective as of the termination of the Services Agreement, a
royalty-free, worldwide, perpetual and non-transferable,
license without right of sublicense, (except as to
subsidiaries who agree in writing to be bound by the terms
of this license), to use and create derivative works of the
software programs (including without limitation all source
and object code and documentation therefor) owned by CFI
which pertain to the Company's administrative and business
functions and activities, in the form they exist as of the
termination of the Services Agreement, which the Company
uses in its business as of the Distribution Date as set
forth on Schedule 3.1(g) hereto (collectively, the "Licensed
Materials"). CFI shall take such steps necessary to provide
to the Company, at CFI's expense, and with minimal
interruption of the operations of CFI and its Affiliates,
copies of the Licensed Materials, together with copies of
any related third-party licenses (subject to the proviso set
forth in the immediately following sentence), and reasonable
instruction as to their installation and use. In addition,
CFI shall, as soon as practicable after the Distribution
Date, make reasonable efforts to obtain on behalf of the
Company, at CFI's expense with respect to initial purchase,
acquisition and original installation fees only, all
consents or separate licenses for third-party software which
the Company uses in its business as of the Distribution
Date, or which are incorporated into the Licensed Materials,
or which are necessary for the Company to have the right to
use the Licensed Materials to the extent contemplated herein
and be able to receive the services contemplated under the
Services Agreement, and such third-party licenses shall be
at least as broad in scope and term as were similar licenses
for CFI prior to the Distribution Date; provided, however,
that if CFI determines that the terms upon which any such
license may be obtained are commercially unreasonable, CFI
shall have the right to obtain a license for reasonably
comparable software in full satisfaction of the above-
mentioned obligation. Where use of third-party software is
limited to a specified number of users or similarly
restricted, an equitable division shall be made as set forth
on Schedule 3.1(g). Each of CFI and the Company further
acknowledges and agrees that:
(i) The use of the Licensed Materials is to
be limited to the internal business use of the Company, or
its Affiliates and their authorized customers who in the
ordinary course of business with the Company request access
to the Licensed Materials in connection with products or
services otherwise provided by the Company.
(ii) The Company's, its Affiliates' and
authorized customers' right to use the Licensed Materials
which require a third-party license is conditioned upon the
Company's, its Affiliates and authorized customers observing
the applicable terms and conditions in any third party
licenses relating to the Licensed Materials and as to
Affiliates and authorized customers the obtaining of any
necessary consents or separate licenses from such third
party vendors. CFI shall make reasonable efforts to obtain
all consents or separate licenses from third party licensors
necessary for the Company to have the right to use the
Licensed Materials to the extent contemplated herein and be
able to receive the services contemplated under the Services
Agreement.
(iii) The Company shall assume all
Liabilities relating to the Company's use, and use by any of
the Company's Affiliates or authorized customers, of the
Licensed Materials after the Distribution Date (including,
without limitation, as relates to maintenance costs) and
shall indemnify and hold harmless CFI against all
Liabilities and expenses (including reasonable attorneys'
fees and costs of litigation) which CFI may incur, which
arise out of the use of the Licensed Materials by the
Company, its Affiliates or authorized customers after the
Distribution Date.
(iv) CFI shall assume all Liabilities
relating to the Company's use of software requiring a third-
party license where CFI has taken a license from such third
party and (A) a license for the Company is available at a
commercially reasonable cost but CFI has failed to provide
the Company with the applicable third-party license to the
extent required by this Agreement, or (B) in the event that
CFI is not able to obtain such a license at a commercially
reasonable cost, CFI has failed to provide the Company with
reasonably comparable software and shall indemnify and hold
harmless the Company against all Losses, Liabilities and
expenses (including reasonable attorneys' fees and cost of
litigation) which the Company may incur, which arise out of
claims by owners of the third party software arising out of
such failure of CFI to obtain such third-party licenses for
the Company. The Company shall assume all Liabilities
relating to the use of third- party software obtained on its
behalf by CFI including, without limitation, as relates to
maintenance costs.
(v) The Licensed Materials constitute
confidential information and shall remain the property of
CFI, subject to the license granted herein. The Company
agrees to hold the same in confidence and not to disclose or
distribute the same unless such information subsequently
becomes publicly available through no fault of the Company.
(vi) CFI shall assume all Liabilities
relating to CFI's use, and use by CFI's Affiliates or
authorized customers, of the Licensed Materials and any
materials not licensed to the Company, and shall indemnify
and hold harmless the Company against all Losses,
Liabilities and expenses (including reasonable attorneys'
fees and cost of litigation) which the Company may incur,
which arise out of the use of the Licensed Materials or any
of the materials not licensed to the Company by CFI, its
Affiliates or authorized customers.
(vii) The Company may request additional
worldwide, perpetual and non-transferable licenses from CFI
which are not currently used by it in its business. CFI may
grant such licenses in its sole discretion. The licenses
requested and granted as of the date hereof are listed in
Schedule 3.1(g) as "Additional Licenses." The Company shall
pay the costs of copying such software and purchasing any
required third party licenses related thereto. The Company
shall assume all Liabilities relating to the Company's use
thereof (including, without limitation, as relates to
maintenance costs) and shall indemnify and hold harmless CFI
against all Liabilities and expenses whatsoever (including
reasonable attorneys' fees and costs of litigation) which
CFI may incur, which arise out of, or are in any way related
to the use of such software by the Company, its Affiliates
or authorized customers.
(viii) The Company shall pay its
proportional share of the development costs of the Licensed
Materials identified in Schedule 3.1(g) as "Under
Development" as incurred after the Distribution Date. Any
cost of "cloning" a second copy, if any, shall be part of
the development costs. The Company shall not, however, pay
a proportional share of the development costs where such
Licensed Materials are used in connection with the provision
of services to the Company under the Services Agreement, to
the extent that the Company has already paid such
proportional share in accordance with the Services
Agreement.
(ix) Because of the extensive number of
software programs used by the parties, the parties expect
that some programs may inadvertently be omitted from, or
included on, Schedule 3.1(g). In such event, the parties
shall determine in good faith whether such programs should
be added or deleted as Licensed Materials and related third-
party software used by the Company as of the date hereof,
"Additional Licenses" or "Under Development"; provided,
however, that the parties acknowledge that the programs
listed on Schedule X have been intentionally omitted from
Schedule 3.1(g).
(h) CFI hereby grants to the Company and its
Subsidiaries a limited, non-exclusive, non-transferable,
royalty-free worldwide right and license, without right of
sublicense (except to subsidiaries who agree in writing to
be bound by the terms of this license) to use the
trademarks, trade names and service marks set forth on
Schedule 3.1(h)(i) (collectively, the "Marks") for the nine-
month period beginning on the Distribution Date. On or
prior to the Distribution Date, CFI and the Company shall
enter into a Trademark License Agreement, substantially in
the form included on Schedule 3.1(h)(ii) in order to effect
the license from CFI to the Company (and its Subsidiaries)
of the marks (the "Additional Marks") set forth on Schedule
3.1(h)(ii). The Company agrees to comply and to cause its
Subsidiaries to comply with reasonable quality standards set
by CFI, and subject to CFI's reasonable rights of inspection
as to compliance with such quality standards, as relates to
the use of the Marks and the Additional Marks, and CFI
acknowledges that the Company and its Subsidiaries currently
meet all such standards. On or prior to the Distribution
Date, CFI shall assign to the Company, pursuant to a
Trademark Assignment in the form included on Schedule
3.1(h)(i) (X) the Marks, effective as of the end of the nine-
month period commencing on the Distribution Date, (Y) the
trademarks, trade names and service marks relating to "CF
Air" and "CF Air Freight" (and as stylized), effective as of
the third anniversary of the Distribution Date. On or prior
to the Distribution Date, CFI shall assign to the Company,
pursuant to the Copyright Assignment and the Patent
Assignment in the forms included on Schedule 3.1(h)(iii),
the patents and copyrights set forth on Schedule
3.1(h)(iii), effective as of the Distribution Date.
(i) Company shall indemnify and hold CFI,
and its subsidiaries, Affiliates, officers, directors and
subsidiaries, harmless from and against any and all
Liabilities arising out of the Company's activities under
the Marks and the Additional Marks.
(j) Prior to the Distribution Date, CFI and
the Company shall take all steps necessary to increase the
outstanding shares of Company Common Stock so that,
immediately prior to the Distribution, CFI will hold a
number of shares of Company Common Stock sufficient to
enable it to complete the Distribution based on the
Distribution Ratio.
3.2 Company Board. CFI and the Company shall
take all steps necessary to elect as directors of the
Company, on or prior to the Distribution Date, the persons
named in the Form 10 to constitute the board of directors of
the Company on the Distribution Date.
3.3 Company Charter and Bylaws. On or prior to
the Distribution Date, (a) CFI shall approve and cause the
Amended and Restated Certificate of Incorporation of the
Company substantially in the form of Annex 6 hereto to be
filed with the Secretary of State of Delaware and to be in
effect on the Distribution Date and (b) CFI shall adopt the
Amended and Restated Bylaws of the Company substantially in
the form of Annex 7 hereto to be in effect on the
Distribution Date.
3.4 Other Agreements. On or prior to the
Distribution Date, CFI and the Company shall enter into,
and/or (where applicable) shall cause their respective
Subsidiaries to enter into, the Other Agreements and any
other agreements necessary or appropriate in connection with
the transactions contemplated hereby and thereby. In the
event of a conflict between the terms of this agreement and
the terms of any of the Other Agreements or any such other
agreements, (including without limitation Section 5.04 of
the Tax Sharing Agreement) the terms of such Other Agreement
or other agreement shall govern.
3.5 Operation in the Ordinary Course of Business.
Prior to the Distribution Date, the Company shall, and shall
cause each of its Subsidiaries to, conduct its business and
operations in the ordinary course of business, consistent
with past practice, and shall, and shall cause each of its
Subsidiaries to, continue to ship products, pay accounts
payable and invoices, deposit and accept payments, and make
capital expenditures in the ordinary course of business, all
consistent with past practice. The Company shall not, and
shall cause each of its Subsidiaries not to, undertake any
arrangement with the intent to delay receipt of any funds by
the Company or its Subsidiaries until on or after the
Distribution Date or to accelerate any payment to be made by
the Company or its Subsidiaries prior to the Distribution
Date, except in each case in the ordinary course of business
consistent with past practice.
3.6 Insurance. The Company and each other member
of the Company Group does hereby release CFI and each other
member of the CFI Group from all Liabilities arising from or
in connection with the insurance policies described on
Schedule 3.6(b), excluding occurrences which commenced on or
prior to October 1, 1996, except the policies covering
underground storage tank liability, which shall be released
as of the Distribution Date. The Company and each other
member of the Company Group does hereby acknowledge that
these policies are cancelled or terminated as to CFCD and
its Subsidiaries as of October 1, 1996, except to the extent
of claims referred to in the preceding sentence. The
Company and each other member of the Company Group expressly
waives any and all rights under section 1542 of the Civil
Code of California, which provides as follows:
"A General Release does not extend to claims which
the creditor does not know or suspect to exist in his favor
at the time of executing the Release, which if known by him
must have materially affected his settlement with the
debtor."
3.7 Collections and Payments after the
Distribution Date. Except as may be explicitly provided in
this Agreement and the Other Agreements, any cash receipts
arising out of or relating to the assets, Liabilities or
operations of the Company or its past or present
Subsidiaries received on or after the Distribution Date
shall be retained by the Company and such Subsidiaries and
any Liabilities or obligations, other than any Liabilities
or obligations relating to LJSC and arising on or prior to
the Distribution Date, arising out of, relating to or
asserted on the basis of the assets, Liabilities or
operations of the Company or its past or present
Subsidiaries due and unpaid on and after the Distribution
Date or incurred on and after the Distribution Date shall be
payable by the Company and such Subsidiaries. The Company
and CFI shall settle all payments received from account
debtors of either of them to the effect that amounts
properly owing to the Company are received by the Company
and amounts properly owing to CFI are received by CFI, with
such settlements to occur by wire transfer (a) daily, for
the three-month period beginning on the Distribution Date
and (b) weekly, thereafter.
3.8 Certain Post-Distribution Transactions. The
Company. (i) The Company shall, and shall cause each of its
Subsidiaries to, comply with each representation and
statement made, or to be made, to the IRS in connection with
the IRS private letter ruling issued to CFI on September 23,
1996 (the "Ruling") or any other ruling to be obtained by
the Company and CFI acting together from any taxing
authority with respect to any transaction contemplated by
this Agreement; and (ii) until the third anniversary of the
Distribution Date, neither the Company nor any of its
Subsidiaries shall (A) make a material disposition, by means
of a sale or exchange of assets or capital stock, a
distribution to stockholders or otherwise, of its assets,
(B) repurchase or issue any Company capital stock (other
than stock issued pursuant to employee plans), or (C) cease
the active conduct of its businesses independently, with its
own employees and without material change, unless, in each
of cases (A), (B) and (C), in the opinion of counsel to the
Company, which opinion shall be reasonably satisfactory to
CFI, or pursuant to a supplemental IRS private letter ruling
reasonably satisfactory to CFI, such act or omission would
not adversely affect the tax consequences of the
Distribution to CFI or the stockholders of CFI, as set forth
in the Ruling or any other ruling issued by any taxing
authority; and the Company has no present intention to take
any such actions.
ARTICLE IV
INDEMNIFICATION
4.1 Indemnification by CFI. Except as otherwise
provided by any of the Other Agreements or as contemplated
by Section 4.5 or Article VII hereof, effective as of the
Distribution Date, CFI and each other member of the CFI
Group agree to indemnify, defend and hold harmless the
Company, each other member of the Company Group, and their
present or former officers, directors, shareholders, agents,
employees, representatives, successors-in-interest, parents,
Affiliates, insurers, attorneys and assigns (the "Company
Indemnitees") from and against any and all Losses of the
Company Indemnitees arising out of or related in any manner
to any item set forth on Schedule 4.1.
4.2 Indemnification by the Company. Except as
otherwise provided by any of the Other Agreements or as
contemplated by Section 4.5 or Article VII hereof, effective
as of the Distribution Date, the Company and each other
member of the Company Group agree to indemnify, defend and
hold harmless CFI, each other member of the CFI Group, and
their present or former officers, directors, shareholders,
agents, employees, representatives, successors-in-interest,
parents, Affiliates, insurers, attorneys and assigns (the
"CFI Indemnitees") from and against any and all Losses of
the CFI Indemnitees arising out of or related in any manner
to any item set forth on Schedule 4.2.
4.3 Limitations on Indemnification Obligations.
The amount that either CFI or the Company (an "Indemnifying
Party") is or may be required to pay to an indemnified party
("Indemnitee") pursuant to Section 4.1 or 4.2, or any other
Section of this Agreement providing for indemnification,
shall be reduced by any Insurance Proceeds or other amounts
actually recovered by or on behalf of such Indemnitee, in
reduction of the related Loss. If an Indemnitee shall have
received the payment required by this Agreement from an
Indemnifying Party in respect of any Loss and shall
subsequently actually receive Insurance Proceeds or other
amounts in respect of such Loss, then such Indemnitee shall
pay to such Indemnifying Party a sum equal to the amount of
such Insurance Proceeds or other amounts actually received
(up to but not in excess of the amount of any indemnity
payment made hereunder). No insurer or other third party
shall: (a) be relieved of the responsibility to pay any
claims which it would otherwise be obligated to pay in the
absence of the foregoing indemnification provisions; (b)
solely by virtue of the indemnification provisions hereof,
have any subrogation rights with respect to any claims which
it would otherwise be obligated to pay; or (c) be entitled
to a benefit it would not be entitled to receive in the
absence of the foregoing indemnification provisions. Any
Indemnifying Party shall succeed to the rights of any
Indemnitee with respect to any matter contemplated by this
Section 4.3.
4.4 Procedures for Indemnification. (a)(i) If
an Indemnitee shall receive notice or otherwise learn of the
assertion of any claim or commencement of any proceeding
(including any governmental investigation) by a person who
is not a party to this Agreement (or any Affiliate of either
party) (a "Third-Party Claim") with respect to which an
Indemnifying Party may be obligated to provide
indemnification pursuant to this Agreement, such Indemnitee
shall give such Indemnifying Party written notice thereof
promptly after becoming aware of such Third-Party Claim
setting forth the particulars as to such claim or proceeding
in reasonable detail; provided that the failure of any
Indemnitee to give notice as provided in this Section 4.4(a)
shall not relieve the related Indemnifying Party of its
obligations under this Article IV, unless such Indemnifying
Party is actually prejudiced by such failure to give notice
and then only to the extent of such actual prejudice.
(ii) An Indemnifying Party may, to the extent
it wishes within thirty days of receipt of notice of a Third
Party claim and at its cost and expense, elect to defend or
to seek to settle or compromise any Third-Party Claim;
provided that the Indemnitee may participate in such
settlement or defense through its chosen counsel at its sole
cost and expense. After notice from an Indemnifying Party
to an Indemnitee of its election to assume the defense of a
Third-Party Claim, such Indemnifying Party shall not be
liable to such Indemnitee under this Article IV for any
legal or other expenses (except expenses approved in advance
by the Indemnifying Party) subsequently incurred by such
Indemnitee in connection with the defense thereof; provided
that if the defendants in any such Third-Party Claim include
both the Indemnifying Party and one or more Indemnitees and
in any Indemnitee's reasonable judgment a conflict of
interest between one or more of such Indemnitees and such
Indemnifying Party exists in respect of such claim, such
Indemnitees shall have the right to employ separate counsel
to represent such Indemnitees and in that event the
reasonable fees and expenses of such separate counsel (but
not more than one separate counsel reasonably satisfactory
to the Indemnifying Party) shall be paid by such
Indemnifying Party; provided further if and to the extent
that there is a conflict of defenses or positions among the
Indemnitees, the Indemnitees shall have the right to retain
such number of additional separate counsel, reasonably
satisfactory to the Indemnifying Party, as is reasonably
necessary to avoid such conflicts, and the Indemnifying
Party shall be responsible for the reasonable fees and
expenses of such additional separate counsel; provided
further that the Indemnitee may participate in the
settlement or defense of a Third-Party Claim through counsel
chosen by such Indemnitee if the fees and expenses of such
counsel shall be borne by such Indemnitee. If an
Indemnifying Party elects not to assume responsibility for
defending a Third-Party Claim, such Indemnitee may defend or
seek to compromise or settle such Third-Party Claim but
shall not thereby waive any right to indemnity therefor
pursuant to this Agreement. Notwithstanding the foregoing,
the Indemnifying Party shall not be liable for any
settlement of any Third-Party Claim effected without its
written consent. The Indemnifying Party shall not, except
with the consent of the Indemnitee, (i) enter into any such
settlement that does not include as an unconditional term
thereof the giving by the person or persons asserting such
Third-Party Claim to all Indemnitees an unconditional
release from all Liability with respect to such Third-Party
Claim, or (ii) consent to entry of any judgment.
(b) Any claim on account of a Loss that does
not result from a Third-Party Claim shall be asserted by
written notice given by the Indemnitee to the Indemnifying
Party. Such Indemnifying Party shall have a period of
thirty (30) days after the receipt of such notice within
which to respond thereto. If such Indemnifying Party does
not respond within such thirty-day period, such Indemnifying
Party shall be deemed to have refused to accept
responsibility to make payment. If such Indemnifying Party
does not respond within such thirty-day period or rejects
such claim in whole or in part, such Indemnitee shall be
free to pursue such remedies as may be available to such
party under this Agreement or under applicable law (except
as provided in the ADR Agreement).
(c) In addition to any adjustments required
pursuant to Section 4.3, if the amount of any Loss shall, at
any time subsequent to the payment required by this
Agreement, be reduced by recovery, settlement or otherwise,
the amount of such reduction that has been received by the
Indemnitee, less any expenses properly incurred in
connection therewith, shall promptly be repaid by the
Indemnitee to the Indemnifying Party.
(d) In the event of payment by an
Indemnifying Party to any Indemnitee in connection with any
Third-Party Claim, such Indemnifying Party shall have all
rights of subrogation and shall stand in the place of such
Indemnitee as to any events or circumstances in respect of
which such Indemnitee may have any right or claim relating
to such Third-Party Claim or against any other person. Such
Indemnitee shall cooperate with such Indemnifying Party in a
reasonable manner, and at the cost and expense of such
Indemnifying Party, in prosecuting any subrogated right or
claim.
(e) Notwithstanding anything to the contrary
herein or in the Other Agreements, the foregoing
indemnification provisions and procedures shall apply to any
other indemnification agreements herein or in the Other
Agreements.
4.5 Releases.
(a) Subject to Article VII and effective on
the Distribution Date, the Company and each other member of
the Company Group releases and forever discharges CFI, each
other member of the CFI Group, and their present or former
officers, directors, shareholders, agents, employees,
representatives, successors-in-interest, parents,
Affiliates, insurers, attorneys and assigns of and from any
and all Liabilities (other than those for which
indemnification is available under (i) this Article IV or
(ii) any Other Agreement (subject to the provisions of
Section 4.3)).
(b) Subject to Article VII and effective on
the Distribution Date, CFI and each other member of the CFI
Group releases and forever discharges the Company, each
other member of the Company Group and their present or
former officers, directors, shareholders, agents, employees,
representatives, successors-in-interest, parents,
Affiliates, insurers, attorneys and assigns of and from any
and all Liabilities (other than those for which
indemnification is available under this Article IV and any
Other Agreement (subject to the provisions of Section 4.3)).
(c) The Company and each other member of the
Company Group, and CFI and each other member of the CFI
Group, expressly waive any and all rights under section 1542
of the Civil Code of California, which provides as follows:
"A General Release does not extend to claims which
the creditor does not know or suspect to exist in his favor
at the time of executing the Release, which if known by him
must have materially affected his settlement with the
debtor."
4.6 Environmental Liabilities. Notwithstanding
anything contained herein or in any Other Agreement to the
contrary, neither party shall have any obligation to
indemnify the other party with respect to any Environmental
Liabilities.
ARTICLE V
ACCESS TO INFORMATION; SERVICES
5.1 Access to Information. From and after the
Distribution Date, CFI shall, and shall cause its
Subsidiaries to, afford to the Company and its authorized
accountants, counsel and other designated representatives
(collectively, "Representatives") reasonable access
(including using reasonable efforts to give access to the
person or firms possessing information) and duplicating
rights during normal business hours to all administrative
records, books, contracts and instruments, and all Company-
owned computer software and computer data and other Company-
owned data and information (collectively, but excluding all
software not owned by the Company, "Information") within
CFI's or any such Subsidiary's possession or control
relating to the Company or any Company Subsidiary and to any
property owned by CFI that was leased or operated by the
Company or any Company Subsidiary, insofar as such access is
reasonably required by the Company or any Company
Subsidiary. Similarly, the Company shall, and shall cause
its Subsidiaries to, afford to CFI and its Representatives
reasonable access (including using reasonable efforts to
give access to persons or firms possessing Information) and
duplicating rights during normal business hours to
Information within the Company's or any such Subsidiary's
possession or control relating to CFI or any CFI Subsidiary
or relating to the Company prior to the Distribution Date
and to any property owned by the Company that was leased or
operated by CFI or any CFI Subsidiary (other than the
Company and its Subsidiaries), insofar as such access is
reasonably required by CFI or any CFI Subsidiary.
Information may be requested under this Article V for,
without limitation, audit, accounting, claim, litigation and
tax purposes, as well as for purposes of fulfilling
disclosure and reporting obligations and for performing this
Agreement and the transactions contemplated hereby.
5.2 Production of Witnesses. After the
Distribution Date, each of CFI and the Company shall, and
shall cause its respective Subsidiaries to, use reasonable
efforts to make available to the other party and its
Subsidiaries, upon written request, its directors, officers,
employees and agents as witnesses to the extent that any
such person may reasonably be required in connection with
any legal, administrative or other proceedings in which the
requesting party may from time to time be involved.
5.3 Provision of Services. In addition to any
services contemplated to be provided following the
Distribution Date by any Other Agreement, each party, upon
written request, shall make available to the other party,
during normal business hours and in a manner that will not
interfere unreasonably with such party's business, its
financial, tax, accounting, legal, employee benefits and
similar staff services (collectively, "Services") whenever
and to the extent that they may be reasonably required in
connection with the preparation of tax returns, audits,
claims, litigation or administration of employee benefit
plans, and otherwise to assist in effecting an orderly
transition following the Distribution.
5.4 Reimbursement. Except to the extent
otherwise provided in any Other Agreement, each party
providing Information, witnesses or Services under Section
5.1, 5.2 or 5.3 to the other party shall be entitled to
receive from the recipient, upon the presentation of
invoices therefor, payment for all out-of-pocket costs and
expenses as may be reasonably incurred in providing such
Information, witnesses or Services. For purposes of this
Section 5.4, salaries and other compensation payable to
employees of either party shall be deemed to be an out-of-
pocket cost or expense reimbursable hereunder.
5.5 Retention of Records. Except as otherwise
required by law or agreed to in writing, each of CFI and the
Company shall retain, and shall cause its respective
Subsidiaries to retain following the Distribution Date, all
significant information ("Information") relating to the
business of the other and the other's subsidiaries, for a
period (a "Retention Period") consistent with the document
retention policies in effect at CFI and the Company,
respectively. In addition, such Information shall not be
destroyed or otherwise disposed of if during such period a
party shall request in writing that any of the Information
be retained for additional specific and reasonable periods
of time at the expense of the party so requesting. After
the applicable Retention Period, any party may destroy or
otherwise dispose of any Information at any time, provided
that, prior to such destruction or disposal, (a) such party
shall provide no less than ninety (90) days' prior written
notice to the other party, identifying the Information
proposed to be destroyed or disposed of, and (b) if the
recipient of such notice shall request in writing prior to
the scheduled date for such destruction or disposal that any
of the Information proposed to be destroyed or disposed of
be delivered to such requesting party, the party proposing
the destruction or disposal shall promptly arrange for the
delivery of such of the Information as was requested at the
expense of the requesting party.
5.6 Confidentiality. CFI and each other member
of the CFI Group on the one hand, and the Company and each
other member of the Company Group on the other hand, shall
use commercially reasonable efforts to hold, and cause their
Representatives to hold, in strict confidence, all
Information concerning the other in their possession or
furnished by the other or the other's Representatives
pursuant to this Agreement or any of the Other Agreements
(except to the extent that such Information is (a) in the
public domain through no fault of such party or (b) later
lawfully acquired on a non-confidential basis from other
sources which are not subject to any confidentiality
litigation with the subject party by such party or
subsequently developed by such party), and neither party
shall release or disclose such Information to any other
person, except to its auditors, attorneys, financial
advisors, bankers and other consultants and advisors, and on
terms and conditions substantially the same as the terms and
conditions on which such party releases its own Information,
unless compelled to disclose by judicial or administrative
process or, as advised by its counsel, by other requirements
of law.
5.7 Provision of Corporate Records.
(a) Except as may otherwise be provided in
any Other Agreement, CFI shall arrange as soon as
practicable following the Distribution Date, to the extent
not previously delivered, for the transportation (at the
Company's cost) to the Company of the Company's, books and
records in its possession, except to the extent such items
are already in the possession of the Company. Such books
and records shall be the property of the Company, but shall
be available to CFI for review and duplication until CFI
shall notify the Company in writing that such records are no
longer of use to CFI.
(b) Except as otherwise provided in any
Other Agreement, the Company shall arrange as soon as
practicable following the Distribution Date, to the extent
not previously delivered, for the transportation (at CFI's
cost) to CFI of CFI's and its Subsidiaries' books and
records in its possession, except to the extent such items
are already in the possession of CFI or a Subsidiary of CFI.
Such books and records shall be the property of CFI, but
shall be available to the Company for review and duplication
until the Company shall notify CFI in writing that such
records are no longer of use to the Company.
5.8 Privileged Matters. The Company and CFI
recognize that legal and other professional services that
have been and will be provided prior to the Distribution
Date have been and will be rendered for the benefit of both
CFI and the Company and that both CFI and the Company should
be deemed to be the client for the purposes of asserting all
privileges related thereto. No party may waive any
privilege which could be asserted under any applicable law,
and in connection with which the other party has a material
interest, without the consent of the other party, except to
the extent reasonably required in connection with any
litigation with third parties.
ARTICLE VI
REPRESENTATIONS, WARRANTIES AND COVENANTS
The Company and each other member of the Company
Group make the following representations and warranties to,
and covenants with, CFI, for its benefit and for the benefit
of each other member of the CFI Group, each and all of which
shall survive the execution and delivery of this Agreement
and the Distribution Date.
6.1 Financial Statements. The consolidated
balance sheets of the Company and its Subsidiaries and the
consolidated statements of earnings and consolidated
statement of cash flows for the Company and its
Subsidiaries, each in the form included in the Information
Statement, have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis
during the periods involved (except as may be indicated in
the notes thereto) and fairly present the consolidated
financial position of the Company and its Subsidiaries as of
the dates indicated therein and the results of operations
and cash flows for the periods indicated therein.
6.2 Form 10 and Information Statement. The Form
10 and the Information Statement each do not misstate any
material fact or omit to state a material fact required to
be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they
were made, not misleading; provided, however, there shall be
excluded therefrom any information provided by CFI to the
extent that such information relates solely to CFI and not
to the Company ("CFI Information").
6.3 Marks. None of CFI's existing trademarks,
trade names and service marks that are not also Marks or
Additional Marks ("CFI marks" as set forth in Schedule 6.3)
infringe in any manner any of the Marks or Additional Marks
or otherwise interfere with the Company's expected use of
the Marks or Additional Marks, and none of the Company nor
any other member of the Company Group shall, at any time,
bring or join in any suit, claim or other proceeding or
action adverse to CFI or any other member of the CFI Group
relating to the use of the CFI marks.
ARTICLE VII
SHARED CLAIMS
7.1 Acknowledgment. Each party acknowledges
that, from and after the Distribution Date, there may be
claims and proceedings against such party and its
Subsidiaries (other than workers' compensation claims which
pertain to any persons who remain employed by LJSC on the
day after the Distribution Date ("Excluded Claims") which
shall remain the sole responsibility of LJSC) that relate
(in whole or in part) to activities alleged to have
transpired prior to the Distribution Date and with respect
to which it would be fair and appropriate to apportion
Liability therefor between the parties ("Shared Claims").
7.2 Notification. If any party shall receive
notice or otherwise learn of the assertion of any claim or
the commencement of any proceeding which such party believes
may constitute a Shared Claim (including, without
limitation, any such claim or proceeding that names or
identifies the other party or any of its Subsidiaries as a
responsible party), such party shall (i) immediately assume
the defense thereof and shall in all respects respond
thereto in a timely manner and (ii) promptly provide written
notice thereof to the other party, setting forth the
particulars as to such claim or proceeding in reasonable
detail; provided that the failure of such party to give such
notice shall not relieve the other party of any obligation
to accept Liability unless it is actually prejudiced by such
failure and then only to the extent of such actual
prejudice.
7.3 Cooperation. The parties shall cooperate
with each other in the defense or settlement of Shared
Claims to the effect that (i) subject to the provisions of
Section 7.2, the party bearing the greater Liability shall
be responsible for the control and administration of any
Shared Claim and (ii) the other party shall cooperate with
such party with respect to such control and administration.
7.4 Liability. The parties shall seek to
apportion Liability between them with respect to any Shared
Claim, and in so doing shall take cognizance of all relevant
factors, including but not limited to, the time and duration
of any alleged activity giving rise thereto. If the parties
are unable to agree on an apportionment of Liability within
thirty days of receipt of notification as provided in
Section 7.2, they shall submit the matter for resolution as
provided in the ADR Agreement.
7.5 Non-Shared Liabilities. Anything to the
contrary contained in this Article VII notwithstanding,
claims or proceedings arising out of or relating to LJSC,
its employees and operations on or prior to the Distribution
Date (other than Excluded Claims) shall be allocated as
described below. The Company shall assume and indemnify CFI
against all Losses and Liabilities arising out of or related
to personnel matters that are caused by employees who are
employed by LJSC immediately following the Distribution
Date. CFI shall assume and indemnify the Company against
all other Losses and Liabilities arising out of or related
to LJSC on or prior to the Distribution Date, including all
other personnel matters. If employees of both the Company
and CFI cause any such Losses or Liabilities relating to
LJSC, then they shall be Shared Claims and dealt with as
provided in this Article VII.
ARTICLE VIII
MISCELLANEOUS
8.1 Complete Agreement; Construction. This
Agreement and the Other Agreements, including any schedules
and exhibits hereto or thereto, shall constitute the entire
agreement between the parties with respect to the subject
matter hereof and shall supersede all previous negotiations,
commitments and writings with respect to such subject
matter.
8.2 Expenses. Except as otherwise set forth in
this Agreement and the Other Agreements, (i) CFI will pay
all out-of-pocket costs and expenses that are necessary to
effect the Distribution and incurred prior to the
Distribution and (ii) each party shall bear its costs and
expenses arising after the Distribution in connection with
the Distribution; provided, however, CFI shall pay the
reasonable moving and relocation costs of separating
employees of CFI and CFC in Portland into two buildings,
including design and architectural fees, phone and data
connections infrastructure and labor associated with the
move, excluding any other capital improvements, except that
CFI shall pay for the costs of wheelchair ramp access, ADA
required upgrades and lobby expansion.
8.3 Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of California without regard to the principles of
conflicts of laws thereof.
8.4 Notices. All notices, requests, claims,
demands and other communications hereunder shall be in
writing and shall be delivered by hand, mailed by registered
or certified mail (return receipt requested), or sent by
cable, telegram, telecopy (confirmed by regular, first-class
mail), to the parties at the following addresses (or at such
other addresses for a party as shall be specified by like
notice) and shall be deemed given on the date on which such
notice is received:
if to CFI:
Consolidated Freightways, Inc.
3240 Hillview Avenue
Palo Alto, California 94304
Attn: General Counsel
if to the Company:
Consolidated Freightways Corporation
175 Linfield Drive
Menlo Park, California 94025
Attn: General Counsel
8.5 Amendments and Waivers. This Agreement may
not be altered or amended, nor may rights hereunder be
waived, except by an instrument in writing executed by the
party or parties to be charged with such amendment or
waiver. No waiver of any term, provision or condition of or
failure to exercise or delay in exercising any rights or
remedies under this Agreement, in any one or more instances,
shall be deemed to be, or construed as, a further or
continuing waiver of any such term, provision, condition,
right or remedy or as a waiver of any other term, provision
or condition of this Agreement.
8.6 Counterparts. This Agreement may be executed
in one or more counterparts each of which shall be deemed an
original instrument, but all of which together shall
constitute but one and the same Agreement.
8.7 Successors and Assigns. This Agreement and
all of the provisions hereof shall be binding upon and inure
to the benefit of the parties and their respective
successors and permitted assigns.
8.8 Termination. This Agreement may be
terminated and the Distribution abandoned at any time prior
to the Distribution Date by and in the sole discretion of
the CFI Board without the approval of the Company or the
shareholders of CFI. In the event of such termination, no
party shall have any Liability of any kind to any other
party on account of such termination except that expenses
incurred in connection with the transactions contemplated
hereby shall be paid as provided in Section 8.2.
8.9 No Third-Party Beneficiaries. Except for the
provisions of Article IV relating to Indemnitees, this
Agreement is solely for the benefit of the parties hereto
and their respective Affiliates and should not be deemed to
confer upon third parties (including any employee of the CFI
Group or the Company Group) any remedy, claim,
reimbursement, cause of action or other right other than
those existing without reference to this Agreement.
8.10 Titles and Headings. Titles and headings to
sections herein are inserted for the convenience of
reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
8.11 Legal Enforceability. Any provision of this
Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof. Any
such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision
in any other jurisdiction. Without prejudice to any rights
or remedies otherwise available to any party hereto, each
party hereto acknowledges that damages would be an
inadequate remedy for any breach of the provisions of this
Agreement and agrees that the obligations of the parties
hereunder shall be specifically enforceable.
8.12 Further Assurances. In addition to the
actions specifically provided for elsewhere in this
Agreement, each of the parties hereto will use its
reasonable efforts to (i) execute and deliver such further
documents and take such other actions as any other party may
reasonably request in order to effectuate the purposes of
this Agreement and to carry out the terms hereof, and (ii)
take, or cause to be taken, all actions, and to do, or cause
to be done, all things, reasonably necessary, proper or
advisable under applicable laws, regulations and agreements
or otherwise to consummate and make effective the
transactions contemplated by this Agreement, including,
without limitation, using its reasonable efforts to obtain
any consents and approvals and make any filings and
applications necessary or desirable in order to consummate
the transactions contemplated by this Agreement. The
parties hereto further agree to cooperate with respect to
the facilities in Portland, Oregon to be used by the parties
or their respective Subsidiaries in accordance with the
Services Agreement to the effect of minimizing any
disruptions that a party (or its Subsidiaries) may
experience as a result of the technical and logistical
interdependencies of such facilities.
8.13 No Solicitation of Employees. For a period
of three years after the Distribution Date, neither CFI nor
the Company, nor any of their Subsidiaries, will directly
solicit the employment of any employee of the other company,
or any of its Subsidiaries, without the prior written
consent of such other company; provided, however, that if
the Company shall cease to receive services provided by CNF
Service Company, Inc. pursuant to the Services Agreement
after the Distribution Date, it may solicit employees
(employed either at the time of notification by the Company
of the termination of services, or in the preceding six
months) from the groups that had been providing such
services.
8.14 Dispute Resolution. Any dispute between the
parties concerning the performance of this Agreement shall
be resolved in accordance with the provisions of the ADR
Agreement.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed as of the day and year first
above written.
CONSOLIDATED FREIGHTWAYS, INC.
By:/S/ D E MOFFITT
Its: President and CEO
CONSOLIDATED FREIGHTWAYS CORPORATION
By:/s/S D Richards
Its: Senior Vice President and
General Counsel
Acknowledged and Agreed by
the following entities with
respect to the indicated
Sections of this Agreement:
EMERY AIR FREIGHT CORPORATION
(with respect to Sections 4.1, 4.5 and 5.6)
By:/s/W F McDonald__________
Its: Vice President
CON-WAY TRANSPORTATION SERVICES, INC.
(with respect to Sections 4.1, 4.5 and 5.6)
By:/s/ R R Magnan___________
Its: Vice President
MENLO LOGISTICS, INC.
(with respect to Sections 4.1, 4.5 and 5.6)
By:/s/John Williford________
Its: President
CONSOLIDATED FREIGHTWAYS CORPORATION
OF DELAWARE
(with respect to Sections 3.6, 4.2, 4.5,
5.6, 6.1, 6.2 and 6.3)
By:/s/S D Richards__________
Its: Vice President and General Counsel
CANADIAN FREIGHTWAYS LIMITED
(with respect to Sections 3.6, 4.2, 4.5,
5.6, 6.1, 6.2 and 6.3)
By:/s/K A Johnson___________
Its: Secretary and Treasurer
EXHIBIT 10.35
-------------
TRANSITION SERVICES AGREEMENT
between
CNF SERVICE COMPANY, INC.
and
CONSOLIDATED FREIGHTWAYS CORPORATION
TABLE OF CONTENTS
ARTICLE 1 SERVICES TO BE PROVIDED
Section 1.1 General Description; Provision of
Services; Volume Discounts 2
Section 1.2 Performance Levels 2
Section 1.3 Instructions 3
Section 1.4 Consents; Indemnification; Assets 3
Section 1.5 Systems Availability and Data
Integrity 5
Section 1.6 Systems Users 5
ARTICLE 2 PAYMENT FOR SERVICES
Section 2.1 Costs 6
Section 2.2 Invoices; Payment Procedures 6
Section 2.3 Disputed Fees 7
ARTICLE 3 TERM; TERMINATION OF SERVICES
Section 3.1 Term 7
Section 3.2 Termination of Services 8
ARTICLE 4 COOPERATION
Section 4.1 Cooperation 8
Section 4.2 Provider Administrative
Records 9
Section 4.3 Periodic Review of Services 9
ARTICLE 5 FORCE MAJEURE
Section 5.1 Force Majeure 9
ARTICLE 6 CONFIDENTIALITY
Section 6.1 Confidentiality 10
ARTICLE 7 MISCELLANEOUS
Section 7.1 Notices 12
Section 7.2 Severability 13
Section 7.3 Binding Effect; Assignment 13
Section 7.4 No Third Party Beneficiaries 13
Section 7.5 Interpretation 13
Section 7.6 Jurisdiction and Consent to
Service 13
Section 7.7 Entire Agreement 14
Section 7.8 Governing Law 14
Section 7.9 Counterparts 14
Section 7.10 Relationship of the Parties 14
Section 7.11 Waiver 15
Section 7.12 Sole Remedy; No Damages 15
Section 7.13 Indemnification 15
Exhibit A - Services
TRANSITION SERVICES AGREEMENT
TRANSITION SERVICES AGREEMENT ("Agreement") dated
as of December 2, 1996, by and between CNF Service Company,
Inc., a corporation organized under the laws of the State of
Delaware (together with its wholly owned subsidiaries,
"Provider"), and Consolidated Freightways Corporation, a
corporation organized under the laws of the State of
Delaware (together with its wholly owned subsidiaries,
"Recipient").
W I T N E S S E T H
WHEREAS, Provider is a wholly owned subsidiary of
Consolidated Freightways, Inc., a Delaware corporation
("CFI");
WHEREAS, pursuant to that certain Distribution
Agreement dated as of the date hereof (the "Distribution
Agreement"), all of the shares of common stock of Recipient
are being distributed (the "Distribution") to the
stockholders of CFI;
WHEREAS, prior to the Distribution, Leland James
Service Corporation, a Delaware corporation ("LJSC")
provided services to Consolidated Freightways Corporation of
Delaware ("CFCD"), the principal operating subsidiary of
Recipient;
WHEREAS, in connection with the Distribution,
certain service capabilities of LJSC are being transferred
to Provider;
WHEREAS, in order for Recipient to operate CFCD
effectively in a transition period following the
consummation of the Distribution, Recipient desires to enter
into certain arrangements with Provider with respect to the
performance of certain transition services;
WHEREAS, Provider is willing to enter into such
transition arrangements on the terms and conditions set
forth herein.
NOW, THEREFORE, the parties hereto agree as
follows:
ARTICLE 1
SERVICES TO BE PROVIDED
Section 1.1 General Description; Provision of
Services; Volume Discounts. (a) The purpose of this
Agreement is to set forth the terms upon which Recipient is
to receive certain services from Provider on an interim
basis after the Distribution on the terms and subject to the
conditions herein (the "Services").
(b) Pursuant to the terms and conditions of
this Agreement, Provider shall provide, and Recipient shall
purchase, the Services as described in Exhibit A hereto;
provided, however, that each of the parties hereto
acknowledges and agrees that Services may be added to, or
deleted from, Exhibit A by mutual consent of the parties at
any time (and the Service Fees (as defined) adjusted
appropriately).
Section 1.2 Performance Levels. In providing the
Services, Provider shall perform according to the
performance levels maintained by LJSC in the past; or,
should any instance arise in which none of such performance
levels applies, Provider shall act to substantially the same
extent, in substantially the same manner and with
substantially the same degree of care and diligence as LJSC
would have acted, prior to the Distribution, if it had
provided such Services to CFCD. Each Service shall be
provided priority no less favorably than in the past,
consistent with past practices and without discrimination
against Recipient.
Section 1.3 Instructions. The parties agree that
the Services provided by Provider shall be essentially
ministerial in nature so that Provider shall, in all matters
requiring the exercise of discretion, follow Recipient's
instructions, which shall be promptly provided to Provider
by Recipient to the extent requested by Provider and which
must be provided in writing if so requested. With respect
to post-Distribution occurrences for which Provider is to
perform Services as set forth in numbers 25, 26, 27, 28, 31
and 32 on Exhibit A, the parties agree that Provider shall
be under no obligation to perform any (or any part of) such
Services without clear, written instructions from Recipient.
Notwithstanding the foregoing, Provider shall not be
required to follow any such instructions that, in Provider's
reasonable judgment, are inconsistent with the proper
performance of its responsibilities, or that require the
exercise of discretion, including without limitation the
making of decisions regarding the hiring or firing of
employees. The parties agree that it is their intent that
Provider not be deemed a fiduciary with respect to plans
subject to the Employee Retirement Income Securities Act of
1974, as amended.
Section 1.4 Consents; Indemnification; Assets.
(a) If the provision of any of the Services by Provider to
Recipient would place CFI, Provider or any other subsidiary
of CFI in violation or breach of any contract or license
(other than software licenses, which are addressed in
Section 3.1(g) of the Distribution Agreement) between any
such entity and any third party, then Recipient and Provider
shall use their respective commercially reasonable efforts,
with all costs thereof to be borne by Recipient to obtain
forthwith any consent required for Provider to provide such
Services to Recipient, and Recipient shall indemnify and
hold harmless Provider against all Losses and Liabilities
relating to any claims arising from any such alleged
violation or breach, such indemnification to be provided in
a like manner to the provision of indemnification under the
Distribution Agreement. If, after the exercise of such
efforts, such consent cannot be obtained, Provider shall use
commercially reasonable efforts to provide Recipient with
functionally equivalent Services with any additional costs
required in providing such Services to be borne by
Recipient. Recipient shall indemnify and hold harmless
Provider against all Losses and Liabilities (including,
without limitation, as relates to software maintenance costs
to the extent not otherwise paid by Recipient as
contemplated by Section 2.1) which arise from or in any way
relate to (i) the use of any software or hardware provided
by Recipient or (ii) the use of any software or hardware in
connection with the performance of the Services hereunder
provided to Recipient, such indemnification to be provided
in a like manner to the provision of indemnification under
the Distribution Agreement. The provisions of this Section
1.4(a) shall not alter the agreement of Recipient and
Provider's parent company as provided in Section 3.1(g) of
the Distribution Agreement.
(b) The Service Fees (as defined) to be paid
by Recipient hereunder shall subsume all costs incurred by
Provider in connection with the performance of its
obligations hereunder and in respect of which separate
payment or indemnification by Recipient is not otherwise
contemplated hereby, including, but not limited to,
personnel (including fringe benefits and management fees
relating thereto), computer hardware, computer time,
printers, voice and data telecommunications equipment, file
cabinets, paper files, administrative records, photocopies,
incidentals and all other assets owned by Provider after the
Distribution which are needed in connection with the
provision of such Services on a routine and non-routine
basis and during peak and non-peak periods; and any such
equipment may be replaced from time to time by Provider with
functionally equivalent or upgraded equipment.
(c) (i) All data, software or other property
or assets owned or created by Recipient (other than the
intellectual property rights which Recipient has
acknowledged to be vested in CFI pursuant to Section 3.1(f)
of the Distribution Agreement) shall remain the sole and
exclusive property and responsibility (including, without
limitation, with respect to maintenance, modification and
upgrade) of Recipient. Provider shall not acquire any
rights in any such data, software or other property or
assets, including any derivative works of Recipient-owned
software or data created by Provider, pursuant to this
Agreement or Provider's performance hereunder.
(ii) All data, software or other
property or assets which are owned by Provider, including
without limitation derivative works thereof and new data or
software created by Provider at Provider's sole expense
pursuant to the provision of Services ("Provider Software")
shall be the sole and exclusive property and responsibility
(including, without limitation, with respect to maintenance,
modification and upgrade) of Provider and any interest of
Recipient therein shall be limited to the Licensed Materials
(as defined in the Distribution Agreement) and the
Additional Licenses (as defined in the Distribution
Agreement), if any. Recipient shall not acquire any other
rights in any such data, software or other property or
assets pursuant to this Agreement or Recipient's performance
hereunder.
(d) If as a result of unanticipated events
or conditions, Recipient reasonably determines that it
requires modification of any of the Services or software
used in connection therewith upon Recipient's request,
Provider shall so modify the Services or software used in
connection therewith upon Recipient's request (i) to the
extent commercially reasonable, (ii) to the extent such
modifications do not adversely affect Provider's ability to
maintain its computer systems in connection with its
continuing business, and (iii) at Recipient's sole cost and
expense subject to Recipient's approval of Provider's
estimate. Moreover, Provider may suggest modification of
software and may, in its sole discretion, offer to share in
the cost thereof if it determines that any such
modifications may be beneficial to Provider. Recipient
shall have exclusive ownership rights to any software
modifications it pays for solely, and shared rights to such
modifications with respect to which, and only to the extent
that, it shares in the payment therefor.
(e) Provider shall provide all support and
assistance reasonably requested by Recipient, at an arm's-
length, negotiated price, in connection with the transfer of
any and all Services from Provider to Recipient or any of
its affiliates or an alternative third-party service
provider selected by Recipient. Specifically, upon the
request of Recipient, during the term of this Agreement,
Provider shall deliver to Recipient (or as directed by
Recipient), at the Recipient's request and with minimal
interruption to the operations of Provider or its
affiliates, all data and programs owned by Recipient or
licensed by Recipient from third party vendors, and all
backup or archival copies thereof (or any part thereof as
specified by Recipient), in hard copy, electronic, magnetic
or any other form which is then in Provider's possession or
control, as requested by Recipient, and (in the event that
this Agreement is terminated) copies of all material
licensed pursuant to Section 3.1(g) of the Distribution
Agreement by Recipient from Provider (with reasonable
instructions for the installation and use thereof).
Section 1.5 Systems Availability and Data
Integrity. Provider shall maintain, consistent with past
practices, operational recovery procedures to insure the
availability of systems and the integrity of data relating
to the Services at all times. In the event of the
unavailability of any such systems or the loss or
destruction of any such data, Provider shall use
commercially reasonable efforts consistent with past
practices to restore such systems and recover or replace
such data as quickly and completely as possible.
Section 1.6 Systems Users. In each case as it
relates to Recipient's employees, consultants, affiliates or
authorized customers during the term of this Agreement the
addition or deletion of authorized users ("Users"),
including persons authorized at the application-level or
system-level, in regard to any computer system, the
modification of computer system authority or access granted
to any person, and the control generally of access to and
use of computer systems, is to be at the direction of
Recipient, and Provider shall permit no changes in such
access or use without prior written notice to and consent
from Recipient. No User will be allowed system authority or
access greater than at the application level without the
prior written consent of Provider. Each party shall
indemnify and hold harmless the other against all
degradations in performance levels caused by users
authorized for system level access on behalf of, or at the
request of, such first party, such indemnification to be
provided in a like manner to the provision of
indemnification under the Distribution Agreement.
ARTICLE 2
PAYMENT FOR SERVICES
Section 2.1 Costs. The prices charged for the
Services shall initially be those set forth in Exhibit A,
which have been negotiated on an arm's-length basis (the
"Service Fees"). The Service Fees shall be adjusted on an
arm's-length basis every 3 months, except that the Service
Fees for the period from the Distribution Date through March
31, 1997 shall be as indicated on Exhibit A and Provider
shall, not less than 3 months before any proposed adjustment
to Service Fees, provide Recipient with details of any
proposed adjustment and justification therefor. The Parties
shall negotiate in good faith to reach an agreement within
30 days. Recipient shall not be charged a fee for any
improvements or upgrades to facilities or equipment without
its prior written consent; provided, however, that Recipient
acknowledges and agrees that its failure to timely provide
any such consent may adversely affect its abilities to
receive Services hereunder, and Provider shall not be liable
for any harm to Recipient resulting therefrom.
Notwithstanding the immediately preceding sentence, all
maintenance fees relating to software used in connection
with the provision of Services hereunder, and a
proportionate share of all consultants' fees relating to the
Year 2000 software conversion project, shall be billed
separately from the Service Fees and shall be paid by
Recipient together therewith.
Section 2.2 Invoices; Payment Procedures. (a)
Not later than 30 days after the end of each calendar month
Provider shall send Recipient an invoice that includes a
detailed breakdown of all Service Fees for such month. All
invoices shall be sent to: Consolidated Freightways
Corporation, attention: Controller, mailing address: 175
Linfield Drive, Menlo Park, CA 94025. All payments of such
invoices shall be made by wire transfer or interbank
transfer in immediately available funds to Provider's
account at such banks as Provider shall designate to
Recipient in writing and shall be made within 15 days after
the date of any invoice.
(b) Recipient shall establish and maintain
an account ("Payroll Account") from which Provider shall be
authorized to draw in order to meet Recipient's gross
payroll obligations, and Recipient shall ensure that such
Payroll Account is sufficiently funded at all times.
Notwithstanding any other provision hereof, (i) Recipient
shall reimburse Provider for each payroll paid by Provider
to the employees of the Recipient for the period
contemplated above, to the extent that Provider elects to
provide funds despite a deficiency in the Payroll Account,
and (ii) Recipient shall provide each such reimbursement by
wire transfer of immediately available funds on the day of
the issuance of that payroll to such employees.
Section 2.3 Disputed Fees. In the event that
Recipient and Provider have a good faith dispute with
respect to the amount of payment for Services actually
rendered (other than with respect to the underlying schedule
of fees for Services generally), Recipient shall withhold
payment only of any unpaid amount in dispute, and shall
deliver to Provider promptly (and within 15 days following
receipt of any invoice from Provider that is the basis of
such dispute) a written statement describing the dispute,
which statement shall provide a reasonably detailed
breakdown of the disputed payment amounts. The parties
agree to use their best efforts to resolve any such dispute
hereunder within 15 days following Provider's receipt of
Recipient's statement describing the dispute. In the event
the parties cannot resolve the dispute within such time
period, each discrepancy or disagreement which cannot be so
resolved shall be submitted to a firm of nationally
recognized independent certified public accountants (agreed
upon by Provider and Recipient), who shall promptly deliver
a report setting forth their calculation of each item that
was the subject of discrepancy or disagreement, which report
shall be final and binding on the parties. The fees and
expenses of such firm shall be borne one-half by Provider
and one-half by Recipient and each party shall bear its own
other expenses in connection therewith.
ARTICLE 3
TERM; TERMINATION OF SERVICES
Section 3.1 Term. (a) The term of this
Agreement shall commence on the date hereof and shall
continue in effect until the close of business on the third
anniversary of the date hereof.
(b) Notwithstanding anything to the contrary
in this Agreement, the provisions of Articles 5 and 6 and
Sections 1.1(c) (solely as relates to indemnification),
1.4(a) (solely as relates to indemnification), 1.6 (solely
as relates to indemnification), 4.2, 7.6, 7.7, 7.8, 7.11,
7.12 and 7.13 shall survive any termination of this
Agreement or the provision of Services hereunder.
Section 3.2 Termination of Services. Recipient
may at any time, upon six months' irrevocable written notice
to Provider, terminate all the Services or any Service (or
any portion thereof) on a Service by Service basis.
Provider may, at any time after the first anniversary of the
date hereof, terminate any or all of the Services on six
months' irrevocable written notice to Recipient; provided,
however, Recipient shall be entitled to continue receiving
the telecommunication and data processing services through
the third anniversary date in its sole discretion. The
provision of all Services pursuant hereto shall in any event
terminate on or prior to the third anniversary of the date
hereof. Upon termination of any Service, all administrative
records (which term is not to be construed to include
Provider Software) relating to that Service as such records
relate solely to Recipient which have not already been
transferred to the sole possession of Recipient shall be so
transferred, it being understood that Provider may retain
copies of such records.
ARTICLE 4
COOPERATION
Section 4.1 Cooperation. Each of the parties
shall cooperate with and provide assistance to the other
consistent with the terms and conditions hereof (including,
without limitation, any limitations relating to software) to
enable (i) the full performance of all obligations
hereunder, (ii) the review and audit of books and
administrative records as they relate to the provision of
Services, and (iii) Recipient, or any of its affiliates or
third party service provider, to assume the performance of
any and all Services upon termination or prior thereto; such
cooperation and assistance to include without limitation
providing the other party, its representatives and its
agents (including, without limitation, its outside auditors)
with reasonable access, during normal business hours and
upon reasonable advance notice, to its employees,
representatives and agents and its books, administrative
records, offices and properties relating to the Services.
Nothing in this section 4.1 shall operate to grant any right
to Recipient of Provider-owned software, data or other
intellectual property.
Section 4.2 Provider Administrative Records.
Provider shall keep administrative records regarding the
provision of Services as LJSC has kept records for itself
regarding such Services prior to the Distribution, and for
each Service shall retain such records for a period of
twelve months following the cessation of Provider's
provision of that Service to Recipient. Recipient, its
agents and representatives shall have reasonable access
during normal business hours and upon reasonable advance
notice to such records (which term is not to be construed to
include Provider Software) from the date hereof through the
end of the period for retaining such records pursuant to
this Section 4.2.
Section 4.3 Periodic Review of Services. From
time to time during the term of this Agreement, but not less
frequently than once each month, the parties shall meet and
discuss the nature, quality, and level of Services covered
by this Agreement, any concerns either party may have in
regard to such matters, and any amendments either party may
wish to make to the Services specified in Exhibit A.
ARTICLE 5
FORCE MAJEURE
Section 5.1 Force Majeure. Each party shall be
relieved of its obligations hereunder if and to the extent
that any of the following events or conditions directly or
indirectly hinder, limit or make impracticable the
performance by that party of any of its obligations
hereunder: Act of God, war, riot, fire, earthquake,
explosion, flood, sabotage, national defense requirement,
strike, lockout, job action, injunction, act or order of a
governmental agency or instrumentality thereof (whether of
fact or law), act of a public enemy, embargo or other
concerted act of workers, telecommunications failures or
electrical failures; provided, that Provider shall continue
to have in place at all times disaster recovery procedures
consistent with past practices of LJSC regarding CFCD to
enable rapid recovery from any such event or condition.
Such procedures may be subject to revision by Provider from
time to time as may be required in the ordinary course of
business, provided, that such revisions do not adversely
affect the levels of protection afforded by such procedures.
Prior to being relieved of any obligations hereunder
Provider shall have used commercially reasonable efforts
(consistent with past practices) to remove or otherwise
address the effects of any such event or condition as soon
as practicable. Recipient shall be liable for all costs
incurred by Provider in connection with any Service that
Provider fails to complete and provide as a result of any
such event or condition.
ARTICLE 6
CONFIDENTIALITY
Section 6.1 Confidentiality. The parties
acknowledge that in connection with the provision of
Services hereunder, each may gain access to confidential and
proprietary information regarding the other's financial and
business affairs (hereinafter "Confidential Information" or
"Information"). Each party hereby agrees to use
commercially reasonable efforts to:
(a) confine its access to and
examination of Confidential Information to the minimum
Information necessary to enable Provider to provide the
Services hereunder and Recipient to operate its business;
(b) limit access to such Information
only to those individuals who reasonably need to receive
such access to enable Provider to provide the Services
hereunder and Recipient to operate its business;
(c) inform such individuals of the
confidential nature of such Information and take all
reasonable steps to secure the compliance of such
individuals with the terms of this Article 6;
(d) use such Information solely to
enable Provider to provide the Services hereunder and
Recipient to operate its business;
(e) keep such Information confidential
and not disclose it to any third party in any manner except
as may be required by law or court order; and
(f) provide the other party with
reasonable access to that party's employees, representatives
and agents and its books and administrative records relating
to the relevant business (including, without limitation, any
and all computer access reports and security access reports)
in order for the other party to monitor compliance with this
Article 6.
Notwithstanding the foregoing, disclosures of
Information may be made to third parties: (i) with the prior
written consent of the party whose Information it is, (ii)
if the Information is in the public domain and has entered
the public domain through no fault of the party seeking to
make such disclosure or its affiliates or representatives,
(iii) if the Information is lawfully acquired by the party
seeking to make such disclosure or its affiliates or
representatives from sources other than the party whose
Information it is or its affiliates or representatives and
none of the party seeking to make such disclosure, its
affiliates or its representatives is aware that such source
was under any obligation (whether contractual, legal or
fiduciary) to the party whose Information it is or any of
its affiliates or representatives to keep such Information
confidential or (iv) to the extent disclosure is compelled
by law or court order. Each party shall be responsible for
any breach of this Article 6 caused by itself or any of its
employees, agents or representatives. Anything contained
herein to the contrary notwithstanding, the parties
acknowledge and agree that irreparable damage would occur in
the event that any provision of this Article 6 was not
performed in accordance with its terms, and that the parties
shall be entitled to specific performance as the sole
remedy.
ARTICLE 7
MISCELLANEOUS
Section 7.1 Notices. All notices, requests,
demands, consents, waivers and other communications required
or permitted to be given under this Agreement (excluding
invoices as described in Section 2.2 above) shall be in
writing and may be given by any of the following methods:
(a) personal delivery; (b) facsimile transmission; (c)
registered or certified mail, postage prepaid, return
receipt requested; or (d) overnight delivery service.
Notices shall be sent to the appropriate party at its
address or facsimile number given below (or at such other
address or facsimile number for such party or other person
as shall be specified by notice given hereunder):
If to Provider to:
CNF Service Company, Inc.
1717 N.W. 21st Avenue
Portland, OR 97209
Attention: Controller
Fax No.:
with a copy to:
Consolidated Freightways, Inc.
3240 Hillview Avenue
Palo Alto, CA 94304
Attention: General Counsel
Fax No.: (415) 494-8372
If to Recipient to:
Consolidated Freightways Corporation
175 Linfield Drive
Menlo Park, CA 94025
Attention: General Counsel
Fax No.:
All such notices, requests, demands, waivers
and communications shall be deemed received upon (i) actual
receipt thereof by the addressee or (ii) actual delivery
thereof to the appropriate address.
Section 7.2 Severability. Should any provision
of this Agreement for any reason be declared invalid or
unenforceable, such declaration shall not affect the
validity or enforceability of any of the other provisions of
this Agreement, which other provisions shall remain in full
force and effect and the application of such invalid or
unenforceable provision to persons or circumstances other
than those as to which it has been held invalid or
unenforceable shall be valid and enforced to the fullest
extent permitted by law.
Section 7.3 Binding Effect; Assignment. This
Agreement and all of the provisions hereof shall be binding
upon and shall inure to the benefit of the parties hereto
and their respective successors and permitted assigns.
Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned, directly or
indirectly, including, without limitation, by operation of
law, by any party hereto without the prior written consent
of the other party hereto; provided, (i) that either of the
parties hereto may without such prior written consent
transfer or assign its rights hereunder to one or more of
its affiliates, but no such transfer arrangement shall
release the transferring party of its obligations hereunder
and (ii) that Provider may subcontract to any party so long
as Provider remains liable for the performance of Services
provided by any such subcontractor.
Section 7.4 No Third Party Beneficiaries. This
Agreement is solely for the benefit of the parties and their
respective successors and permitted assigns, and shall not
be deemed to confer upon or give to any other party any
remedy, claim, liability, reimbursement, cause of action or
other right.
Section 7.5 Interpretation. The section headings
contained in this Agreement are solely for the purpose of
reference, are not part of the agreement of the parties and
shall not in any way affect the meaning or interpretation of
this Agreement.
Section 7.6 Jurisdiction and Consent to Service.
In accordance with the laws of the State of Oregon, and
without limiting the jurisdiction or venue of any other
court, the parties (a) agree that any suit, action or
proceeding arising out of or relating to this Agreement
(other than proceedings arising under Section 2.3 above with
respect to the amount of payment for Services) shall be
brought solely in the state or federal courts of Oregon; (b)
consent to the exclusive jurisdiction of each such court in
any suit, action or proceeding relating to or arising out of
this Agreement; (c) waive any objection which any of them
may have to the laying of venue in any such suit, action or
proceeding in any such court; and (d) agree that service of
any court paper may be made in any manner as may be provided
under the applicable laws or court rules governing service
of process in such court.
Section 7.7 Entire Agreement. This Agreement
constitutes the entire agreement among the parties with
respect to the subject matter hereof, and supersedes all
other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter
hereof. Any conflicts between the language herein and the
language used in the Distribution Agreement shall be
resolved in favor of the language used herein.
Section 7.8 Governing Law. THIS AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF OREGON (REGARDLESS OF THE LAWS THAT MIGHT
OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF
LAWS THEREOF) AS TO ALL MATTERS, INCLUDING BUT NOT LIMITED
TO MATTERS OF VALIDITY, CONSTRUCTION, EFFECT, PERFORMANCE
AND REMEDIES.
Section 7.9 Counterparts. This Agreement may be
executed in counterparts, each of which shall be deemed to
be an original, but all of which shall constitute one and
the same agreement.
Section 7.10 Relationship of the Parties.
Provider and Recipient each acknowledge that they are
separate entities, each of which has entered into this
Agreement for independent business reasons. Except as
provided below in this Section 7.10, the relationship of
Provider to Recipient hereunder is that of an independent
contractor and nothing herein shall be deemed or construed
to create a relationship of partnership, employment, agency,
joint venture, or any other relationship. Except as
provided below in this Section 7.10, neither party shall
transact any business in the name of the other party or
obligate or commit the other party in any manner. In
recognition of the fact that some of the Services to be
provided by Provider pursuant to this Agreement will require
that personnel employed by Provider engage in business
dealings with customers, vendors, or others with whom
Recipient does business and that it is to Recipient's
advantage for such business dealings to be conducted on
behalf of and in the name of Recipient, Recipient may
authorize Provider to use any of its names, whenever (a)
necessary or appropriate in providing Services or other
assistance hereunder and (b) Recipient explicitly so
instructs Provider, in writing. Recipient shall indemnify
and hold harmless Provider against all Losses and
Liabilities incurred by Provider and arising from this
Section 7.10, such indemnification to be provided in a like
manner to the provision of indemnification under the
Distribution Agreement.
Section 7.11 Waiver. Any failure by either party
to comply with any obligation, covenant or agreement herein
or to fulfill any condition herein may be waived only by a
written notice from the party entitled to the benefits
thereof. No failure by either party hereto to exercise, and
no delay in exercising, any right hereunder shall operate as
a waiver thereof, nor shall any single or partial exercise
of any right hereunder preclude any other or future exercise
of that right or any other right hereunder by that party.
Section 7.12 Sole Remedy; No Damages. If
Recipient becomes dissatisfied with the quality or level of
Services provided hereunder, claims any breach of this
Agreement by Provider or otherwise becomes dissatisfied with
any matter relating hereto or arising herefrom, its sole
remedy shall be termination of all or a part of the Services
without right to seek actual, compensatory or consequential
damages. RECIPIENT HEREBY ACKNOWLEDGES AND AGREES THAT IT
IS HEREBY WAIVING CERTAIN LEGAL RIGHTS AND REMEDIES, AND
THAT THIS WAIVER IS A FUNDAMENTAL ELEMENT OF THE BARGAIN
BETWEEN THE PARTIES HERETO, WITHOUT WHICH PROVIDER WOULD NOT
HAVE ENTERED INTO THIS AGREEMENT. RECIPIENT HEREBY
ACKNOWLEDGES AND AGREES FURTHER THAT, NOTWITHSTANDING
ANYTHING TO THE CONTRARY CONTAINED HEREIN, PROVIDER MAY, BUT
SHALL IN NO EVENT BE OBLIGATED TO, ADVANCE FUNDS OR INCUR
COSTS IN CONNECTION WITH ITS PERFORMANCE HEREUNDER.
Section 7.13 Indemnification. Recipient, at its
own expense, shall indemnify, defend and hold Provider, its
subsidiaries and their present or former officers,
directors, shareholders, agents, employees, representatives,
successors-in-interest, parents, affiliates, insurers,
attorneys and assigns (collectively, the "Indemnified
Parties") harmless from and against any claims, judgments,
losses, deficiencies, damages, punitive or exemplary
damages, fines or penalties, liabilities, costs and expenses
(including reasonable attorneys' fees, charges and
disbursements) whether required to be paid to a third party
or otherwise incurred in connection with or arising from any
claim, suit, action or proceeding ("Claim") against the
Indemnified Party to the extent the basis of such Claim is
that: (i) Recipient has failed to pay any amounts owed to
third parties in connection with the Services provided by
Provider under this Agreement; (ii) a third party has been
or may be injured or damaged in any way by any breach of
Recipient of any of its duties, representations or
warranties under this Agreement; (iii) Recipient or any of
its employees, agents, or services acted improperly in
connection with the notification, investigation, adjustment
or settlement of claims and losses arising out of the
Services described in Exhibit A, and (iv) there is any other
liability or obligation arising out of Provider's
administration or operation of the Services or functions
described in Exhibit A, except to the extent that same
arises from the gross negligence or willful misconduct of
Provider. The provision of indemnification under this
Section 7.13 shall be in a like manner to the provision of
indemnification under the Distribution Agreement.
IN WITNESS WHEREOF, the parties have each caused
this Agreement to be executed by its duly authorized
representative as of the day and year first above written.
CNF SERVICE COMPANY, INC.,
on behalf of itself and its
wholly owned subsidiaries
By: /s/D E Moffitt___________
Name: Donald E. Moffitt
Title: President and CEO
CONSOLIDATED FREIGHTWAYS
CORPORATION,
on behalf of itself and its
wholly owned subsidiaries
By: /s/S D Richards__________
Name: Stephen D. Richards
Title: Senior Vice President and
General Counsel
EXHIBIT 10.36
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CFI TAX SHARING AGREEMENT
TAX SHARING AGREEMENT
This Tax Sharing Agreement (the "Agreement"), dated as of
this 2nd day of December, 1996, by and between Consolidated
Freightways, Inc., a Delaware corporation ("CFI"), and
Consolidated Freightways Corporation, a Delaware corporation
("Holdings").
WHEREAS, CFI and Holdings have entered into a
Distribution Agreement dated as of November 25, 1996 (the
"Distribution Agreement"), providing for the distribution by
CFI of the common stock of Holdings to the holders of CFI
common stock as of the close of the day on the Distribution
Date, and setting forth the terms and conditions which will
govern certain relationships between the parties; and
WHEREAS, CFI and Holdings desire to set forth their
agreement on the proper allocation among CFI, Holdings and
their subsidiaries of federal, state, local and foreign
taxes and to provide for future cooperation with respect to
tax matters;
NOW, THEREFORE, in consideration of their mutual
promises, the parties agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have
the following meanings (such meanings to be equally
applicable to both the singular and the plural forms of the
terms defined):
"Affiliate" means any corporation which is a member of
the Consolidated Group.
"CFI Affiliate" means any corporation, partnership or
other entity directly or indirectly controlled by CFI, other
than Holdings or any Holdings Affiliate.
"CFI Businesses" means the present and future
subsidiaries, divisions and business of any member of the
CFI Group, other than the present and future subsidiaries,
divisions and business of any member of the Holdings Group.
CFI Businesses shall include all former subsidiaries,
divisions and businesses other than the Holdings Businesses.
"CFI Group" means the group of corporations that
immediately after the Distribution Date are members of the
affiliated group of which CFI is the common parent (within
the meaning of section 1504 of the Code).
"Code" means the Internal Revenue Code of 1986 (or, if
relevant, the Internal Revenue Code of 1954), as amended, or
any successor thereto, as in effect for the taxable period
in question.
"Combined Jurisdiction" means, for any taxable period,
any jurisdiction in which Holdings or a Holdings Affiliate
could be or is included in a consolidated or combined return
with CFI or a CFI Affiliate for Other Tax purposes for such
period.
"Consolidated Group" means the affiliated group of
corporations (within the meaning of section 1504 of the
Code) of which CFI is the common parent.
"Distribution" means the transfer by CFI of its ownership
of Holdings and the Holdings Affiliates from CFI by means of
a distribution of the stock of Holdings to CFI shareholders.
"Distribution Date" means the date determined by the CFI
Board of Directors as of which the Distribution shall be
effected.
"Final Determination" means the final resolution of
liability for any Tax for a taxable period (i) by the
appropriate IRS form which binds the taxpayer on the date of
acceptance by or on behalf of the IRS, or by a comparable
form under the laws of other jurisdictions; except that any
such form that reserves (whether by its terms or by
operation of law) the right of the taxpayer to file a claim
for refund and/or the right of the Taxing Authority to
assert a further deficiency shall not constitute a Final
Determination; (ii) by a decision, judgment, decree, or
other order by a court of competent jurisdiction, which has
become final and unappealable; (iii) by a closing agreement
or accepted offer in compromise under section 7121 or
section 7122 of the Code, or comparable agreements under the
laws of other jurisdictions; (iv) by any allowance of a
refund or credit in respect of an overpayment of Tax, but
only after the expiration of all periods during which such
refund may be recovered (including by way of offset) by the
Tax imposing jurisdiction; or (v) by any other final
disposition, including by reason of the expiration of the
applicable statute of limitations.
"Holdings Affiliate" means any former or current
corporation, partnership or other entity directly or
indirectly controlled by Holdings.
"Holdings Businesses" means the present and future
subsidiaries, divisions and business of any member of the
Holdings Group. Holdings Businesses shall include all former
subsidiaries, divisions and businesses.
"Holdings Group" means the group of corporations that
immediately after the Distribution Date are members of the
affiliated group of corporations of which Holdings is the
common parent (within the meaning of section 1504(a) of the
Code).
"IRS" means the Internal Revenue Service.
"Other Taxes" is defined in Section 3.05.
"Representative" means with respect to any person or
entity, any of such person's or entity's directors,
officers, employees, agents, consultants, advisors,
accountants, attorneys and representatives.
"Restructuring Taxes" means all Taxes resulting from the
disposition of Holdings stock undertaken to effect the
Holdings Distribution.
"Ruling Request" means the private letter ruling request
filed by CFI with the IRS dated February 22, 1996, as
supplemented from time to time, with respect to certain tax
aspects of the Distribution.
"Tax" means any of the Taxes.
"Tax Controversy" is defined in Section 4.02.
"Tax Return" means any return, filing, questionnaire or
other document required to be filed, including requests for
extensions of time, filings made with estimated Tax
payments, claims for refund and amended returns that may be
filed, for any taxable period with any Taxing Authority
(whether domestic or foreign) in connection with any Tax
(whether or not a payment is required to be made with
respect to such filing) or any information reporting
requirement.
"Taxes" means any and all forms of taxation, whether
created or imposed by a national, municipal, state, federal,
or other governmental body (a "Taxing Authority") and,
without limiting the generality of the foregoing, shall
include net income, alternative or add-on minimum, any
special estimated tax payments required pursuant to section
847 of the Code, gross income, sales, use, ad valorem, gross
receipts, value added, franchise, profits, license,
transfer, recording, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, property,
windfall profit, custom duty, or other tax, governmental fee
or other like assessment or charge of any kind whatsoever,
together with any related interest, penalties or other
additions to tax, or additional amounts imposed by any such
Taxing Authority on the Consolidated Group or any member
thereof.
"Taxing Authority" is defined under the term "Taxes."
ARTICLE II
PREPARATION AND FILING OF TAX RETURNS
Section 2.01. Manner of Filing. All Tax Returns
(relating to pre-Distribution and post-Distribution taxable
periods) filed by CFI and CFI Affiliates and Holdings and
Holdings Affiliates after the Distribution Date shall be
prepared on a basis which is consistent with the rulings of
Taxing Authorities or opinions of tax counsel retained or
approved by CFI and which are issued in connection or relate
directly to the Distribution and shall be filed on a timely
basis (including extensions) by the party responsible for
such filing under this Agreement.
Section 2.02. Pre-Distribution Federal Tax Returns
(a) Holdings will join, and will cause each Holdings
Affiliate to join, in all pre-Distribution federal Tax
Returns for the Consolidated Group to the extent they are
eligible to join in such returns under the provisions of the
Code and the regulations thereunder. Holdings will neither
elect to file separate returns for such periods nor will it
cause or permit any of the Holdings Affiliates to so elect.
(b) Holdings hereby irrevocably designates, and Holdings
agrees to cause each of the Holdings Affiliates to so
designate, CFI as its agent to take any and all actions
necessary or incidental to the filing of Form 1122 (or any
amendment thereto) with respect to any taxable period in
which Holdings or any of the Holdings Affiliates is a member
of the Consolidated Group, and Holdings agrees to deliver,
and to cause each Holdings Affiliate to deliver, executed
copies of Form 1122 (or any amendment thereto) to CFI, if
required, with respect to any such year.
(c) CFI shall timely prepare and file, or cause to be
timely prepared and filed, all pre-Distribution federal Tax
Returns for the Consolidated Group. This shall include all
tax items required to be reported by the Holdings Group for
taxable periods ending before or including the Distribution
Date. Holdings shall provide CFI, with respect to Holdings
and Holdings Affiliates, its federal Tax Returns and
supporting schedules and additional information requested by
CFI for the 1996 taxable period ending on the Distribution
Date on a timely basis, as reasonably determined by CFI, in
order for CFI to timely file the Tax Returns for the
Consolidated Group. Upon request, CFI shall deliver to
Holdings copies of the relevant portions of the Consolidated
Group Tax Return for 1996, as determined by CFI, within 30
days after the day that it is filed.
(d) All Tax Returns relating to taxable periods ending
before or including the Distribution Date and submitted
after the date of this Agreement by Holdings shall be
prepared, and all items of such Tax Returns shall be
reported (in the absence of a controlling change in law or
circumstances, except with the consent of CFI, which consent
shall not be unreasonably withheld), in a manner that is
consistent with past practices, elections, accounting
methods, conventions, and principles of taxation
(collectively, "Tax Practices") used for the most recent
taxable periods for which Tax Returns involving similar
items have been filed prior to the Distribution Date. All
decisions relating to the preparation of Tax Returns under
Section 2.02 (including whether items are reported
consistent with past Tax Practices) shall be made in the
reasonable discretion of CFI. However, any decisions
regarding intercompany transactions, as defined under Treas.
Reg. 1.1502-13, shall be made as mutually agreed upon by
the parties or by CFI if mutual agreement is not reached,
with CFI's decision being subject to arbitration under
Section 5.04.
Section 2.03. Post-Distribution Federal Tax Returns.
Holdings shall prepare and file, or cause to be filed, all
post-Distribution federal Tax Returns for the Holdings Group
for taxable periods beginning after the Distribution Date.
CFI shall prepare and file, or cause to be prepared and
filed, all post-Distribution federal Tax Returns for the CFI
Group for taxable periods beginning after the Distribution
Date. CFI and Holdings agree to notify each other within 60
days after such post-Distribution federal Tax Returns are
filed regarding any utilization by either party of minimum
tax credits generated in pre-Distribution taxable periods.
In addition CFI agrees to provide to Holdings periodic
estimates of the amount of minimum tax credits generated in
pre-Distribution years which are expected to be utilized in
post-Distribution returns of the CFI Group. CFI agrees to
provide such estimates within 60 days after each quarterly
federal estimated tax payment and within 60 days after an
application for automatic extension of time (Form 7004) is
filed. Holdings acknowledges that such estimates are subject
to change and CFI shall have no liability for any changes or
inaccuracies in such estimates.
ARTICLE III
PAYMENT OF TAXES
Section 3.01. Allocation of Tax Liability.
(a) For purposes of this Agreement, the Consolidated
Group's federal regular income tax liability for all periods
ending before or including the Distribution Date shall be
allocated in accordance with section 1552(a)(2) of the Code
and Treasury Regulations sections 1.1552-1(a)(2) and 1.1502-
33(d)(3). Accordingly, the consolidated federal regular
income tax liability to be allocated to each Affiliate
included in the federal Tax Return of the Consolidated Group
in the following manner:
(1) Step 1. Each Affiliate shall first be allocated
that percentage of the consolidated federal regular income
tax liability which is equal to the percentage that the
total federal regular income tax liability of such
Affiliate, if computed on a separate return basis, (with the
adjustments provided by Treasury Regulation section 1.1552-
1(a)(2)) would be to the total amount of the federal regular
income tax of all Affiliates so computed.
(2) Step 2. An additional amount shall be allocated to
each Affiliate equal to one hundred percent (100%) of the
excess, if any, of (A) the "separate return tax liability"
of such Affiliate for the taxable year (as computed pursuant
to Treasury Regulation section 1.1552-1(a)(2)), over (B) the
tax liability of such Affiliate in accordance with Step 1 of
this Section 3.01(a).
(3) Step 3. The total of any additional amounts
allocated to Affiliates pursuant to Step 2 of this Section
3.01(a) (including amounts allocated as a result of a
carryback) shall be paid by such Affiliates to those other
Affiliates which had such losses, deductions, or credits in
proportion to the tax benefit derived by the Consolidated
Group from the losses, credits and deductions of all
Affiliates, as determined by CFI.
(4) For the purposes of this Agreement, Holdings'
allocable share of the consolidated federal regular income
tax liability, as determined under this Section, is the
aggregate amount of liability allocated to Holdings and any
Holdings Affiliate. CFI's allocable share of the
consolidated federal income tax liability, as determined
under this Section, is the aggregate amount of liability
allocated to CFI and any CFI Affiliate.
(b) For purposes of this Agreement, the Consolidated
Group's federal minimum tax liability and environmental tax
liability for all periods ending before or including the
Distribution Date shall be allocated in accordance with the
allocation method set out in Proposed Regulations 1.1502-
55 and 1.1552-1(g) issued on December 30, 1992 (the
"Proposed Regulations"). If temporary or final regulations
are issued which differ from the Proposed Regulations, this
Agreement will be amended to reflect such changes to the
extent and for an effective date deemed necessary or
desirable by CFI.
Section 3.02. Alternative Minimum Tax Credits. A
portion of any consolidated minimum tax credit of the
Consolidated Group will be allocated to a Holdings Affiliate
which ceases to be a member of the Consolidated Group on the
Distribution Date in accordance with the allocation method
set forth in the Proposed Regulations. To the extent such
Holdings Affiliate was not allocated a corresponding amount
of alternative minimum tax in an earlier or the same tax
year, Holdings shall pay to CFI an amount equal to the
amount of any such credit utilized by the Holdings Affiliate
on an estimated basis on or before June 30 following the
taxable year in which the credit is utilized by such
Holdings Affiliate. Subsequent thereto, a final settlement
payment, if necessary, will be made within 10 days of filing
the Tax Return for such taxable year or, if later, 10 days
after receipt of notice of the amount of the settlement
payment required. Any payment required under this Section
shall be accompanied by a calculation setting forth the
basis for the amount paid. In calculating minimum tax credit
utilization and payment responsibility under this Section,
minimum tax credits allocated to Holdings Affiliates under
this Section shall be deemed used first. If temporary or
final regulations are issued which differ from the Proposed
Regulations, this Agreement will be amended to reflect such
changes to the extent and for an effective date deemed
necessary or desirable by CFI.
Section 3.03. Payment of Consolidated Federal Income
Tax.
(a) CFI shall pay all Taxes due with respect to the
consolidated federal income tax liability (including any
minimum tax or environmental tax liability) of the
Consolidated Group for all taxable periods ending before or
including the Distribution Date. Holdings shall pay to CFI
an amount equal to Holdings' and Holdings Affiliates' share
of such Taxes as determined in the manner provided in
Section 3.01. Furthermore, Holdings shall make estimated tax
payments to CFI or receive refunds on or before the
statutory payment dates under a method generally consistent
with past practices as reasonably determined by CFI. CFI
hereby acknowledges that, upon resolution of the
intercompany accounts as of the Distribution Date, all
federal Taxes have been paid by Holdings and Holdings
Affiliates with respect to federal consolidated Tax Returns
that have been filed for any period up to and including the
year ended December 31, 1995, and Holdings and Holdings
Affiliates shall have no further liability in respect
thereof except as otherwise provided in this Agreement.
(b) Except as otherwise provided in this Agreement,
Holdings shall pay all Taxes due with respect to the federal
income tax liability (including any minimum tax or
environmental tax liability) of the Holdings Group for
periods beginning after the Distribution Date.
Section 3.04. Tax Deficiencies and Refunds as to CFI
Filed Returns.
(a) If as a result of any audit, amendment or other
change in a federal income Tax Return as filed by CFI or any
CFI Affiliate with respect to any taxable period ending
before or including the Distribution Date, there is an
additional amount of federal income Taxes (including minimum
tax and environmental tax) due and payable, or a refund of
federal income Taxes previously paid (whether by payment,
credit, offset against other federal income Taxes due or
otherwise), any such deficiency shall be paid by, and any
such refund shall be payable to, CFI.
(b) Holdings shall pay to CFI any federal income Taxes
paid by CFI as a result of any audit, amendment or other
change in a Consolidated Group Tax Return allocable to the
Holdings' Businesses (as determined under Section 3.01) with
respect to any taxable periods ending before or including
the Distribution Date. In determining the amount due under
this Section 3.04(b), the amount of federal income Taxes
paid by CFI shall include any additional tax payments or
deposits made by CFI for a taxable year subsequent to the
filing of the federal income tax return for the taxable
year, it being expressly recognized by Holdings that no
portion of such payments were charged to Holdings or a
Holdings Affiliate through the intercompany accounts.
(c) CFI shall pay to Holdings, reduced by reasonable
administrative costs (including legal and accounting
expenses) incurred by CFI or a CFI Affiliate, the amount of
any refund of federal income Taxes received (including by
offset against other federal Taxes due) as a result of any
audit, amendment or other change in a Consolidated Group Tax
Return allocable to the Holdings Businesses (as determined
under Section 3.01) with respect to any taxable period
ending before or including the Distribution Date.
(d) For purposes of both (b) and (c) of this Section,
the amount of any federal Taxes paid or federal Taxes
received (including by way of offset) as a result of any
audit, amendment or other change to a Consolidated Group
Tax Return shall be taken into account in the year to which
they relate and the Tax liability (including Other Taxes)
for such year shall be recomputed and allocated accordingly.
Section 3.05 Penalties and Interest
(a) Any interest incurred by the Consolidated Group
shall be paid by the Affiliate to whom it is attributable.
The total amount of interest incurred by the Consolidated
Group will be apportioned to and paid by each Affiliate
according to (1) the ratio of the interest incurred by each
Affiliate so computed, plus (2) the additional interest, if
any, that such Affiliate would have paid on a separate
return basis over the allocated interest determined under
(1) above. Interest computed by an Affiliate on a separate
return basis shall be calculated using the interest rate or
rates applicable to the consolidated deficiency. Any
additional amount allocated to an Affiliate determined under
(2) above shall be paid to the Affiliate whose income or
deduction would have given rise to a refund on a separate
return basis, but in no case shall an Affiliate which incurs
interest under (2) above be required to pay more interest to
such receiving Affiliate than such receiving Affiliate would
have received on a separate return basis. In calculating
the allocable share of any interest payable by a Holdings
Affiliate with respect to any federal audit adjustments,
only interest actually payable to the IRS, and not interest
abated as a result of tax deposits, shall be taken into
account. CFI shall have sole discretion to determine how
tax deposits are allocated among taxable periods and audit
items. CFI shall act in good faith in making such
determination, with an intention to minimize the overall out-
of-pocket costs and financial reporting impacts on CFI and
Holdings.
(b) Any interest received by the Consolidated Group as a
result of any refund of Tax shall be allocated to the
Affiliate whose income or deductions gave rise to the
refund. The amount of interest received by the Consolidated
Group will be apportioned to and received by each Affiliate
according to (1) the ratio of the interest to be received by
each Affiliate computed on a separate return basis to the
total of all the interest received by Affiliates so
computed, plus (2) the additional interest, if any, that
such Affiliate would have received on a separate return
basis over the allocated interest determined under (1)
above. Any additional amount allocated to an Affiliate
determined under (2) above shall be received from the
Affiliate whose income or deductions caused such interest
not to be received by the Consolidated Group, but in no case
shall an Affiliate which receives such interest receive more
interest than such Affiliate would have received on a
separate return basis.
(c) Any penalties incurred by the Consolidated Group
shall be paid by the Affiliate whose actions, income or
deductions caused such penalties. If a penalty was caused by
more than one Affiliate, such penalty shall be allocated
proportionately to those Affiliates that would have incurred
a penalty on a separate return basis. Any excess penalty
will be allocated in proportion to the actions, income or
deductions of each Affiliate which caused or contributed to
the penalty regardless of whether such Affiliate's actions,
income or deductions exceeded the minimum threshold required
for the penalty to be imposed.
(d) For purposes of this Agreement, Holdings' allocable
share of any interest or penalties, as determined under this
Section, is the aggregate amount of liability allocated to
Holdings and any Holdings Affiliate. CFI's allocable share
of any interest or penalties, as determined under this
Section, is the aggregate amount of liability allocated to
CFI and any CFI Affiliate.
Section 3.06. Other Tax Returns of Holdings.
(a) Holdings shall prepare and file, or cause to be
prepared and filed, all appropriate Tax Returns or other
filings relating to Taxes other than federal income taxes
("Other Taxes") imposed on any member of the Holdings Group
or the Holdings Businesses except for returns and filings
with respect to Combined Jurisdictions.
(b) For any Combined Jurisdictions, CFI or a CFI
Affiliate, as appropriate, shall be responsible for the
preparation and filing of all returns and filings relating
to any Other Taxes imposed upon any member of the Holdings
Group for the same taxable periods with respect to which CFI
is responsible for filing federal income tax returns under
Section 2.02. For this purpose, Holdings (or the appropriate
Holdings Affiliate) shall provide CFI (or the appropriate
CFI Affiliate) such schedules and additional information
requested by CFI for any period for which such Tax Return
has not been filed as of the date hereof by the later of (i)
15 days after such request or (ii) 60 days prior to the date
on which such Tax Return shall be due. Unless required by
law, as reasonably determined by CFI, CFI shall file such
Tax Return consistent with such schedules and additional
information provided by Holdings or Holdings Affiliates. CFI
shall deliver to Holdings copies of relevant portions of
each Tax Return no later than 60 days after the day that
such Tax Return is filed. Unless required by law, as
reasonably determined by CFI, CFI shall not amend any such
Tax Return to reflect any change in information provided by
Holdings Businesses without the written consent of Holdings.
(c) CFI hereby acknowledges that all Other Taxes have
been paid with respect to Tax Returns that have been filed
(in any Combined Jurisdiction in which unitary or nexus
consolidation principles have been agreed upon by CFI and
Holdings or a Holdings Affiliate) on or before the
Distribution Date. Liability for payment of all Other Taxes
imposed by any Combined Jurisdiction shall be allocated
between the CFI Group and the Holdings Group. The allocation
shall be made in such manner as CFI shall reasonably deem
appropriate; provided, however, that the liability of the
Holdings Group shall not exceed the greater of (i) the total
amount that the Holdings Group would have paid if the
members of the Holdings Group filed their own return for
Other Taxes not combined with any other member of the CFI
Group, or (ii) a pro rata share of the combined liability of
the members of the Holdings Group and the CFI Group. CFI
shall be liable for the Other Taxes remaining after payment
of the Holdings Group's allocable share of the Other Taxes.
(d) To the extent there is an Other Tax liability, but
the Holdings Group has a net aggregate loss in a Combined
Jurisdiction, the Holdings Group shall be entitled to the
benefit of the net aggregate loss, to the extent reasonably
determined by CFI, except limited (i) to the extent of its
nexus within the state, and (ii) to the extent such benefit
is eliminated or reduced by the fact that Holding Group's
inclusion in the Combined Jurisdiction increases the
liability of the combined group.
(e) To the extent that a refund is obtained by CFI
Businesses or Holdings Businesses and such refund relates to
Other Taxes in Combined Jurisdictions, Holdings or a
Holdings Affiliate shall be entitled to receive its
proportionate share of such refunds as determined by CFI (or
a member of the CFI Group, as appropriate), in accordance
with the principles of Section 3.06(c) or (d).
(f) CFI and Holdings shall be responsible for the filing
of their respective Tax Returns for (i) non-Combined
Jurisdictions, and (ii) jurisdictions outside the United
States that are due with respect to all taxable periods and
for the payment of all Taxes due or payable in connection
therewith.
(g) If as a result of any audit, amendment or other
change in a Combined Jurisdiction Tax Return as filed by CFI
or a CFI Affiliate with respect to any taxable period ending
before or including the Distribution Date, there is an
additional amount of Taxes due and payable, or a refund of
Taxes previously paid (whether by payment, credit, offset
against other Taxes due or otherwise), any such deficiency
shall be paid by, and any such refund shall be payable to,
CFI or the CFI Affiliate. Holdings shall pay to CFI any
Taxes incurred as a result of any audit, amendment or other
change in a Combined Jurisdiction Tax Return with respect to
any taxable period ending before or including the
Distribution Date in a manner consistent with the provisions
outlined in Section 3.06(c) and (d). CFI or a CFI Affiliate
shall pay to Holdings the amount of any refund of Other
Taxes received (including by offset against Other Taxes due)
as a result of any audit, amendment or other change to a Tax
Return attributable to the Holdings Businesses with respect
to any taxable period ending before or including the
Distribution Date in a manner consistent with the provisions
outlined in Section 3.06(e).
(h) Notwithstanding the provisions of Section 3.06(g),
if Holdings or a Holdings Affiliate wishes to make advance
payment of, or enter into a cash bond with respect to, any
Taxes for which it would bear the burden under this
Agreement prior to the date that payment of such Taxes is
required by the relevant Taxing Authority, CFI shall permit
Holdings to make such advance payment or enter into such
cash bond and shall take such reasonable actions as may be
necessary to effectuate the same.
Section 3.07. Restructuring Taxes.
(a) Notwithstanding any other provision of this
Agreement to the contrary, Holdings shall pay and shall
indemnify and hold harmless CFI from and against any and all
Restructuring Taxes and from and against any costs
whatsoever connected with such taxes, including, but not
limited to, fees, interest, penalties and reasonable
attorney's fees to the extent any portion of such
Restructuring Taxes would not have resulted: (i) but for a
Ruling Misrepresentation or Omission (as defined in Section
3.07(b)); or (ii) but for the fact that, within three (3)
years after the Distribution Date, either Holdings or any
member of the Holdings Group has (A) made a material
disposition outside the Holdings Group by means of a sale or
exchange of assets or capital stock (except (x) the issuance
by Holdings of its own stock in an amount which does not
exceed 10% of Holding's issued and outstanding stock
immediately following the Distribution Date and (y)
dispositions, if any, disclosed in the Ruling Request), (B)
made a distribution to its stockholders or otherwise of any
assets of the Holdings Group (other than dividends paid in
the ordinary course of business), (C) made any repurchase of
any Holdings Group capital stock (excluding repurchases in
connection with employee benefit plans which comply with
Revenue Procedure 91-63), (D) has voluntary ceased to engage
in the active conduct of a trade or business within the
meaning of section 355(b)(2) of the Code, or (E) Holdings
has liquidated or merged with any other corporation
(including a member of the Holdings Group) unless, prior to
each of cases (A), (B), (C), (D) and (E), Holdings has
received an opinion of counsel to the Holdings Group (which
opinion shall be reasonably satisfactory to CFI) or a
favorable supplemental IRS ruling letter satisfactory to
CFI, that such act would not adversely affect the tax
consequences of the Distribution to CFI or the shareholders
of CFI, as set forth in any ruling issued by the IRS or in
any opinion of counsel to CFI obtained in lieu of such a
ruling.
(b) For purposes of paragraph (a), a "Ruling
Misrepresentation or Omission" means with respect to
Holdings or a Holdings Affiliate (i) the failure of Holdings
or a member of the Holdings Group to comply in all material
respects with each written representation and statement
regarding Holdings or a Holdings Affiliate made to the IRS
in the Ruling Request or in a certificate provided to
counsel to the CFI Group for use in preparing its tax
opinion with respect to the Distribution, or (ii) any untrue
statement or alleged untrue statement of a material fact
contained in the Ruling Request (or certificate provided to
counsel) or the omission to state in the Ruling Request (or
certificate provided to counsel) a material fact required to
be stated therein or necessary to make the statements
therein not misleading, but only, in the case of both clause
(i) and (ii), insofar as any such statement or omission was
made in reliance upon, and in conformity with, written
information furnished by Holdings a Holdings Affiliate, or a
Representative of either specifically for use in the
preparation of the Ruling Request (or certificate provided
to counsel).
Section 3.08. Manner of Payment.
(a) Any payment required to be made pursuant to Sections
3.04, 3.05, 3.06, 3.07 or Section 3.10 with respect to any
Tax Return shall be made by wire transfer by the party
obligated to make such payment (i) in the case of a refund
of Tax, within 10 days after receipt (whether by way of
payment, credit, or offset against any payments due or
otherwise) of such refund or (ii) in the case of the payment
of Tax with respect to any such Tax Return, within 10 days
after the later of (x) such payment of Tax or (y) the
delivery of written demand for the payment hereunder to the
party obligated to make such payment hereunder. Any payment
described in clause (i) and any demand for payment described
in clause (ii) shall be accompanied by a calculation
consistent with past Tax Practices setting forth the basis
for the amount paid or demanded. Any payment not made within
the prescribed time period shall thereafter bear interest at
the federal underpayment rate established pursuant to
section 6621(a)(2) (substituting "5 percentage points" for
"3 percentage points" in the case any demand for payment
described in clause (ii) in an amount exceeding $100,000).
(b) Notwithstanding the foregoing, in the case of
payments due from Holdings as a result of any IRS audit
adjustments which result in a deferred tax asset for
Holdings for taxable years following the Distribution Date,
at Holdings' request CFI shall enter into a note agreement
on reasonable commercial terms permitting Holdings to make
installment payments of the amounts due hereunder over a
period not longer than the lesser of (i) 4 years, or (ii)
the period over which such deferred tax asset is amortized
by Holdings.
Section 3.09. Liability for Taxes with Respect to Post-
Distribution Taxable Periods. Unless otherwise provided in
this Agreement, the CFI Group and the Holdings Group
severally shall pay all Taxes and shall be entitled to
receive and retain all refunds of Taxes with respect to
taxable periods beginning after the Distribution Date which
are attributable to the CFI Businesses and the Holdings
Businesses, respectively.
Section 3.10. Carrybacks and Carryforwards.
(a) In the event that Holdings, any Holdings Affiliate
or the Holdings Group incurs a loss or realizes a tax
credit in a Tax Return filed for periods after the
Distribution Date, loss or tax credit will not be carried
back to any Consolidated Group Tax Return without the
specific consent of CFI. CFI need consent only if the
carryback of such loss or credit to the Consolidated Group
return will cause no detriment to CFI's tax position. In
determining whether a carryback is likely to cause a
detriment to its tax position, CFI may take into account
audit risks resulting from claiming a carryback. If CFI
agrees to carryback such loss or credit, or is required by
law to carryback such loss or credit, Holdings shall be
entitled to its allocable share of any refund of Tax
obtained by the Consolidated Group (or any member of the
Consolidated Group in a Combined Jurisdiction) as a result
of the carryback of losses or credits of any member of the
Holdings Group from any taxable period beginning after the
Distribution Date to any taxable period ending before or
including the Distribution Date. Such refund is limited to
the net amount received by CFI (by refund, offset against
other Taxes or otherwise), net of any net Tax cost incurred
by CFI or a CFI Affiliate, which would include the reduction
of minimum tax credits previously utilized by CFI, resulting
from such refund, and shall be paid in the manner and at the
time specified in Section 3.08. In determining the net
amount received by CFI as a result of a carryback of losses
or tax credits by Holdings or a Holdings Affiliate, amounts
carried back by Holdings or a Holdings Affiliate shall be
considered to reduce the Consolidated Group's tax burden
only to the extent that such carrybacks reduce the
Consolidated Group's tax burden after first taking into
account all other tax credits and carrybacks available to
the Consolidated Group. Holdings shall indemnify CFI for any
interest, fines and penalties resulting from the carryback
of any item under this paragraph. Notwithstanding this
Section 3.10, Holdings and any member of the Holdings Group
shall have the right, in its sole discretion, to make the
election under section 172(b)(3) of the Code, which would
eliminate or limit the carryback of any loss or credit of
the Holdings Group to any taxable period ending before or
including the Distribution Date.
(b) If CFI has a carryback of losses or credits from any
member of the CFI Group from any taxable period beginning
after the Distribution Date to any taxable period ending
before or including the Distribution, CFI shall be entitled
to any refund received from the Taxing Authority
attributable to the carryback. To the extent such refund is
reduced as a result of the inclusion of the Holdings Group
in the Tax Return to which the item is carried back and
results in additional minimum tax credits or other credits
being made available to the Holdings Group, Holdings shall
pay to CFI the amount of any tax savings when and if the
additional benefits are realized by Holdings.
(c) Within 180 days following the close of the CFI tax
year in which the Distribution Date occurs, CFI shall
provide a schedule of the relevant carryforward items
allocable to Holdings for tax years following the
Distribution Date. CFI shall indemnify Holdings for any
interest, fines or penalties resulting from the
overstatement of the carryforward items or CFI shall
reimburse Holdings for any Tax benefits (including interest
at the rate specified in Section 3.08) foregone by Holdings
as a result of the understatement of the carryforward items.
Notwithstanding the foregoing, CFI shall not be required to
so indemnify or reimburse Holdings (i) with respect to any
overstated allocation of alternative minimum tax credits
made by CFI on a good faith basis, or (ii) to the extent the
overstatement or understatement of any carryforward items
other than alternative minimum tax credits results (x) from
a change in law or regulation (including the retroactive
effectiveness of any such law or regulation), (y) from an
audit or other adjustments to the Tax Returns as filed, or
(z) from incorrect information supplied by Holdings.
ARTICLE IV
COOPERATION AND EXCHANGE OF INFORMATION
Section 4.01. Cooperation.
(a) CFI and Holdings shall cooperate (and shall cause
any member of their group to cooperate) fully at such time
and to the extent reasonably requested by the other party in
connection with the preparation and filing of any return or
the conduct of any audit, dispute, proceeding suit or action
concerning any issues or any other matter contemplated
hereunder. Such cooperation shall include, without
limitation, (i) the retention and provision on demand of
books, records, documentation or other information relating
to any Tax Return until the later of (x) the expiration of
the applicable federal or state statute of limitation
(giving effect to any extension, waiver, or mitigation
thereof) and (y) in the event any claim has been made under
this Agreement for which such information is relevant, until
a Final Determination with respect to such claim; (ii) the
provision of additional information with respect to and
explanation of Tax Practices and material provided under
clause (i) of this section; (iii) the execution of any
document that may be necessary or reasonably helpful in
connection with the filing of any Tax Return by any member
of the CFI Group or the Holdings Group, or in connection
with any audit, proceeding, suit or action addressed in the
preceding sentence; and (iv) the use of the parties'
reasonable best efforts to obtain any documentation from a
governmental authority or third party that may be necessary
or helpful in connection with the foregoing. Each party
shall make its employees and facilities available on a
mutually convenient basis to facilitate such cooperation.
(b) CFI and Holdings shall use reasonable efforts to
keep each other advised as to the status of Tax audits and
litigation involving any items reportable on a consolidated
federal income Tax Return or a combined Tax Return with
respect to the Holdings Businesses for pre-Distribution
periods and which (i) give rise to a Tax which could be
assessed against Holdings (or any Affiliate thereof) or (ii)
could give rise to a liability of Holdings (or any Affiliate
thereof) under this Agreement (either of which constitutes a
"Liability Issue"). The primary person for dealing with the
Holdings Liability Issues in Tax audits shall be a Holdings
Representative. CFI and Holdings shall promptly furnish each
other copies of any inquiries or requests for information
from any Taxing Authority or any other administrative,
judicial or other governmental authority concerning any
Liability Issue. CFI shall notify Holdings as to which
inquiries or information requests it desires to monitor and,
with respect to such matters, Holdings will submit for CFI
approval (which shall not be unreasonably withheld) the
information to be provided to a Taxing Authority or any
governmental authority in response to the inquiries or
requests. Holdings agrees to timely notify CFI regarding any
proposed written communication (i.e., communications not
related to inquiries or requests for information) by
Holdings or a Holdings Affiliate to any such Taxing
Authority or other governmental authority with respect to
such Liability Issue and CFI shall subsequently notify
Holdings as to which Liability Issues CFI desires to
monitor. Upon request by CFI, Holdings shall provide copies
of such written communications and documents to be submitted
therewith and receive approval from CFI to submit such
communications (which approval shall not be unreasonably
withheld and shall be given on a timely basis) prior to
submission to the Taxing Authority or other governmental
authority. CFI shall have the right to consult with Holdings
regarding any responses attributable to such requests. CFI
shall indemnify Holdings for any costs which would not have
been incurred, but for CFI's failure to grant approval to
Holdings to submit information for which CFI's approval is
required by this section; provided, however, this
indemnification shall not apply to CFI actions or decisions
made pursuant to Section 2.02(b). Furthermore, CFI and
Holdings, as the case may be, shall each promptly furnish to
the other upon receipt a copy of information document
requests, a notice of proposed adjustment, revenue agent's
report or similar report or notice of deficiency together
with all relevant documents and memos related to the
foregoing documents, notices or reports, received by any
member of the CFI Group or any member of the Holdings Group,
as the case may be, relating to any Liability Issue.
(c) CFI shall advise Holdings with respect to items
reported in a revenue agent's report and provide periodic
updates, as necessary, as to the resolution of any such
items relating to the Consolidated Group that may affect any
member of the Holdings Group after the Distribution Date.
(d) Holdings shall promptly notify CFI of any inquiries
by any Taxing Authority or other administrative, judicial or
other governmental authority that relates to any Other Taxes
that may be imposed on CFI or a CFI Affiliate.
Section 4.02. Contest Provisions.
(a) Subject to the cooperation provisions of Section
4.01, CFI shall have full responsibility for and discretion
in handling any Tax controversy, including, without
limitation, an audit, technical advice request, arbitration
or dispute resolution procedure, protest to the Appeals
Division of the IRS, and litigation in Tax Court or any
other court of competent jurisdiction (a "Tax Controversy"),
involving a Tax Return of the Consolidated Group or a Tax
Return for a Combined Jurisdiction. However, upon request by
Holdings, and subject to CFI approval (which may not be
unreasonably withheld) and the cooperation provisions of
Section 4.01, Holdings shall have full responsibility and
discretion in the handling, at Holdings' expense of any Tax
Controversy with respect to any item reported on a Holdings
or Holdings Affiliate Tax Return that would give rise to a
payment of Tax for which Holdings would be liable, or a
refund of Tax for which Holdings would be entitled to
receive payment, under Article III hereof. If CFI approval
is not granted to Holdings for the handling of a Tax
Controversy item, CFI shall provide Holdings with a timely
written response which sets out the reasons for not granting
the approval. Furthermore, CFI shall be subject to the
cooperation provisions of Section 4.01 and shall allow
Holdings, at Holdings' expense, the right to consult with
CFI with respect to such Tax Controversy.
(b) In addition to the cooperation and contest
provisions of Section 4.01 and Section 4.02(a), in the event
that a notice of deficiency is received by CFI from any
Taxing Authority and such notice relates in whole or in part
to Restructuring Taxes for which Holdings would be liable to
CFI pursuant to Section 3.06 hereof (the "Holdings
Restructuring Issue") then --
(1) CFI, upon receiving written request from Holdings,
which shall be given no later than a date reasonably
necessary to permit preparation and timely filing of
a petition in the Tax Court for redetermination of
the deficiency, shall timely file such petition at
Holdings' expense; provided, however, that upon the
request of Holdings, CFI shall, at Holdings'
expense: (A) pay the amount of the deficiency
(provided that Holdings has loaned to CFI no later
than three (3) business days before CFI pays such
deficiency, without interest and until a Final
Determination of the Holdings Restructuring Issue,
100 percent of the amount of the portion of the
deficiency relating to the Holdings Restructuring
Issue; (B) file a claim for refund of such Tax; and
(C) if the claim is denied, bring an action in a
court of competent jurisdiction seeking the refund
of such Tax; and
(2) In the event that a judgment of the Tax Court or
other court of competent jurisdiction results in an
adverse determination with respect to the Holdings
Restructuring Issue and CFI notifies Holdings that
it does not intend to appeal such Holdings
Restructuring Issue, then Holdings shall have the
right to cause CFI to appeal such adverse
determination at Holdings' expense.
(3) Holdings and its Representatives, at Holding's
expense, shall be entitled to participate in all
conferences, meetings, or proceedings with any Tax
Authority, the subject matter of which is or
includes the Holdings Restructuring Issue. Holdings
and its Representatives, at Holding's expense, shall
be entitled to participate in all appearances before
any court, the subject matter of which includes the
Holdings Restructuring Issue.
(4) All actions taken under this Section 4.02(b) at
Holding's request or direction shall be at Holdings'
expense.
(5) The right to participate referred to in Section
4.02(b)(3) hereof shall include the submission and
content of documentation, protests, memoranda of
fact and law and briefs, the conduct of oral
arguments or presentations, the selection of
witnesses, and the negotiations of stipulations of
fact with respect to the Holdings Restructuring
Issue.
(6) Within five (5) business days of the receipt by CFI
of a refund of any amounts loaned to it by Holdings
under paragraph (b)(1) above (including any interest
received by CFI), CFI shall pay such refunded amount
and interest, if any to Holdings net of any net Tax
detriment (as determined by CFI) incurred by CFI or
a CFI Affiliate resulting from such refund.
Section 4.03. Information for Shareholders. CFI shall
provide each shareholder which receives Holdings stock
pursuant to the Distribution with the information necessary
for each such shareholder to comply with the requirements of
section 355 of the Code and the Treasury Regulations with
respect to statements that such shareholders must file with
their federal income tax returns demonstrating the
applicability of section 355 to the Distribution.
ARTICLE V
MISCELLANEOUS
Section 5.01. Tax Indemnification.
(a) Holdings shall indemnify and hold harmless CFI and
each CFI Affiliate from and against any liability, cost or
expense, including, without limitation, any fine, penalty,
interest, charge, attorney's fee or accountant's fee arising
out of fraudulent or negligent information, workpapers,
documents and other items prepared by Holdings or a Holdings
Affiliate used in the preparation of any Tax Return filed by
CFI and/or the Consolidated Group for any period during
which Holdings or a Holdings Affiliate was or has been a
member of the Consolidated Group.
(b) Except as set forth in Section 5.01(a), CFI shall
indemnify and hold harmless Holdings and each Holdings
Affiliate from and against any liability, cost or expense,
including, without limitation, any fine, penalty, interest,
charge, attorney's fee or accountant's fee arising out of
fraudulent or negligent preparation of any Tax Return filed
by CFI and/or the Consolidated Group for any period during
which Holdings or a Holdings Affiliate was or has been a
member of the Consolidated Group.
Section 5.02. Breach. CFI shall indemnify and hold
harmless each member of the Holdings Group and Holdings
shall indemnify and hold harmless each member of the CFI
Group from and against any payment required to be made under
this Agreement as a result of the breach by a member of the
CFI Group or the Holdings Group, as the case may be, of any
obligation under this Agreement.
Section 5.03. Disclaimers.
(a) CFI disclaims all knowledge of or responsibility for
the content or accuracy of any separate returns or filings
made by Holdings or Holdings Affiliates except to the extent
such returns include information provided by CFI pursuant to
Section 3.10(c).
(b) Holdings disclaims all knowledge of or
responsibility for the content or accuracy of any (i)
separate returns or filings made by CFI or CFI Affiliates,
(ii) Tax Returns or filings made by or on behalf of the
Consolidated Group or any member thereof for any period
except to the extent such federal Tax Returns or filings
reflect items of the Holdings Businesses, and (iii) Tax
Returns or filings in Combined Jurisdictions, except to the
extent such Tax Returns or filings reflect items of the
Holdings Businesses.
Section 5.04. Resolution of Certain Disputes.
(a) Disagreements between CFI and Holdings with respect
to amounts that either claims is owed by the other (or by an
Affiliate of the other) under this Agreement or other
matters under this Agreement that are not resolved by mutual
agreement shall be resolved by arbitration pursuant to this
Section 5.04. Until the time of a final resolution by the
arbitrator selected pursuant to Section 5.04(b), the time
period for any payments described in Section 3.08 (other
than loans required by Section 4.02(c)) shall be tolled.
Such tolling, however, shall not affect the accrual of
interest.
(b) Selection of the Arbitrator. Any arbitrator
selected pursuant to this Section 5.04(b) shall have at
least ten years of experience in the field of corporate
taxation, shall be an attorney licensed to practice law in
any state of the United States or a certified public
accountant licensed to practice in any state of the United
States and shall not be or have been routinely employed by,
retained or affiliated with either party. The parties shall
first attempt to agree on a mutually satisfactory
arbitrator. If the parties are unable to agree on a mutually
satisfactory arbitrator within 30 days after either party
notifies the other in writing of a disagreement requiring
arbitration pursuant to this Section 5.04 (15 days in the
case of a disagreement with respect to Section 4.01 or
Section 4.02), each party shall select an arbitrator. The
two arbitrators thus selected shall agree on and select a
third arbitrator. If the two arbitrators cannot agree on
such third arbitrator within 30 days (15 days in the case of
a disagreement with respect to Section 4.01 or Section
4.02), the parties shall each select a different arbitrator
and renew the foregoing procedure. If the position of
arbitrator is vacated by virtue of events outside the
control of the parties, the person or persons who originally
selected the arbitrator to fill such position shall select a
new arbitrator to fill the position, unless the parties
agree to continue the arbitration with the remaining
arbitrators. When used hereafter, the term "arbitrator" may
refer to the three arbitrators so selected when appropriate
and a decision of a majority of such arbitrators shall
constitute a decision by the arbitrator in the appropriate
context.
(c) Arbitration Procedures.
(1) The arbitration shall be conducted in accordance
with the rules set forth in Exhibit A. The
arbitration shall not be conducted under the
auspices of the American Arbitration Association.
(2) Each party within 30 days after engagement of the
arbitrator shall submit to the arbitrator a written
statement of the party's position (including, where
relevant, the total net amount it asserts is owed by
it or is due to it) regarding the total amount in
dispute, together with a copy of such calculation.
(3) The arbitrator shall base his or her decision on the
following standards. In the case of a factual
dispute between the parties, the arbitrator shall
make a determination of the facts. In the case of a
dispute regarding a legal issue, including the
proper application of the Tax laws or the proper
interpretation of this Agreement, the arbitrator
shall make a determination in accordance with his or
her best legal judgment. Upon making determinations
with respect to all factual and legal issues in
dispute, the arbitrator shall determine the amount
due by one party to the other or such other matter
with respect to the matter subject to the
arbitration. Where relevant, as to each matter in
dispute, the arbitrator shall find in favor of the
party whose statement submitted pursuant to
paragraph (2) above proposed the amount closest to
the amount so determined.
(4) The arbitrator shall render a written decision
stating only the result of such decision as soon as
practicable. The arbitrator shall also orally
explain the bases of such decision to both parties
as soon as practicable. If and only if both parties
request, the arbitrator shall state the basis of
such decision in writing. As to each matter in
dispute, the arbitrator's decision shall be in an
amount equal to one of the total amounts asserted by
one of the parties in the written statements
submitted pursuant to paragraph (2) above. The
arbitrator shall not, and is not authorized, to
render a decision in any other amount.
(5) The arbitrator's decision shall be final and binding
on the parties. No appeal to any court is
contemplated by this Agreement and each party, to
the maximum extent permissible by law, waives and
relinquishes all rights and entitlements to appeal
such decision.
Section 5.05. Notices. Any notice, demand, claim or
other communication under this Agreement shall be in writing
and shall be deemed given upon delivery if delivered
personally or by courier, upon mailing if sent by certified
mail, return receipt requested, postage prepaid, or upon
completion of transmission if sent by telecopy or facsimile,
to the parties at the following address:
CFI at: 3240 Hillview Avenue
Palo Alto, CA 94304
Attn: General Counsel
Holdings at:175 Linfield Drive
Menlo Park, CA 94025
Attn: General Counsel
Section 5.06. Complete Agreement. This Agreement and
the Exhibit thereto constitute the entire agreement of the
parties concerning the subject matter hereof, supersede all
other agreements, whether or not written, in respect of any
Tax between or among CFI and CFI Affiliates, on the one
hand, and Holdings and Holdings Affiliates, on the other
hand. This Agreement may not be amended except by an
agreement in writing, signed by the parties hereto.
Section 5.07. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of California, without regard to the principles of
conflict of laws of the State of California.
Section 5.08. Successors and Assigns. A party's rights
and obligations under this Agreement may not be assigned
without the prior written consent of the other party. All of
the provisions of this Agreement shall be binding upon and
inure to the benefit of the parties and their respective
successors and permitted assigns.
Section 5.09. No Third-Party Beneficiaries. This
Agreement is solely for the benefit of the parties to this
Agreement and their respective Affiliates and should not be
deemed to confer upon third parties any remedy, claim,
liability, reimbursement, claim of action or other right in
excess of those existing without the Agreement.
Section 5.10. Legal Enforceability. Any provision of
this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of the prohibition or unenforceability without
invalidating the remaining provisions. Any prohibition or
unenforceability of any provision of this Agreement in any
jurisdiction shall not invalidate or render unenforceable
the provision in any other jurisdiction.
Section 5.11. Expenses. Unless otherwise provided in
this Agreement, each party shall bear any and all expenses
that arise from their respective obligations under this
Agreement (including Arbitration). In the event either party
to this Agreement brings an action or proceeding for breach
or enforcement of this Agreement, the prevailing party in
such action or proceeding, whether or not such action or
proceeding proceeds to final judgment, shall be entitled to
recover as an element of its costs, and not as damages, such
reasonable attorneys' fees as may be awarded in the action
or proceeding in addition to whatever other relief to which
the prevailing party may be entitled.
Section 5.12. Counterparts. This Agreement may be
signed in any number of counterparts, each of which shall be
an original, with the same effect as if the signature
thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have executed and
delivered this Agreement as of the date first above written.
CONSOLIDATED FREIGHTWAYS, INC.
By: /S/Donald E. Moffitt_____________
Its: President and CEO
CONSOLIDATED FREIGHTWAYS CORPORATION
By: /s/Stephen D. Richards__________
Its: S.V.P. and General Counsel
EXHIBIT 10.37
-------------
CNF TRANSPORTATION INC.
EXECUTIVE INCENTIVE PLAN FOR 1997
THE PLAN
In order to motivate certain employees of CNF Transportation Inc.
(CNFT) more effectively and efficiently, The Company (CNFT)
establishes an Incentive Plan (Plan) under which payments will be made
to eligible executive personnel of CNFT out of calendar year 1997
Incentive Profits.
DESIGNATION OF PARTICIPANTS
Participants in this Plan shall be all full-time executive personnel
of CNFT. A master list of all Plan participants will be maintained in
the office of the President of CNFT.
ELIGIBILITY FOR PAYMENT
Participants will commence participation at the beginning of the first
full calendar quarter following becoming eligible. Calendar quarters
begin January 1, April 1, July 1, and October 1 or the first working
day thereafter. An employee who commences participation in the 1997
Plan during the 1997 Plan year, and who participates less than four
full quarters, will receive a pro rata payment based on the number of
full calendar quarters of Plan participation.
Subject to the following exceptions, no person shall receive any
payment under this Plan unless on the date that the payment is
actually made that person is then currently (i) employed by
CNFT and (ii) a Plan participant.
EXCEPTION 1. A Plan participant who is employed by CNFT through
December 31, 1997 but leaves that employment or otherwise becomes
ineligible after December 31, 1997 but before the final payment is
made relating to 1997, unless terminated for cause, shall be
entitled to receive payments under this Plan resulting from 1997
Incentive Profits.
EXCEPTION 2. An appropriate pro rata payment will be made (1) to
a Plan participant who retires prior to December 31, 1997 pursuant
to the CNF Transportation Inc. Retirement Plan or to the
provisions of the Social Security Act and who, at the time of
retirement, was an eligible participant in this Plan, (2) to the
heirs, legatees, administrators or executors of a Plan participant
who dies prior to December 31, 1997 and who, at the time of death,
was an eligible participant in this Plan, (3) to an eligible Plan
participant who is placed on an approved Medical, Sabbatical, or
Military Leave of Absence prior to December 31, 1997, or (4) to an
eligible Plan participant who is transferred to another subsidiary
of CNF Transportation Inc. (CNFT) and who remains an employee
through December 31, 1997.
METHOD OF PAYMENT
Each Plan participant will be assigned an incentive participation
factor as a percent of annual compensation. The Incentive
Participation Factor will be allocated 100% to the assigned profit
goal.
Incentive compensation for the assigned goals will be earned on a pro
rata basis for accomplishments between the Minimum level and the
Incentive Factor Goals and will continue to be earned ratably for
performance over the Incentive Factor Goal.
No incentive will be earned by a participant until the Minimum Profit
Goal is achieved. There is a maximum percent of accomplishment for
any performance goal of 200%.
PERSONAL DATA SHEET
A "Personal Data Sheet" for calculation of incentive earnings will be
prepared for each Plan participant which designates (1) the unit to
which the participant is assigned, (2) his assigned incentive
participation factor, (3) the minimum level of achievement required
for each assigned goal, (4) the incentive factor level of achievement
for each assigned goal, and (5) the incentive earnings at the
incentive factor level for each assigned goal.
DATE OF PAYMENT
The President of CNFT may authorize a partial payment of the estimated
annual earned incentive, in December, 1997. The final payment to
eligible participants, less any previous partial payment, will be made
on or before March 15, 1998.
INCENTIVE PROFIT
Incentive Profit is defined as earnings before deducting any amounts
expensed under any CNFT and qualified CNFS incentive plans and before
deducting income taxes.
ANNUAL COMPENSATION
Annual Compensation for incentive purposes for each Plan participant
is his annualized salary before any incentive or other special
compensation as of the first pay period following the date the
participant becomes eligible to participate in this Plan. The term
"special compensation" used herein does not include deferred salary
arrangements wherein the participant could have chosen to receive the
deferred salary in the Plan year.
MAXIMUM PAYMENT
Payments under this Plan are limited as noted on the "Personal Data
Sheet".
LAWS GOVERNING PAYMENTS
No payment shall be made under this Plan in an amount which is
prohibited by law.
AMENDMENT, SUSPENSION, AND ADMINISTRATION OF PLAN
The Board of Directors of CNFT may at any time amend, suspend, or
terminate the operation of this Plan, by thirty-day written notice to
the Plan participants, and will have full discretion as to the
administration and interpretation of this Plan. No participant in
this Plan shall at any time have any right to receive any payment
under this Plan until such time, if any, as any payment is actually
made.
DURATION OF PLAN
This Plan is for the calendar year 1997 only.
EXHIBIT 10.38
-------------
CNF SERVICE COMPANY
EXECUTIVE INCENTIVE PLAN FOR 1997
THE PLAN
In order to motivate certain employees of CNF Service Company (CNFS)
more effectively and efficiently, The Company (CNFS) establishes an
Incentive Plan (Plan) under which payments will be made to eligible
executive personnel of CNFS out of calendar year 1997 Incentive
Profits.
DESIGNATION OF PARTICIPANTS
Participants in this Plan shall be all full-time executive personnel
of CNFS. A master list of all Plan participants will be maintained in
the office of the President of CNFS.
ELIGIBILITY FOR PAYMENT
Participants will commence participation at the beginning of the first
full calendar quarter following becoming eligible. Calendar quarters
begin January 1, April 1, July 1, and October 1 or the first working
day thereafter. An employee who commences participation in the 1997
Plan during the 1997 Plan year, and who participates less than four
full quarters, will receive a pro rata payment based on the number of
full calendar quarters of Plan participation.
Subject to the following exceptions, no person shall receive any
payment under this Plan unless on the date that the payment is
actually made that person is then currently (i) employed by
CNFS and (ii) a Plan participant.
EXCEPTION 1. A Plan participant who is employed by CNFS through
December 31, 1997 but leaves that employment or otherwise becomes
ineligible after December 31, 1997 but before the final payment is
made relating to 1997, unless terminated for cause, shall be
entitled to receive payments under this Plan resulting from 1997
Incentive Profits.
EXCEPTION 2. An appropriate pro rata payment will be made (1) to
a Plan participant who retires prior to December 31, 1997 pursuant
to the CNF Transportation Inc. Retirement Plan or to the
provisions of the Social Security Act and who, at the time of
retirement, was an eligible participant in this Plan, (2) to the
heirs, legatees, administrators or executors of a Plan participant
who dies prior to December 31, 1997 and who, at the time of death,
was an eligible participant in this Plan, (3) to an eligible Plan
participant who is placed on an approved Medical, Sabbatical, or
Military Leave of Absence prior to December 31, 1997, or (4) to an
eligible Plan participant who is transferred to another subsidiary
of CNF Transportation Inc. (CNFT) and who remains an employee
through December 31, 1997.
METHOD OF PAYMENT
Each Plan participant will be assigned an incentive participation
factor as a percent of annual compensation. The Incentive
Participation Factor will be allocated 100% to the assigned profit
goal.
Incentive compensation for the assigned goals will be earned on a pro
rata basis for accomplishments between the Minimum level and the
Incentive Factor Goals and will continue to be earned ratably for
performance over the Incentive Factor Goal.
No incentive will be earned by a participant until the Minimum Profit
Goal is achieved. There is a maximum percent of accomplishment for
any performance goal of 200%.
PERSONAL DATA SHEET
A "Personal Data Sheet" for calculation of incentive earnings will be
prepared for each Plan participant which designates (1) the unit to
which the participant is assigned, (2) his assigned incentive
participation factor, (3) the minimum level of achievement required
for each assigned goal, (4) the incentive factor level of achievement
for each assigned goal, and (5) the incentive earnings at the
incentive factor level for each assigned goal.
DATE OF PAYMENT
The President of CNFS may authorize a partial payment of the estimated
annual earned incentive, in December, 1997. The final payment to
eligible participants, less any previous partial payment, will be made
on or before March 15, 1998.
INCENTIVE PROFIT
Incentive Profit is defined as earnings before deducting any amounts
expensed under any CNFT and qualified CNFS incentive plans and before
deducting income taxes.
ANNUAL COMPENSATION
Annual Compensation for incentive purposes for each Plan participant
is his annualized salary before any incentive or other special
compensation as of the first pay period following the date the
participant becomes eligible to participate in this Plan. The term
"special compensation" used herein does not include deferred salary
arrangements wherein the participant could have chosen to receive the
deferred salary in the Plan year.
MAXIMUM PAYMENT
Payments under this Plan are limited as noted on the "Personal Data
Sheet".
LAWS GOVERNING PAYMENTS
No payment shall be made under this Plan in an amount which is
prohibited by law.
AMENDMENT, SUSPENSION, AND ADMINISTRATION OF PLAN
The Board of Directors of CNFS may at any time amend, suspend, or
terminate the operation of this Plan, by thirty-day written notice to
the Plan participants, and will have full discretion as to the
administration and interpretation of this Plan. No participant in
this Plan shall at any time have any right to receive any payment
under this Plan until such time, if any, as any payment is actually
made.
DURATION OF PLAN
This Plan is for the calendar year 1997 only.
EXHIBIT 10.39
-------------
CON-WAY TRANSPORTATION SERVICES, INC.
INCENTIVE PLAN FOR 1997
THE PLAN
In order to motivate certain of its employees more effectively and
efficiently, Con-Way Transportation Services, Inc. (CTS) establishes
an Incentive Plan (Plan) under which payments will be made to eligible
supervisory, managerial, and regular full-time nonsalaried personnel
out of calendar year 1997 Incentive Profits.
DESIGNATION OF PARTICIPANTS
Participants in the Plan shall be all full-time supervisory,
managerial, and regular nonsalaried personnel of CTS Administration.
A master list of Plan participants will be maintained in the office of
the President of CTS.
ELIGIBILITY FOR PARTICIPATION
Participants will commence participation at the beginning of the first
full calendar quarter following becoming eligible. Calendar quarters
begin January 1, April 1, July 1, and October 1 or the first working
day thereafter. An employee who commences participation in the 1997
Plan during the 1997 Plan year, and who participates less than four
full quarters, will receive a pro rata payment based on the number of
full calendar quarters of Plan participation.
Subject to the following exceptions, no person shall receive any
payment under this Plan unless on the date that the payment is
actually made that person is then currently (i) employed by CTS or any
of its subsidiaries and (ii) a Plan participant.
EXCEPTION 1. A Plan participant who is employed by CTS or any of
its subsidiaries through December 31, 1997 but leaves that
employment or otherwise becomes ineligible after December 31, 1997
but before the final payment is made relating to 1997, unless
terminated for cause, shall be entitled to receive payments under
this Plan resulting from 1997 Incentive Profits.
EXCEPTION 2. An appropriate pro rata payment will be made (1) to
a Plan participant who retires prior to December 31, 1997 pursuant
to the CNF Transportation Inc. Retirement Plan or to the
provisions of the Social Security Act and who, at the time of
retirement, was an eligible participant in this Plan, (2) to the
heirs, legatees, administrators or executors of a Plan participant
who dies prior to December 31, 1997 and who, at the time of death,
was an eligible participant in this Plan, (3) to an eligible Plan
participant who is placed on an approved Medical, Sabbatical, or
Military Leave of Absence prior to December 31, 1997, or (4) to an
eligible Plan participant who is transferred to another subsidiary
of CNF Transportation Inc. and who remains an employee through
December 31, 1997.
METHOD OF PAYMENT
Each Plan participant will be assigned an incentive participation
factor as a percent of Annual Compensation in accordance with the
enclosed Personal Data Sheet. The incentive participation factor will
be allocated 100% to the assigned profit goal.
Incentive for assigned goals will be earned on a pro rata basis for
accomplishment between the Minimum level and the Incentive Factor
Goal. Incentive earnings over the Incentive Factor Goal will continue
to earn at the same pro rata relationship that exists between minimum
level and factor goal.
No incentive will be earned by a participant until CTS has achieved
its Minimum Profit Goal. The maximum percent of accomplishment for
any goal is 200%.
Actual incentive payout is subject to the CTS ICP pool, thus Incentive
Earnings will be adjusted proportionately to the amount in the pool.
PERSONAL DATA SHEET
A "Personal Data Sheet" for calculation of incentive earnings will be
prepared for each Plan participant which designates (1) the unit to
which the participant is assigned, (2) his assigned incentive par-
ticipation factor, (3) the minimum level of achievement required for
each assigned goal, (4) the incentive factor level of achievement for
each assigned goal, and (5) the incentive earnings at the incentive
factor level for each assigned goal.
DATE OF PAYMENT
The President of CTS may authorize a partial payment of the estimated
annual earned incentive, in December 1997. The final payment to
eligible participants, less any previous partial payment, will be made
on or before March 15, 1998.
INCENTIVE PROFIT
Incentive profit is defined as the consolidated earnings of all of the
companies comprising CTS, before deducting any amounts expensed under
this or any similar incentive or bonus plan and before deducting in-
come taxes and excluding interest income and expense.
ANNUAL COMPENSATION
Annual Compensation for incentive purposes for each Plan participant
is his annualized salary or hourly base pay before any incentive,
overtime, or other special compensation as of the first pay period
following the date the participant becomes eligible to participate in
this Plan.
MAXIMUM PAYMENT
Payments under this Plan are limited as noted on the "Personal Data
Sheet".
LAWS GOVERNING PAYMENTS
No payment shall be made under this Plan in an amount which is
prohibited by law.
AMENDMENT, SUSPENSION, AND ADMINISTRATION OF PLAN
The Board of Directors of CTS may at any time amend, suspend, or
terminate the operation of this Plan, by thirty-day written notice to
the Plan participants, and will have full discretion as to the
administration and interpretation of this Plan. No participant in
this Plan shall at any time have any right to receive any payment
under this Plan until such time, if any, as the payment is actually
made.
DURATION OF PLAN
This Plan is for the calendar year 1997 only.
EXHIBIT 10.40
-------------
EMERY WORLDWIDE
INCENTIVE PLAN FOR 1997
THE PLAN
In order to motivate certain employees more effectively and
efficiently, Emery Worldwide (EWW) establishes an Incentive Plan
(Plan) under which payments will be made to designated participants
out of calendar year 1997 Incentive Profits.
DESIGNATION OF PARTICIPANTS
Participants in the Plan shall be designated supervisory and
managerial personnel of EWW. A master list of Plan participants will
be maintained in the office of the President of EWW.
ELIGIBILITY FOR PARTICIPATION
Participants will commence participation at the beginning of the first
full calendar quarter following becoming eligible. Calendar quarters
begin January 1, April 1, July 1 and October 1 or the first working
day thereafter. An employee who commences participation in the 1997
Plan during the 1997 Plan year, and who participates less than four
full quarters, will receive a pro rata payment based on the number of
full calendar quarters of Plan participation.
Subject to the following exceptions, no person shall receive any
payment under this Plan unless on the date that the payment is
actually made that person is then currently (i) employed by EWW or any
of its subsidiaries and (ii) a Plan participant.
EXCEPTION 1. A Plan participant who is employed by EWW through
December 31, 1997 but leaves that employment or otherwise becomes
ineligible after December 31, 1997 but before the final payment is
made relating to 1997, unless terminated for cause, is entitled to
receive payments under this Plan resulting from 1997 Incentive
Profits.
EXCEPTION 2. An appropriate pro rata payment will be made (1) to
a Plan participant who retires prior to December 31, 1997 pursuant
to the CNF Transportation Inc. Retirement Plan or to the
provisions of the Social Security Act and who, at the time of
retirement, was an eligible participant in this Plan, (ii) to the
heirs, legatees, administrators or executors of a Plan participant
who dies prior to December 31, 1997 and who, at the time of death,
was an eligible participant in this Plan, (iii) to an eligible
Plan participant who is placed on approved Medical, Sabbatical, or
Military Leave of Absence prior to December 31, 1997, or (iv) to
an eligible Plan participant who is transferred to another
subsidiary of CNF Transportation Inc. and who remains an employee
through December 31, 1997.
METHOD OF PAYMENT
Each Plan participant will be assigned an incentive participation
factor as a percent of annual compensation. The President of Emery
will assign each Plan participant to an operating unit (service
center, division, total company, etc.) to earn incentive. The
participation factor may be further indexed to specific performance
goals such as revenue, profit, service, etc.
Incentive compensation will be paid from an ICP
pool earned ratably between the Minimum and Incentive Factor Profit
Goals and will continue to be earned ratably over the Incentive Factor
Goal. Incentive Factor Plan Goals and minimum levels of accomplish-
ment will be established for all performance goals.
No incentive will be earned by a participant until the system Minimum
Profit Goal is achieved. Actual incentive payout is subject to the
ICP pool. Incentive Compensation will be adjusted proportionately to
the amount in the ICP pool, thus actual system incentive payout for
all goals can never surpass the percent of accomplishment for system
profit. Company profit contributions will be paid first and other
participation factors thereafter. There is a maximum percent of
accomplishment for any performance goal of 200%.
PERSONAL DATA SHEET
A "Personal Data Sheet" for calculation of incentive earnings will be
prepared for each Plan participant which designates (1) the unit to
which the participant is assigned, (2) his assigned incentive par-
ticipation factor and the allocation of that factor to specific
Performance Goals, (3) the minimum level of achievement required for
each assigned goal, (4) the incentive factor level of achievement for
each assigned goal, and (5) the incentive earnings at the incentive
factor level for each assigned goal.
DATE OF PAYMENT
The President of EWW may authorize a partial payment of the estimated
annual earned incentive, in December 1997. The final payment to
eligible participants, less any previous partial payment, will be made
on or before March 15, 1998.
INCENTIVE PROFIT
Incentive Profit is defined as the earnings of Emery Worldwide, Emery
Custom Brokers, Emery Ocean Services, Emery Global Logistics, Emery
Expedite and Emery Worldwide Airlines before deducting any amounts
expensed under this or any similar incentive or bonus plan and before
deducting income taxes and excluding interest income and expense.
ANNUAL COMPENSATION
Annual Compensation for incentive purposes for each Plan participant
is his annual earnings for 1997 before any incentive or bonus payments
earned during the period of Plan participation eligibility.
MAXIMUM PAYMENT
Payments under this plan are limited as noted on the "Personal Data
Sheet".
LAWS GOVERNING PAYMENTS
No payment shall be made under this Plan in an amount which is
prohibited by law.
AMENDMENT, SUSPENSION, AND ADMINISTRATION OF PLAN
The Board of Directors of EWW may at any time amend, suspend, or
terminate the operation of this Plan, by thirty-day written notice to
the Plan participants, and will have full discretion as to the
administration and interpretation of this Plan. No participant in
this Plan shall at any time have any right to receive any payment
under this Plan until such time, if any, as any payment is actually
made.
DURATION OF PLAN
This Plan is for the calendar year 1997 only.
EXHIBIT 10.41
-------------
CNF TRANSPORTATION INC.
SPECIAL BONUS PLAN FOR 1997
THE PLAN
In order to motivate certain key employees more effectively,
CNF Transportation Inc. (CNFT) establishes a Special Bonus Plan for
1997 (Plan) under which payments will be made to designated executive
personnel out of calendar year 1997 profits.
DESIGNATION OF PARTICIPANTS
Participants in this Plan shall be designated full-time executive
personnel of CNFT subsidiaries. A master list of all Plan
participants will be maintained in the office of the Chief Financial
Officer of CNFT.
METHOD OF PAYMENT
Each Plan participant will be assigned specific Operating Profit Ratio
(O/R) performance goals.
Compensation for the assigned goals will be earned on a pro rata basis
for accomplishments between the Minimum level and the Target O/R Goal.
No special 1997 bonus will be earned by a participant until the
Minimum O/R Goal is achieved.
Payments under this Plan are limited to 100 percent of each
participant's annual compensation.
OPERATING RATIO
Operating Ratio is defined as: 1) operating expense before taxes,
interest and non-operating expenses, but, including all amounts
expensed under any qualified (Company) incentive and bonus plans;
divided by 2) net revenue. Full year results will be used.
ANNUAL COMPENSATION
Annual Compensation for Bonus Plan purposes for each Plan participant
is annualized salary (ie. weekly base salary as of January 1, 1997
multiplied by 52) excluding any incentive or other special
compensation as of the first pay period following the date the
participant becomes eligible to participate in this Plan. The term
"special compensation" used herein includes deferred salary
arrangements wherein the participant could have chosen to receive the
deferred salary in the Plan year.
PERSONAL DATA SHEET
A "Personal Data Sheet" for calculation of Bonus Plan earnings
will be prepared for each Plan participant which
designates (1) the unit to which the participant is assigned, (2) the
minimum level of achievement required for the assigned O/R goal, (3)
the target level of achievement for the assigned O/R goal, and (4) the
earnings at the target level for the assigned O/R goal.
ELIGIBILITY FOR PAYMENT
Eligible employees will commence participation on January 1, 1997. An
employee who commences participation after the January 1 date will
receive a pro rata payment based on the number of full calendar
quarters of Plan participation.
Subject to the following exceptions, no person shall receive any
payment under this Plan unless on the date that the payment is
actually made that person is then currently (i) employed by
CNF Transportation Inc. or any of its subsidiaries and (ii) a Plan
participant.
EXCEPTION 1. A Plan participant who is employed by CNFT or any of
its subsidiaries through December 31, 1997 but leaves that
employment or otherwise becomes ineligible after December 31, 1997
but before the final payment is made relating to 1997, unless
terminated for cause, shall be entitled to receive payments under
this Plan resulting from 1997 Incentive Profits.
EXCEPTION 2. An appropriate pro rata payment will be made (1) to
a Plan participant who retires prior to December 31, 1997 pursuant
to the CNF Transportation Inc. Retirement Plan or to the
provisions of the Social Security Act and who, at the time of
retirement, was an eligible participant in this Plan, (2) to the
heirs, legatees, administrators or executors of a Plan participant
who dies prior to December 31, 1997 and who, at the time of death,
was an eligible participant in this Plan, (3) to an eligible Plan
participant who is placed on an approved Medical, Sabbatical, or
Military Leave of Absence prior to December 31, 1997, or (4) to an
eligible Plan participant who is transferred to another subsidiary
of CNFT and who remains an employee through December 31, 1997.
DATE OF PAYMENT
The Chief Executive Officer of CNFT will select a date for payment to
eligible participants. Such date will be no later than March 15, 1998.
LAWS GOVERNING PAYMENTS
No payment shall be made under this Plan in an amount which is
prohibited by law.
AMENDMENT, SUSPENSION, AND ADMINISTRATION OF PLAN
The Board of Directors of CNFT may at any time amend, suspend, or
terminate the operation of this Plan, by thirty-day written notice to
the Plan participants, and will have full discretion as to the
administration and interpretation of this Plan. No participant in
this Plan shall at any time have any right to receive any payment
under this Plan until the date for payment.
DURATION OF PLAN
This Plan is effective from January 1, 1997 through December 31, 1997
only.
<TABLE> Exhibit 12
----------
CONSOLIDATED FREIGHTWAYS, INC.
dba CNF TRANSPORTATION INC.
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
<CAPTION>
Year Ended December 31,
1996 1995 1994 1993 1992
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Fixed Charges:
Interest Expense $ 39,766 $ 33,407 $ 27,065 $ 29,890 $ 33,023
Capitalized Interest 2,092 731 793 531 4
Preferred Dividends 12,645 12,419 12,475 12,551 12,618
Total Interest 54,503 46,557 40,333 42,972 45,645
Interest Component of
Rental Expense 48,704 43,202 41,416 34,464 32,219
Fixed Charges 103,207 89,759 81,749 77,436 77,864
Less:
Capitalized Interest 2,092 731 793 531 4
Preferred Dividends 12,645 12,419 12,475 12,551 12,618
Net Fixed Charges $ 88,470 $ 76,609 $ 68,481 $ 64,354 $ 65,242
Earnings:
Income from continuing
operations before Taxes $ 147,132 $ 152,942 $ 165,129 $ 66,202 $ (26,783)
Add: Net Fixed
Charges 88,470 76,609 68,481 64,354 65,242
Total Earnings $ 235,602 $ 229,551 $ 233,610 $ 130,556 $ 38,459
Ratio of Earnings to
Fixed Charges:
Total Earnings $ 235,602 $ 229,551 $ 233,610 $ 130,556 $ 38,459
Fixed Charges (1) 103,207 89,759 81,749 77,436 77,864
Ratio 2.3 x 2.6 x 2.9 x 1.7 x 0.5 x(2)
<FN>
(1) Fixed Charges represent interest on capital leases and short-term and long-term debt, capitalized interest,
dividends on shares of the Series B Cumulative Convertible Preferred Stock used to pay debt service on notes
issued by the Company's Thrift and Stock Plan (the "TASP"), and the applicable portion of the consolidated rent
expense which approximates the interest portion of lease payments.
(2) Earnings were inadequate to cover fixed charges for the period shown; the deficiency was $39.4 million
for the year ended December 31, 1992.
</TABLE>
EXHIBIT 13
----------
PAGE 18
FINANCIAL REVIEW AND MANAGEMENT DISCUSSION
- ----------------------------------------------------------
On December 2, 1996, CNF Transportation Inc. (formerly
Consolidated Freightways, Inc.)(the Company) completed the
tax-free distribution (the Spin-off) to shareholders of all
the outstanding shares of Consolidated Freightways
Corporation (CFC), including its related Canadian
subsidiaries, which have historically been reported in the
CF MotorFreight segment. Accordingly, the accounts and
operations of CFC through the date of the Spin-off are
reported as discontinued operations in the accompanying
consolidated financial statements.
The Company's 1996 operating income from continuing
operations was $192.1 million, representing a 2.9% increase
over the same group of companies in 1995. The increase came
from higher operating income at Con-Way Transportation
Services (CTS) and the Other segment, which consists
primarily of Menlo Logistics. The record-setting operating
income for 1996 was achieved despite additional costs caused
by severe weather conditions at the start of the year and
increased fuel prices. Operating income in 1995 was 1.7%
below 1994 primarily as a result of competitive rate
discounting and expansion costs at CTS.
The Company's revenues from continuing operations in
1996, also a record at $3.66 billion, increased 11.3% over
1995 reflecting increased revenues at all three of the
Company's segments. CTS and Emery overcame a difficult
start for the year caused in part by the severe winter
weather conditions. Menlo Logistics also contributed
revenue growth of more than 25% over 1995. Total Company
revenues in 1995 increased 17.5% over 1994 as CTS, Emery and
Other experienced strong revenue growth from domestic and
international markets as well as new logistics contracts.
CON-WAY TRANSPORTATION SERVICES
CTS revenues for 1996 increased 12.1% over 1995 on a tonnage
increase of 7.8% with less-than-truckload (LTL) tonnage up
5.9%. Revenues for the first quarter of the year were
adversely affected by severe winter weather. Steady
improvements from both the LTL and truckload businesses, and
increased density in newer geographic regions, contributed
to a stronger second half in 1996. Revenues for 1995
increased 13.1% over 1994 with LTL and total tonnage
increases of 6.7% and 6.4%, respectively. The higher
revenue reflected CTS' continued expansion into new
geographic markets and growth in traditional markets of
overnight service and inter-regional business.
Operating income at CTS in 1996 increased 4.6% over
1995. While the first half of the year was affected by
costs of winter storms and higher fuel costs, results
improved steadily in the third and fourth quarters.
Although fuel costs remained high, these increased expenses
were offset by a fuel surcharge passed on to customers.
Concentrated efforts to re-price or replace low-margin
freight also improved operating profits. Operating income in
1995 declined 13.2% from 1994 due to start-up costs and
lower system utilization associated with expansion into new
geographic areas and markets as well as the absence of
benefits received in 1994 during a strike of unionized LTL
carriers.
EMERY WORLDWIDE
Emery's 1996 revenues increased 11.4% over 1995, brought
about by both domestic and international revenue growth.
Domestic tonnage increased 14.7% from the prior year and
international tonnage was up 10.0%. International revenues
in 1996 comprised approximately 40% of Emery's commercial
revenues. Revenues in 1995 increased 12.7% from 1994,
driven by 37.2% growth in international tonnage.
PAGE 19
Operating income was 4.1% lower in 1996 compared with
1995 due to higher fuel costs, a growing share of
international business with generally lower margins and
higher costs of developing information systems. Beginning
November, 1996, Emery began to recoup fuel cost increases
with a fuel index fee. Operating income in 1995 increased
5.3% from 1994, but the operating margin of 4.6% represented
a decline from 5.0% in 1994 due to an increasing share of
international business that yields a lower margin compared
to domestic.
OTHER OPERATIONS
The results of operations of the Other segment consist
primarily of Menlo Logistics and to a lesser extent Road
Systems and VantageParts. These operating results were
previously included as part of the CF MotorFreight segment
which was discontinued with the Spin-off.
Revenues in 1996 increased 8.2% compared to 1995 with
higher revenues coming from the logistics operations,which
were partially offset by lower trailer sales to the
discontinued operations. The 1995 revenues of $371.6
million increased 74.0% from 1994.
Operating income in 1996 of $12.7 million was a 51.4%
increase over 1995, with most of the increase coming from
the logistics operations. The 1995 operating income
increased $7.2 million over 1994, again coming primarily
from the logistics business.
OTHER INCOME (EXPENSE)
Other expense increased 33.4% from 1995 as a result of
interest expense on increased short-term borrowings and
losses from write-offs and sales of non-operating assets.
Other expense in 1995 was 35.8% higher than 1994 due
primarily to interest expense on new short-term borrowings
and a full year's interest on 10-year Notes issued in 1994.
INCOME TAXES
The increased effective tax rate of 45.5% in 1996, compared
to a tax rate of 43.6% in 1995, was attributable to a higher
proportion of foreign taxes and non-deductible items. The
1995 effective income tax rate exceeded the 1994 rate due to
a higher foreign tax rate applied to increased foreign
income.
NET INCOME
Income from continuing operations for 1996 decreased 7.0%
from 1995 as a result of the increase in other expense and
the higher effective tax rate. The 1995 income from
continuing operations was 10.0% below 1994 due primarily to
higher interest expense and lower operating income. Net
income available to common shareholders for 1996 was down
59.3% as it included both a comparatively higher loss of
$36.4 million, net of income tax benefits, from operations
of CFC through the Spin-off date, and $16.2 million of
costs, net of income tax benefits, associated with the Spin-
off. Preferred dividends in 1996 decreased 20.4% from 1995
due to the absence of dividends from the Series C preferred
stock that converted to common stock in March 1995. The
preferred dividends were lower in 1995 compared to 1994 due
to a full year of dividends from the Series C preferred
stock in 1994. Net income available to common shareholders
in 1995 was $46.6 million compared to $35.7 million in 1994.
The 1994 amount included a $5.5 million charge ($1.9 million
related to discontinued operations) for the write-off of
intrastate operating rights.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, the Company had $82.1 million of cash
and cash equivalents. Net cash flow from operations was
$205.8 million compared to $91.1 million in 1995 and was
primarily the result of income
PAGE 20
from continuing operations, depreciation and amortization
and a lesser increase in accounts receivable compared with
1995. In 1996, changes in working capital contributed an
additional $38.1 million.
Capital expenditures for continuing operations were
$200.8 million in 1996, an increase of $33.6 million over
1995. The 1995 capital expenditure level was $17.4 million
over that of 1994. Capital expenditures in 1996, which
consisted primarily of revenue and other equipment, were
financed by cash from operations supplemented by short-term
borrowings. The 1997 capital expenditure requirements are
expected to be financed with cash flows from operations.
The Company increased borrowings under its $350 million
unsecured credit facility to $100 million at year-end 1996
with an additional $55 million borrowed against other open
lines of credit. The 1996 balance of $155 million compared
to total outstanding borrowings under all credit facilities
of $50 million in 1995. The net proceeds from these sources
were used for general corporate purposes and capital
expenditures. At December 31, 1996, after deducting
outstanding letters of credit, the Company had available
$133.1 million under the above credit facilities.
At December 31, 1996, $121.2 million of letters of
credit were issued under the Company's $350 million
unsecured credit facility. In addition, $45.7 million of
letters of credit were issued under several unsecured letter
of credit facilities.
The Company paid $29.9 million of common and preferred
dividends in 1996 compared with $31.3 million in 1995 and
$23.1 million of preferred dividends in 1994. The
variations in dividends are the result of the reinstatement
of quarterly common dividends of $.10 per common share and
conversion of Series C preferred stock both in the first
quarter of 1995. The Company also used $64.9 million of
cash to fund discontinued operations in 1996 compared with
$67.1 million in 1995 and $5.8 million in 1994.
At December 31, 1996, the Company's ratio of long-term
debt obligations (including guarantees) to total capital
(including long-term obligations) was 48.4% compared with
39.9% at year-end 1995. The ratio increase is attributable
to the reduction of equity caused by the Spin-off. The
current ratio was 1.0 to 1 at December 31, 1996 and 1.2 to 1
at December 31, 1995, excluding the net assets of
discontinued operations.
The Company filed a shelf registration statement with
the Securities and Exchange Commission in June 1995 that
covers $150 million of debt and equity securities for future
issuance with terms to be decided at the time of and if
issued.
ENVIRONMENTAL MATTERS
The Company has been designated a Potentially Responsible
Party (PRP) by the U.S. Environmental Protection Agency with
respect to the disposal of hazardous substances at various
sites. However, based upon cost studies performed by
independent parties, management expects the Company's share
of the cleanup costs to be minimal.
PAGE 21
REPORT OF INDEPENDENT PUBLIC ACCOUNTS
To the Shareholders and Board of Directors of
CNF Transportation Inc.
We have audited the accompanying consolidated balance sheets of
CNF Transportation Inc. (a Delaware Corporation) and
subsidiaries as of December 31, 1996 and 1995, and the related
statements of consolidated income, cash flows and shareholders'
equity for each of the three years ended December 31, 1996. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based upon 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
CNF Transportation Inc. and subsidiaries as of December 31,
1996 and 1995, and the results of their operations and their cash
flows for each of the three years in the period ended December 31,
1996 in conformity with generally accepted accounting principles.
/s/Arthur Andersen LLP
San Francisco, California
January 24, 1997
PAGE 22
<TABLE>
CNF TRANSPORTATION INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31
(Dollars in thousands)
<CAPTION>
1996 1995
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 82,094 $ 59,787
Trade accounts receivable, net of allowance (Note 1) 542,381 510,029
Other accounts receivable 49,278 49,387
Operating supplies, at lower of average cost of market 32,916 26,578
Prepaid expenses 31,249 34,182
Deferred income taxes (Note 6) 77,977 58,395
Net current assets of discontinued operations (Note 2) - 33,628
Total Current Assets 815,895 771,986
Property, Plant and Equipment, at Cost
Land 104,314 74,182
Buildings and improvements 265,655 175,840
Revenue equipment 586,720 497,977
Other equipment and leasehold improvements 302,679 232,270
1,259,368 980,269
Accumulated depreciation and amortization (506,719) (405,595)
752,649 574,674
Other Assets
Restricted funds 12,685 11,189
Deposits and other assets 95,144 80,198
Unamortized aircraft maintenance, net (Note 1) 119,927 114,636
Costs in excess of net assets of businesses acquired,
net of accumulated amortization (Note 1) 285,566 306,795
Net non-current assets of discontinued operations (Note 2) - 225,480
513,322 738,298
Total Assets $ 2,081,866 $ 2,084,958
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
PAGE 23
<TABLE>
CNF TRANSPORTATION INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31
(Dollars in thousands)
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY 1996 1995
<S> <C> <C>
Current Liabilities
Accounts payable $ 210,902 $ 176,619
Accrued liabilities (Note 3) 349,497 284,359
Accrued claims costs 87,340 68,688
Current maturities of long-term debt and capital leases
(Notes 4 and 5) 3,185 2,412
Short-term borrowings (Note 4) 155,000 50,000
Federal and other income taxes (Note 6) 9,162 11,589
Total Current Liabilities 815,086 593,667
Long-Term Liabilities
Long-term debt and guarantees (Note 4) 366,305 369,445
Long-term obligations under capital leases (Note 5) 110,896 110,965
Accrued claims costs 57,912 63,372
Employee benefits (Note 8) 115,470 131,035
Other liabilities and deferred credits 75,479 83,807
Deferred income taxes (Note 6) 32,439 10,307
Total Liabilities 1,573,587 1,362,598
Shareholders' Equity (Note 7)
Preferred stock, no par value; authorized 5,000,000 shares:
Series B, 8.5% cumulative, convertible, $.01 stated
value; designated 1,100,000 shares; issued 875,191
and 954,412 shares, respectively 9 10
Additional paid-in capital, preferred stock 133,108 145,156
Deferred compensation (Note 9) (108,655) (114,896)
Total Preferred Shareholders' Equity 24,462 30,270
Common stock, $.625 par value; authorized 100,000,000
shares; issued 51,595,827 and 51,451,490 shares,
respectively 32,247 32,157
Additional paid-in capital, common stock 242,879 239,696
Cumulative translation adjustment 3,279 (2,028)
Retained earnings 378,744 608,399
Cost of repurchased common stock
(7,029,917 and 7,549,174 shares, respectively) (173,332) (186,134)
Total Common Shareholders' Equity 483,817 692,090
Total Shareholders' Equity 508,279 722,360
Total Liabilities and Shareholders' Equity $2,081,866 $2,084,958
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
PAGE 24
<TABLE>
CNF TRANSPORTATION INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
YEARS ENDED DECEMBER 31
(Dollars in thousands except per share data)
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
REVENUES $ 3,662,183 $ 3,290,077 $ 2,799,935
COSTS AND EXPENSES
Operating expenses 2,918,682 2,641,756 2,169,369
Selling and administrative expenses 463,930 391,682 377,032
Depreciation 87,423 69,952 63,557
3,470,035 3,103,390 2,609,958
OPERATING INCOME 192,148 186,687 189,977
OTHER INCOME (EXPENSE)
Investment income 52 85 1,708
Interest expense (39,766) (33,407) (27,065)
Miscellaneous, net (5,302) (423) 509
(45,016) (33,745) (24,848)
Income from continuing operations before income
taxes and extraordinary charge 147,132 152,942 165,129
Income taxes (Note 6) 66,951 66,723 69,304
INCOME FROM CONTINUING OPERATIONS BEFORE
EXTRAORDINARY CHARGE 80,181 86,219 95,825
Losses from discontinued operations, net of income
tax benefits (Note 2) (36,386) (28,854) (37,442)
Loss from discontinuance, net of
income tax benefits (Note 2) (16,247) - -
(52,633) (28,854) (37,442)
Extraordinary charge from write-off of intrastate
operating rights, net of income tax
benefits of $2,827 - - (3,610)
Net income 27,548 57,365 54,773
Preferred stock dividends 8,592 10,799 19,063
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 18,956 $ 46,566 $ 35,710
Primary average shares (Note 1) 45,062,576 44,362,485 44,116,044
Fully diluted average shares (Note 1) 49,833,947 48,723,790 48,441,388
PRIMARY EARNINGS PER SHARE (Note 1)
Income from continuing operations before
extraordinary charge $ 1.59 $ 1.75 $ 1.98
Losses from discontinued operations (0.81) (0.65) (0.85)
Loss from discontinuance (0.36) - -
Extraordinary charge - - (0.08)
Net income $ 0.42 $ 1.10 $ 1.05
FULLY DILUTED EARNINGS PER SHARE (Note 1)
Income from continuing operations before
extraordinary charge $ 1.47 $ 1.63 $ 1.81
Losses from discontinued operations (0.73) (0.59) (0.77)
Loss from discontinuance (0.32) - -
Extraordinary charge - - (0.07)
Net income $ 0.42 $ 1.04 $ 0.97
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
PAGE 25
<TABLE>
CNF TRANSPORTATION INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
YEARS ENDED DECEMBER 31
(Dollars in thousands)
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR $ 59,787 $ 72,595 $ 128,280
Cash Flows from Operating Activities
Net income 27,548 57,365 54,773
Adjustments to reconcile income to net
cash provided by operating activities:
Discontinued operations 52,633 28,854 37,442
Depreciation and amortization 95,746 79,625 72,322
Increase (decrease) in deferred income taxes (6,705) 14,288 16,346
Losses (gains) from property disposals, net (1,577) (145) 1,896
Changes in assets and liabilities:
Receivables (30,006) (114,855) (141,920)
Accounts payable 27,661 9,942 46,234
Accrued liabilities 36,074 1,057 28,136
Accrued claims costs 11,616 9,625 (11,214)
Income taxes 18,040 7,454 12,002
Accrued incentive compensation 9,366 (30,413) 27,074
Employee benefits (14,565) 32,793 20,330
Other (20,004) (4,467) (18,251)
Net Cash Provided by Operating Activities 205,827 91,123 145,170
Cash Flows from Investing Activities
Capital expenditures (200,835) (167,253) (149,808)
Proceeds from sales of property 7,689 5,361 5,383
Net Cash Used by Investing Activities (193,146) (161,892) (144,425)
Cash Flows from Financing Activities
Proceeds from issuance of long-term debt - 98,890 -
Repayment of long-term debt and capital lease
obligations (2,436) (2,537) (39,486)
Net short-term borrowings 105,000 50,000 -
Proceeds from issuance of common stock 1,887 10,460 11,949
Redemption of preferred stock purchase rights - (435) -
Payments of common dividends (17,604) (16,688) -
Payments of preferred dividends (12,288) (14,626) (23,102)
Net Cash Provided (Used) by Financing Activities 74,559 125,064 (50,639)
Net Cash Provided (Used) by Continuing Operations 87,240 54,295 (49,894)
Net Cash Used by Discontinued Operations (64,933) (67,103) (5,791)
Increase (Decrease) in Cash and Cash Equivalents 22,307 (12,808) (55,685)
CASH AND CASH EQUIVALENTS, END OF YEAR $ 82,094 $ 59,787 $ 72,595
Supplemental Disclosure
Cash paid for income taxes $ 32,749 $ 27,400 $ 56,679
Cash paid for interest
(net of amounts capitalized) $ 36,047 $ 22,916 $ 29,354
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
PAGE 26
<TABLE>
CNF TRANSPORTATION INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
(Dollars in thousands)
<CAPTION>
Preferred Stock Series B Preferred Stock Series C Common Stock
Number of Number of Number of
Shares Amount Shares Amount Shares Amount
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1993 968,655 $ 10 690,000 $ 7 43,340,801 $ 27,090
Exercise of stock options including tax
benefits of $2,400 - - - - 614,709 382
Recognition of deferred compensation - - - - - -
Repurchased common stock issued for
conversion of preferred stock (5,907) - - - - -
Net income - - - - - -
Common dividends declared ($.10 per share) - - - - - -
Series B, Preferred dividends ($12.93
per share) net of tax benefits of $4,039 - - - - - -
Series C, Preferred dividends
($15.40 per share) - - - - - -
Translation adjustment - - - - - -
BALANCE, DECEMBER 31, 1994 962,748 10 690,000 7 43,955,510 27,472
Exercise of stock options including tax
benefits of $1,122 - - - - 583,143 364
Conversion of Series C Preferred stock
to Common stock - - (690,000) (7) 6,900,000 4,313
Issuance of restricted stock - - - - 12,837 8
Recognition of deferred compensation - - - - - -
Redemption of preferred stock purchase
rights (Note 7) - - - - - -
Repurchased common stock issued for
conversion of preferred stock (8,336) - - - - -
Net income - - - - - -
Common dividends declared ($.30 per share) - - - - - -
Series B, Preferred dividends ($12.93
per share) net of tax benefits of $3,827 - - - - - -
Series C, Preferred dividends
($3.20 per share) - - - - - -
Translation adjustment - - - - - -
BALANCE, DECEMBER 31, 1995 954,412 10 - - 51,451,490 32,157
Exercise of stock options, including tax
benefits of $1,565 - - - - 138,027 86
Issuance of restricted stock - - - - 6,310 4
Recognition of deferred compensation - - - - - -
Repurchased common stock issued for
conversion of preferred stock (79,221) (1) - - - -
Net income - - - - - -
Common dividends declared ($.40 per share) - - - - - -
Series B, Preferred dividends ($12.93 per
share) net of tax benefits of $3,696 - - - - - -
Distribution of investment in CFC (Note 2) - - - - - -
Translation adjustment - - - - - -
BALANCE, DECEMBER 31, 1996 875,191 $9 - - 51,595,827 $ 32,247
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
PAGE 27
<TABLE>
CNF TRANSPORTATION INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
(Dollars in thousands)
<CAPTION>
Cost of
Additional Cumulative Repurchased
Paid-in Translation Retained Common Deferred
Capital Adjustment Earnings Stock Compensation Total
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1993 $ 369,848 $ 1,229 $ 542,811 $ (188,344) $ (129,276) $ 623,375
Exercise of stock options including tax
benefits of $2,400 11,567 - - - - 11,949
Recognition of deferred compensation - - - - 8,630 8,630
Repurchased common stock issued for
conversion of preferred stock (922) - - 922 - -
Net income - - 54,773 - - 54,773
Common dividends declared ($.10 per share) - - (3,636) - - (3,636)
Series B, Preferred dividends ($12.93
per share) net of tax benefits of $4,039 - - (8,436) - - (8,436)
Series C, Preferred dividends
($15.40 per share) - - (10,627) - - (10,627)
Translation adjustment - (2,399) - - - (2,399)
BALANCE, DECEMBER 31, 1994 380,493 (1,170) 574,885 (187,422) (120,646) 673,629
Exercise of stock options including tax
benefits of $1,122 10,096 - - - - 10,460
Conversion of Series C Preferred stock
to Common stock (4,306) - - - - -
Issuance of restricted stock 292 - - - (300) -
Recognition of deferred compensation - - - - 6,050 6,050
Redemption of preferred stock purchase
rights (Note 7) (435) - - - - (435)
Repurchased common stock issued for
conversion of preferred stock (1,288) - - 1,288 - -
Net income - - 57,365 - - 57,365
Common dividends declared ($.30 per share) - - (13,052) - - (13,052)
Series B, Preferred dividends ($12.93
per share) net of tax benefits of $3,827 - - (8,592) - - (8,592)
Series C, Preferred dividends
($3.20 per share) - - (2,207) - - (2,207)
Translation adjustment - (858) - - - (858)
BALANCE, DECEMBER 31, 1995 384,852 (2,028) 608,399 (186,134) (114,896) 722,360
Exercise of stock options including tax
benefits of $1,565 3,778 - - - - 3,864
Issuance of restricted stock 158 - - - (162) -
Recognition of deferred compensation - - - - 6,403 6,403
Repurchased common stock issued for
conversion of preferred stock (12,801) - - 12,802 - -
Net income - - 27,548 - - 27,548
Common dividends declared ($.40 per share) - - (17,604) - - (17,604)
Series B, Preferred dividends ($12.93 per
share) net of tax benefits of $3,693 - - (8,592) - - (8,592)
Distribution of investment in CFC (Note 2) - 4,571 (231,007) - - (226,436)
Translation adjustment - 736 - - - 736
BALANCE, DECEMBER 31, 1996 $ 375,987 $ 3,279 $ 378,744 $ (173,332) $ (108,655) $ 508,279
</TABLE>
PAGE 28
CNF TRANSPORTATION 1996 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: PRINCIPAL ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation: The
consolidated financial statements include the accounts of CNF
Transportation, Inc. (the Company) and its wholly owned subsidiaries. On
December 2, 1996, the Company (formerly Consolidated Freightways, Inc.)
completed the spin-off of Consolidated Freightways Corporation (CFC) as
described in Note 2. CFC has been reflected as discontinued operations in
the consolidated financial statements and, unless otherwise stated, is
excluded from the accompanying notes.
The continuing operations of the Company encompass three business
segments: Con-Way Transportation Services (CTS), a regional trucking and
full-service truckload company; Emery Worldwide (Emery), an international
air freight company; and Other, which is composed of Menlo Logistics
(Menlo), a full-service contract logistics company; Road Systems, a trailer
manufacturer; and VantageParts, a wholesale distributor of truck parts and
supplies. CTS provides regional one- and two-day LTL freight trucking,
full-service truckload freight delivery utilizing highway over-the-road and
intermodal rail stack train resources for transcontinental, inter-regional
and regional transportation, local and interstate container drayage
throughout the U.S. and international services for Canada and Mexico. Emery
provides expedited and deferred domestic and international air cargo
services through a freight system designed for the movement of parcels and
packages of all sizes and weights, and also provides ocean delivery and
customs brokerage. Menlo, the primary business in the Other segment,
provides full-service contract logistics using advanced management systems
to cost-effectively integrate and simplify complex logistics operations,
including transportation, storage and distribution, shipment tracking and
invoicing.
Recognition of Revenues: Transportation freight charges are
recognized as revenue when freight is received for shipment. The estimated
costs of performing the total transportation service 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 original maturities of three months or less to be cash
equivalents.
Trade Accounts Receivable, Net: Trade accounts receivable are net of
allowances of $18,712,000 and $16,870,000 at December 31, 1996 and 1995,
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, 10 years or
less for aircraft, 5 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, except for
aircraft, are charged to operating expenses as incurred; betterments are
capitalized. Gains (losses) on sales of equipment are recorded in
operating expenses.
The costs to perform required maintenance inspections of engines and
aircraft frames for leased and owned aircraft are capitalized and amortized
to expense over the shorter of the period until the next scheduled
maintenance or the remaining term of the lease agreement. Accordingly, the
Company has recorded unamortized maintenance of $169,035,000 and
$174,233,000 at December 31, 1996 and 1995, respectively. Under the
Company's various aircraft lease agreements, the Company is expected to
return the aircraft with a stipulated number of hours remaining on the
aircraft and engines until the next scheduled maintenance. The Company has
recorded $49,108,000 and $59,597,000 at December 31, 1996 and 1995,
respectively, to accrue for this obligation and any estimated unusable
maintenance at the date of lease return or other disposal. The net amount,
which represents the difference between maintenance performed currently and
that required or
PAGE 29
remaining at the expiration of the lease or other disposal, is
classified as Unamortized Aircraft Maintenance, net, in the
Consolidated Balance Sheets.
Costs in Excess of Net Assets of Businesses Acquired: The costs in
excess of net assets of businesses acquired (goodwill) are capitalized and
amortized on a straight-line basis up to a 40-year period. Impairment is
periodically reviewed based on a comparison of estimated, undiscounted cash
flows from the underlying segment to the related investment. In the event
goodwill is not considered recoverable, an amount equal to the excess of
carrying amount of goodwill less the estimated discounted cashflows from
the segment will be charged against goodwill with a corresponding expense
to the income statement. Based on this review, management does not believe
goodwill is impaired. Accumulated amortization at December 31, 1996 and
1995 was $76,961,000 and $68,413,000, respectively.
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 on trends of losses for filed
claims and claims estimated to be incurred but not filed. The long-term
portion of accrued claims costs relates primarily to workers' compensation
claims which are payable over several years.
Earnings Per Share: Primary earnings per common share are based upon
the weighted average number of common shares outstanding during each period
after consideration of the dilutive effect of stock options. Fully diluted
earnings per share are similarly computed, but include the dilutive effect
of the Company's Thrift and Stock Plan (TASP) shares. The 1995 and 1994
primary and fully diluted computations include the addback of dividends of
$2,207,000 and $10,627,000, respectively, for the conversion of Series C
preferred stock. The 1996, 1995 and 1994 fully diluted computations
include addbacks to earnings of $1,769,000, $1,849,000 and $478,000,
respectively, representing the addback of the Series B preferred stock
dividend net of replacement funding.
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 accompanying financial statements and notes thereto. Actual results
could differ from those estimates.
Reclassification: Certain amounts in prior year's financial statements
have been reclassified to conform to the current year presentation.
NOTE 2: BUSINESS DIVESTITURES
On December 2, 1996, the Company completed a tax-free distribution
(the Spin-off) to the Company's shareholders of all the outstanding shares
of CFC. CFC consists of the Company's former long-haul, LTL segment, CF
MotorFreight, which is composed of CF MotorFreight, a domestic LTL motor
carrier, and its Canadian operations. The Company's shareholders received
one share of CFC common stock for every two shares of The Company's common
stock owned on November 15, 1996.
The accompanying consolidated financial statements have been restated
to report the discontinued operations of CFC separately from continuing
operations of The Company. The December 31, 1996 Consolidated Balance Sheet
reflects a non-cash reduction to Retained Earnings of $231,007,000 and a
($4,571,000) adjustment to Cumulative Translation Adjustment to recognize
the book value of net assets distributed. The Statements of Consolidated
Income include
PAGE 30
the following operating results for the discontinued
operations presented as a single classification, net of tax:
(Dollars in thousands) 1996 1995 1994
Revenues $1,982,544 $2,106,529 $1,936,412
Operating loss (48,942) (42,786) (47,743)
Other income (expense), net 706 717 (5,466)
Loss before income tax benefits (48,236) (42,069) (53,209)
Income tax benefits (11,850) (13,215) (17,679)
Losses from discontinued operations$ (36,386) $ (28,854) $ (37,442)*
* Includes $1,912,000 ($0.04 per share) extraordinary charge, net of
income tax benefits, for write-off of intrastate operating rights.
The Company incurred costs in connection with the Spin-off, including
legal and advisory fees, costs of relocating administrative, data
processing and other operating locations, severance, and other transaction
costs. These costs are reported net of $7.0 million of income tax benefits
in the Statements of Consolidated Income as Loss from Discontinuance in
1996.
The following supplemental summarized balance sheet data represents
the accounts of CFC as spun off on December 2, 1996 and as reported, net,
in the December 31, 1995 balance sheet:
(Dollars in thousands) December 2, 1996 December 31, 1995
Current Assets
Trade accounts receivable, net $300,444 $252,105
Other 157,113 147,080
457,557 399,185
Property, plant and equipment, net 419,931 501,311
Other 11,668 9,764
Total assets of discontinued
operations $889,156 $910,260
Current Liabilities
Accounts payable and
accrued liabilities $284,102 $282,253
Other 88,626 83,304
372,728 365,557
Long-term debt 15,100 15,100
Other long-term liabilities 274,892 270,495
Total liabilities of
discontinued operations $662,720 $651,152
NOTE 3: ACCRUED LIABILITIES
Accrued liabilities consist of the following as of December 31:
1996 1995
(Dollars in thousands)
Other accrued liabilities $130,365 $100,897
Accrued holiday and vacation pay 44,922 35,839
Purchased transportation 43,328 38,713
Accrued taxes other than income taxes 33,826 29,154
Wages and salaries 24,841 22,905
Estimated revenue adjustments 23,912 21,634
Accrued interest 27,224 23,504
Accrued incentive compensation 21,079 11,713
Total accrued liabilities $349,497 $284,359
NOTE 4: DEBT AND GUARANTEES
As of December 31, long-term debt and guarantees consisted of the
following:
(Dollars in thousands) 1996 1995
9 1/8% Notes Due 1999 (interest payable
semi-annually) $117,705 $117,705
7.35% Notes due 2005
(interest payable semi-annually) 100,000 100,000
6.14% Industrial Revenue
Bonds due 2014 4,800 4,800
Other debt 20 290
TASP Notes guaranteed, 8.42% to 9.04%,
due through 2009 146,900 149,000
369,425 371,795
Less current maturities (3,120) (2,350)
Total long-term debt and guarantees $366,305 $369,445
The 9 1/8% notes due in 1999 and the 7.35% notes due in 2005 contain
certain covenants limiting the incurrence of additional liens.
The Company has a $350 million unsecured credit facility to provide
for letter of credit and working capital needs. Borrowings under the
agreement, which expires in 1999, bear interest at a rate (5.97% at
December 31, 1996) based upon select indices plus a margin dependent on the
Company's credit rating. The agreement contains various restrictive
covenants which limit the incurrence
PAGE 31
of additional indebtedness and require the Company to maintain minimum
amounts of net worth and fixed charge coverage. As of December 31, 1996,
the Company had $100.0 million of short-term borrowings and $121.2 million
of letters of credit outstanding under this agreement. In addition, the
Company had $55.0 million of short-term borrowings under other unsecured,
open lines of credit.
Of the $146.9 million TASP Notes, $115.1 million are subject to
redemption at the option of the holders should a certain designated event
occur or ratings by both Moody's and S&P of senior unsecured indebtedness
decline below investment grade. The remaining $31.8 million of the notes
contain financial covenants including a common dividend restriction equal
to $10.0 million plus one-half of the Company's earnings since inception of
the agreement.
The aggregate annual maturities and sinking fund requirements of long-
term debt for each of the next five years ending December 31 are: 1997,
$3,120,000; 1998, $4,200,000; 1999, $122,905,000; 2000, $6,400,000; and
2001, $7,500,000.
In June 1995, the Company filed a shelf registration statement with
the Securities and Exchange Commission covering $150 million of debt and
equity securities for future issuance with terms to be decided at the time
of issuance.
The Company's consolidated interest expense as presented on the
Statements of Consolidated Income is net of interest capitalized of
$2,092,000 in 1996, $731,000 in 1995 and $793,000 in 1994.
NOTE 5: LEASES
The Company and its subsidiaries are obligated under various non-
cancelable leases which expire at various dates through 2014.
The principal capital lease covers a sorting facility in Dayton, Ohio
(the Facility) for a 30-year lease term. The Facility is financed by City
of Dayton, Ohio revenue bonds. Of the total bonds, $46 million bear an
effective rate of 8%, while the remaining $62 million bear rates of
interest between 6.05% and 6.20%. The bonds, due through 2009, have
various call provisions and are secured by the underlying assets of the
lease, a $7 million debt service fund, certain other Emery assets and
irrevocable letters of credit. Included in property, plant and equipment is
$40,847,000 of equipment and leasehold improvements, net, related to the
Facility.
Future minimum lease payments under all leases with initial or
remaining non-cancelable lease terms in excess of one year, at December 31,
1996, are as follows:
Capital Operating
(Dollars in thousands) Leases Leases
Year ending December 31
1997 $ 9,981 $146,113
1998 9,981 113,863
1999 11,261 66,919
2000 11,261 32,824
2001 11,261 16,061
Thereafter 171,849 18,962
Total minimum lease payments 225,594 $394,742
Less amount representing interest (114,633)
Present value of minimum lease
payments 110,961
Less current maturities of obligations
under capital leases (65)
Long-term obligations under capital
leases $110,896
Certain operating leases contain financial covenants equal to or less
restrictive than covenants on debt.
Rental expense for operating leases is comprised of the following:
1996 1995 1994
(Dollars in thousands)
Minimum rentals $178,781 $174,951 $146,055
Less:
Sublease rentals (2,355) (4,505) (1,170)
Amortization of deferred
gains (4,487) (1,785) (1,785)
$171,939 $168,661 $143,100
PAGE 32
NOTE 6: INCOME TAXES
The components of pretax income and income taxes are as follows:
1996 1995 1994
(Dollars in thousands)
Pretax income
U.S. corporations $137,918 $146,042 $161,723
Foreign corporations 9,214 6,900 3,406
Total pretax income $147,132 $152,942 $165,129
Income taxes (benefits)
Current
U.S. federal $ 51,947 $ 36,277 $ 43,355
State and local 6,430 7,979 5,223
Foreign 11,212 8,179 1,178
69,589 52,435 49,756
Deferred
U.S. federal (2,903) 12,147 16,068
State and local 265 2,141 3,480
(2,638) 14,288 19,548
Total income taxes $ 66,951 $ 66,723 $ 69,304
During 1996 and 1995, the Company utilized $29 million and $11 million,
respectively, of net operating loss carryforwards from an acquired
subsidiary to reduce the income tax liability of that subsidiary. The
related tax benefits of approximately $11 million and $5 million,
respectively, were used to reduce costs in excess of net assets of
businesses acquired. The Company has no remaining net operating loss
carryforwards from acquired subsidiaries.
The components of deferred tax assets and liabilities at December 31,
relate to the following:
(Dollars in thousands)
Deferred tax assets 1996 1995
Reserves for accrued claims costs $28,001 $ 26,885
Reserves for post retirement health benefits 35,743 34,782
Other reserves not currently deductible 47,496 33,694
Reserves for employee benefits 42,308 35,482
Alternative minimum tax
credit carryovers 18,065 8,860
171,613 139,703
Deferred tax liabilities
Depreciation 120,440 88,714
Unearned revenue 2,939 1,816
Other 2,696 1,085
126,075 91,615
Net deferred tax asset $ 45,538 $ 48,088
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 Company is currently under examination by the Internal Revenue
Service (IRS) for tax years 1984 through 1990. It is the opinion of
management that any adjustments related to the examination for these years
would not have a material impact on the Company's financial position or
results of operations. In addition, as part of the Spin-off, the Company
and CFC entered into a Tax Sharing Agreement which provides a mechanism for
the allocation of any additional tax liability and related interest that
arise due to adjustments from the IRS for years prior to the Spin-off.
PAGE 33
Income taxes vary from the amounts calculated by applying the U.S.
statutory income tax rate to the pretax income as set forth in the
following reconciliation:
1996 1995 1994
U.S. statutory tax rate 35.0% 35.0% 35.0%
State income taxes (net of
federal income tax benefit) 4.4 5.0 4.4
Foreign taxes in excess of
U.S. statutory rate 5.4 3.8 --
Dividends paid to TASP (0.5) (0.6) (0.5)
Non-deductible operating
expenses 1.8 1.5 1.2
Amortization of costs in excess
of net assets of businesses
acquired 2.2 2.1 2.1
Foreign tax credits, net (3.6) (2.5) (0.5)
Other, net 0.8 (0.7) 0.3
Effective income tax rate 45.5% 43.6% 42.0%
The cumulative undistributed earnings of the Company's foreign
subsidiaries (approximately $14.5 million at December 31, 1996), which if
remitted are subject to withholding tax, have been reinvested indefinitely
in the respective foreign subsidiaries' operations unless it becomes
advantageous for tax or foreign exchange reasons to remit these earnings.
Therefore, no withholding or U.S. taxes have been provided. The amount of
withholding tax that would be payable on remittance of the undistributed
earnings would approximate $1.3 million.
NOTE 7: SHAREHOLDERS' EQUITY
In 1986, the Board of Directors designated a series of 600,000 shares
as Series A Participating Preferred Stock from the Company's 5,000,000
shares of preferred stock, no par value. In November 1995, the Company
redeemed related preferred stock purchase rights.
In 1989, the Board of Directors designated a series of 1,100,000
preferred shares as Series B Cumulative Convertible Preferred Stock, $.01
stated value, which is held by the Consolidated Freightways Thrift and
Stock Plan (TASP). The Series B preferred stock is convertible into common
stock, as described in Note 9, at the rate of 4.71 shares for each share of
preferred stock subject to antidilution adjustments in certain
circumstances. Holders of the Series B preferred stock are entitled to vote
with the common stock and are entitled to a number of votes in such
circumstances equal to the product of (a) 1.3 multiplied by (b) the number
of shares of common stock into which the Series B preferred stock is
convertible on the record date of such vote. Holders of the Series B
preferred stock are also entitled to vote separately as a class on certain
other matters. The TASP trustee is required to vote the allocated shares
based upon instructions from the participants; unallocated shares are voted
in proportion to the voting instructions received from the participants
with allocated shares.
In March 1995, the Company's 6,900,000 depository shares, each
representing one-tenth of a share of Series C Conversion Preferred Stock,
were converted to 6,900,000 shares of the Company's common stock.
NOTE 8: EMPLOYEE BENEFIT PLANS
The Company has a non-contributory defined benefit pension plan (the
Plan) covering non-contractual employees in the United States. The
Company's annual pension provision and contributions are based on an
independent actuarial computation. Although it is the Company's funding
policy to contribute the minimum required tax-deductible contribution for
the year, it may increase its contribution above the minimum if appropriate
to its tax and cash position and the plan's funded status. Benefits under
the Plan are based on a career average final five-year pay formula.
Approximately 86% of the Plan assets are invested in publicly traded stocks
and bonds. The remainder is invested in temporary cash investments, real
estate funds and investment capital funds.
Significant changes to the Plan from the prior year consist mainly of
the transfers of assets and obligations in connection with the Spin-off.
Of the total plan balances, $220.9 million of projected benefit obligation
and $212.3 million of plan assets were transferred to a pension plan of
CFC. The interest costs and expected returns in pension costs reflect the
lower amounts.
PAGE 34
The following sets forth the pension liabilities included in Employee
Benefits in the Consolidated Balance Sheets at December 31:
1996 1995
(Dollars in thousands)
Accumulated benefit obligation, including
vested benefits of $169,714 in 1996 and
$158,813 in 1995 $(187,041) $(176,559)
Effect of projected future compensation
levels (65,049) (64,045)
Projected benefit obligation (252,090) (240,604)
Plan assets at market value 271,669 215,418
Plan assets over (under)
projected benefit obligation 19,579 (25,186)
Unrecognized prior service costs 10,183 8,910
Unrecognized net gain (36,473) (1,909)
Unrecognized net asset at transition (7,905) (6,103)
Plan liability $ (14,616) $ (24,288)
Weighted average discount rate 7.75% 7.25%
Expected long-term rate of return on assets 9.5% 9.5%
Rate of increase in future compensation levels 5.0% 5.0%
Net pension cost includes the following:
1996 1995 1994
(Dollars in thousands)
Cost of benefits earned during
the year $ 22,544 $ 15,651 $ 15,359
Interest cost on projected
benefit obligation 18,214 15,702 19,029
Actual gain arising from
plan assets (36,002) (46,575) (2,726)
Net amortization and deferral 15,449 29,223 (17,472)
Net pension cost $ 20,205 $ 14,001 $ 14,190
The Company's Plan includes programs to provide additional benefits
for compensation excluded from the basic Plan. The annual provision for
these programs is based on independent actuarial computations using
assumptions consistent with the Plan. Obligations in these supplemental
programs up to the Spin-off date for participants now employed by CFC have
been retained by the Company. At December 31, 1996 and 1995, the total
pension liability was $12,480,000 and $12,824,000, respectively, and the
total pension cost was $2,274,000 in 1996, $1,837,000 in 1995 and
$1,880,000 in 1994.
The Company has a retiree health plan that provides benefits to all
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 sets forth the total post retirement benefit liability
included in Employee Benefits in the Consolidated Balance Sheets at
December 31:
(Dollars in thousands) 1996 1995
Accumulated post retirement benefit obligation
Retirees and other inactives $ 38,789 $ 40,645
Participants currently eligible to retire 13,581 15,853
Other active participants 19,334 18,910
71,704 75,408
Unrecognized prior service costs 499 1,814
Unrecognized valuation gain 12,313 5,905
Accrued post retirement benefit cost $ 84,516 $83,127
Weighted average discount rate 7.75% 7.25%
Average health care cost trend rate
First year 9.0% 10.0%
Declining to (year 1999) 6.0% 6.0%
Net periodic post retirement benefit cost includes the following
components:
1996 1995 1994
(Dollars in thousands)
Cost of benefits earned during
the year $2,422 $1,960 $ 2,699
Interest cost on accumulated post
retirement obligation 5,256 5,301 4,794
Net amortization and deferral (131) (719) (410)
Net periodic post retirement benefit cost $7,547 $6,542 $7,083
PAGE 35
The increase in the accumulated post retirement benefit obligation and
the aggregate service and interest cost, given a 1 percent increase in the
health care cost trend rate assumption, would be approximately 12% and 15%,
respectively.
The Company and each of its subsidiaries have adopted various plans
relating to the achievement of specific goals to provide incentive
compensation for designated employees. Total compensation earned by
salaried participants of those plans was $23,210,000, $17,300,000 and
$52,200,000 in 1996, 1995 and 1994, respectively, and by hourly
participants was $12,200,000, $9,100,000 and $29,500,000 in 1996, 1995 and
1994, respectively.
NOTE 9: THRIFT AND STOCK PLAN
The Company sponsors the Consolidated Freightways Thrift and Stock
Plan (TASP), a voluntary defined contribution plan with a leveraged ESOP
feature, for non-contractual U.S. employees. The TASP satisfies the
Company's contribution requirement by matching up to 50% of the first three
percent of a participant's basic compensation. In 1989, the TASP borrowed
$150,000,000 to purchase 986,259 shares of the Company's Series B
Cumulative Convertible Preferred Stock. This stock is only issuable to the
TASP trustee. Company contributions were $8,589,000 in 1996, $7,227,000 in
1995 and $5,366,000 in 1994, primarily in the form of preferred stock.
The Series B Preferred Stock earns a dividend of $12.93 per share and
is used to repay the TASP debt. Any shortfall is paid in cash by the
Company. Dividends on these preferred shares are deductible for income tax
purposes and, accordingly, are reflected net of their tax benefits in the
Statements of Consolidated Income. Allocation of preferred stock to
participants' accounts is based upon the ratio of the current year's
principal and interest payments to the total TASP debt. Since the debt is
guaranteed by the Company, it is reflected in Long-term Debt and Guarantees
in the Consolidated Balance Sheets. The TASP guarantees are reduced as
principal is paid.
Each share of preferred stock is convertible into common stock, upon
an employee ceasing participation in the plan, at a rate generally equal to
that number of shares of common stock that could be purchased for $152.10,
but not less than the minimum conversion rate of 4.71 shares of common
stock for each share of Series B preferred stock.
Deferred compensation expense is recognized as the preferred shares
are allocated to participants and is equivalent to the cost of the
preferred shares allocated and the TASP interest expense for the year,
reduced by the dividends paid to the TASP. During 1996, 1995 and 1994,
$6,250,000, $5,918,000 and $5,780,000, respectively, of deferred
compensation expense was recognized.
At December 31, 1996, the TASP owned 875,191 shares of Series B
preferred stock, of which 163,596 shares have been allocated to employees.
In connection with the Spin-off, 67,222 allocated shares held by CFC
participants were converted to the Company's common stock in December 1996.
At December 31, 1996, the Company has reserved, authorized and unissued
common stock adequate to satisfy the conversion feature of the Series B
preferred stock.
NOTE 10. STOCK OPTION PLANS
Officers and non-employee directors have been granted options under
the Company's stock option plans to purchase common stock of the Company at
prices equal to the market value of the stock on the date of grant.
Outstanding options become fully exercisable one year after date of grant;
any unexercised options expire after 10 years.
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123). Adoption of SFAS 123 is optional, and the
Company does not intend to change its accounting for stock-based
compensation. Had the Company adopted this statement in 1995, pro forma
net income from continuing operations as reported net of preferred
dividends would have been $68.6 million or $1.52 per share and $74.0
million or $1.72 per share for the years 1996 and 1995, respectively.
These pro forma effects of
PAGE 36
applying SFAS 123 are not indicative of future amounts. The weighted
average fair value of options granted in 1996 and 1995 were $8.54
and $8.37 per share, respectively. The following assumptions were
used with the Black-Scholes options pricing model to calculate the
option values: risk-free weighted average rate, 6.7%; option term, 10.0
years; dividend yield, 1.7%; and volatility, 35.0%.
Following is a summary of stock option data:
Number Wgtd Avg
of Exercise
Options Price
Outstanding at December 31, 1993 3,813,599 $17.15
Granted 736,800 22.60
Exercised (614,709) 15.56
Expired or canceled (157,262) 27.78
Outstanding at December 31, 1994 3,778,428 18.02
Granted 647,500 23.61
Exercised (583,143) 16.01
Expired or canceled (84,590) 26.48
Outstanding at December 31, 1995 3,758,195 19.11
Granted 537,500 21.53
Exercised (138,027) 14.30
Expired or canceled (24,319) 27.10
Adjustment for Spin-off 773,139 -
Outstanding at December 31, 1996 4,906,488 $16.46
The following is a summary of the stock options outstanding at
December 31, 1996:
Range of Number of Wgtd Avg Wgtd Avg
Exercise Options Remaining Exercise
Prices Outstanding Life (Years) Price
$9.08-$13.35 2,026,159 5.3 $11.59
$15.99-$19.63 2,219,609 8.0 $19.01
$21.01-$27.66 660,720 5.5 $23.70
Of the options outstanding at December 31, 1996, the following were
the number of options exercisable and the respective weighted average
exercise price for each range indicated: $9.08-$13.35, 2,026,159 options at
$11.59; $15.99-$19.63, 1,694,408 options at $18.97, and $21.01-$27.66,
645,473 options at $23.82.
As a result of the Spin-off, participants in the stock option plan who
are employees of CFC have until March 3, 1997, to exercise approximately
566,000 options with an aggregate value of $9,574,000.
NOTE 11: FINANCIAL INSTRUMENTS
The Company has entered into interest rate swap agreements that expire in
1999. These agreements effectively convert $44 million of variable rate
lease obligations to fixed rate obligations. Interest rate differentials
to be paid or received are recognized over the life of each agreement as
adjustments to operating expense. The Company is exposed to credit loss on
the interest rate swaps in the event of non-performance by counter parties,
but the Company does not anticipate non-performance by any of these counter
parties. The fair values of the interest rate swaps, as presented below,
reflect the estimated amounts that the Company would receive or pay to
terminate the contracts at the reported date.
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments," defines the fair value of a financial
instrument as the amount at which the instrument could be exchanged in a
current transaction between willing parties. The following table presents
the carrying amounts and estimated fair values of the Company's financial
instruments at December 31:
(Dollars in thousands) 1996 1995
Carrying Fair Carrying Fair
Amount Value Amount Value
Payables for
interest swaps $ -- $ 1,351 $ -- $ 2,845
Short-term borrowings 155,000 155,000 50,000 50,000
Long-term debt 369,425 400,000 371,795 408,000
Capital leases $110,961 $119,000 $111,027 $122,000
PAGE 37
NOTE 12: CONTINGENCIES AND OTHER COMMITMENTS
In connection with the Spin-off, the Company agreed to indemnify
certain states, insurance companies and sureties against the failure of CFC
to pay certain worker's compensation and public liability claims that were
pending as of September 30, 1996. In some cases, these indemnities are
supported by letters of credit under which the Company is liable to the
issuing bank and by bonds issued by surety companies. In order to secure
CFC's obligation to reimburse and indemnify the Company against liability
with respect to these claims, CFC has provided the Company with
approximately $30 million of letters of credit and $50 of real property
collateral.
The Company has entered into a Transition Services Agreement to
provide CFC with certain information systems, data processing and other
administrative services and will administer CFC's retirement and benefits
plans. The agreement has a three year term although CFC may terminate any
or all services with six months notice. The Company may terminate all
services other than the telecommunications and data processing services at
any time after the first anniversary of the agreement, with six months
notice. Services performed by the Company under the agreement shall be
paid by CFC on an arm's-length negotiated basis.
The Internal Revenue Service has notified a subsidiary of the Company
of proposed adjustments in aviation transportation excise tax caused by a
difference in methods used to calculate the tax. The Company intends to
vigorously defend against the proposed adjustments. Although the Company
is unable to predict the ultimate outcome, it is the opinion of management
that this action will not have a material impact on the Company's financial
position or results of operations.
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
several hazardous waste sites. Under CERCLA, PRPs are jointly and
severally liable for all site remediation and expenses. After
investigating the Company's involvement at such sites, the Company has
either agreed to de minimis settlements or, based upon cost studies
performed by independent third parties, believes its obligations with
respect to such sites would not have a material adverse effect on the
Company's financial position or results of operations.
The Company and its subsidiaries are defendants in various lawsuits
incidental to their businesses. It is the opinion of management that the
ultimate outcome of these actions will not have a material impact on the
Company's financial position or results of operations.
NOTE 13: INDUSTRY GROUP ANALYSIS AND FOREIGN OPERATIONS
The following analyses are by geographic and industry group. Revenues
and expenses are allocated between the United States and international,
depending on whether the shipments are between locations within the United
States or between locations where one or both are outside the United
States. Operating income is net of general corporate expenses, a portion
of which have been allocated to subsidiaries on a revenue and capital
basis. Intersegment revenues and earnings thereon have been eliminated.
The identifiable assets of the parent consist principally of cash, cash
equivalents and deposits.
GEOGRAPHIC GROUP INFORMATION
(Dollars in thousands)
Consolidated U.S. International
Year Ended December 31, 1996
Revenues $3,662,183 $ 2,898,091 $ 764,092
Operating income 192,148 151,575 40,573
Identifiable assets 2,081,866 2,032,085 49,781
Year Ended December 31, 1995
Revenues $3,290,077 $ 2,601,193 $ 688,884
Operating income 186,687 151,379 35,308
Identifiable assets* 1,825,850 1,787,960 37,890
Year Ended December 31, 1994
Revenues $2,799,935 $ 2,288,308 $ 511,627
Operating income 189,977 163,540 26,437
Identifiable assets* 1,621,110 1,584,660 36,450
* Excludes net assets of discontinued operations.
PAGE 38
<TABLE>
INDUSTRY GROUP INFORMATION
(Dollars in thousands)
<CAPTION> Industry Group
Adjustments, Con-Way
Eliminations and Transportation Emery
Consolidated the Parent Services Worldwide Other
<S>
Year Ended December 31, 1996 <C> <C> <C> <C> <C>
Revenues $3,662,183 $1,292,082 $1,968,058 $402,043
Operating expenses 2,918,682 973,341 1,586,855 358,486
Selling and administrative expenses 463,930 165,291 270,834 27,805
Depreciation 87,423 52,401 31,954 3,068
Operating income 192,148 $ 101,049 $ 78,415 $ 12,684
Other expense (45,016)
Income before income taxes $ 147,132
Capital expenditures $ 200,835 $ 434 $ 146,377 $ 46,939 $ 7,085
Identifiable assets $2,081,866 $ 172,969 $ 687,821 $1,137,631 $ 83,445
Year Ended December 31, 1995
Revenues $3,290,077 $1,152,164 $1,766,301 $371,612
Operating expenses 2,641,756 876,505 1,422,872 342,379
Selling and administrative expenses 391,682 138,329 234,223 19,130
Depreciation 69,952 40,757 27,472 1,723
Operating income 186,687 $ 96,573 $ 81,734 $ 8,380
Other expense (33,745)
Income before income taxes $ 152,942
Capital expenditures $ 167,253 $ (4,242) $ 136,546 $ 32,197 $ 2,752
Identifiable assets* $1,825,850 $ 106,080 $ 562,449 $1,082,507 $ 74,814
Year Ended December 31, 1994
Revenues $2,799,935 $1,018,544 $1,567,854 $213,537
Operating expenses 2,169,369 748,086 1,252,263 169,020
Selling and administrative expenses 377,032 124,719 211,841 40,472
Depreciation 63,557 34,519 26,134 2,904
Operating income 189,977 $ 111,220 $ 77,616 $ 1,141
Other expense (24,848)
Income before income taxes $ 165,129
Capital expenditures $ 149,808 $ (1,514) $ 97,392 $ 48,648 $ 5,282
Identifiable assets* $1,621,110 $ 138,702 $ 424,234 $1,008,012 $ 50,162
<FN>
* Excludes net assets of discontinued operations.
</TABLE>
PAGE 39
<TABLE>
CNF TRANSPORTATION INC. AND SUBSIDIARIES
NOTE 14: Quarterly Financial Data (Unaudited)
(Dollars in thousands except per share data)
<CAPTION>
1996 - QUARTER ENDED March 31 June 30 September 30 December 31
<S> <C> <C> <C> <C>
Revenues $ 847,873 $ 894,336 $ 935,790 $ 984,184
Operating income 35,214 52,657 54,416 49,861
Income from continuing operations
before income taxes 25,683 41,323 42,065 38,061
Income taxes 12,020 17,605 18,766 18,560
Net income from continuing operations 13,663 23,718 23,299 19,501
Loss from discontinued operations
net of tax benefits* (13,383) (10,062) (3,445) (25,743)**
Net income (loss) applicable to common
shareholders (1,854) 11,473 17,713 (8,376)
Per share:
Primary income (loss):
Continuing operations 0.26 0.48 0.47 0.38
Discontinued operations* (0.29) (0.22) (0.07) (0.57)**
Net income (loss) (0.03) 0.26 0.40 (0.19)
Fully diluted income (loss):
Continuing operations 0.24 0.45 0.44 0.35
Discontinued operations* (0.27) (0.21) (0.07) (0.51)**
Net income (loss) (0.03) 0.24 0.37 (0.16)
Market price range $29.38-$21.00 $26.25-$21.13 $24.50-$17.25 $26.00-$21.50
Common dividends paid 0.10 0.10 0.10 0.10
</TABLE>
<TABLE>
<CAPTION>
1995 - QUARTER ENDED
March 31 June 30 September 30 December 31
<S> <C> <C> <C> <C>
Revenues $771,691 $808,983 $830,979 $878,424
Operating income 45,515 47,453 45,151 48,568
Income from continuing operations
before income taxes 38,877 40,210 35,793 38,062
Income taxes 16,865 17,628 15,595 16,635
Net income from continuing operations 22,012 22,582 20,198 21,427
Income (loss) from discontinued
operations net of taxes (benefits)* 2,154 (355) (4,683) (25,970)
Net income (loss) applicable to common
shareholders 19,842 20,086 13,360 (6,722)
Per share:
Primary income (loss):
Continuing operations 0.45 0.46 0.40 0.43
Discontinued operations* 0.05 (0.01) (0.10) (0.58)
Net income (loss) 0.50 0.45 0.30 (0.15)
Fully diluted income (loss):
Continuing operations 0.42 0.43 0.38 0.40
Discontinued operations* 0.04 (0.01) (0.10) (0.53)
Net income (loss) 0.46 0.42 0.28 (0.13)
Market price range $27.00-$20.25 $27.00-$20.63 $26.75-$21.75 $27.88-$22.75
Common dividends paid 0.10 0.10 0.10 0.10
<FN>
* Reflects the results of CFC as described in Note 2 to the consolidated financial statements.
** Includes $16.2 million for loss on discontinuance, net of tax benefits ($0.36 per share
primary and $0.32 per share fully diluted).
</TABLE>
PAGE 40
<TABLE>
CNF Transportation Inc.
Five Year Financial Summary
<CAPTION>
(Dollars in thousands except per share data) 1996 1995 1994 1993 1992
SUMMARY OF OPERATIONS
<S> <C> <C> <C> <C> <C>
Revenues $3,662,183 $3,290,077 $2,799,935 $2,163,631 $1,921,379
Con-Way Transportation Services 1,292,082 1,152,164 1,018,544 818,301 724,195
Emery Worldwide 1,968,058 1,766,301 1,567,854 1,261,273 1,147,204
Other 402,043 371,612 213,537 84,057 49,980
Operating income (loss) 192,148 186,687 189,977 90,754 24,916
Con-Way Transportation Services 101,049 96,573 111,220 71,854 53,747
Emery Worldwide 78,415 81,734 77,616 16,591 (32,651)
Other 12,684 8,380 1,141 2,309 3,820
Investment income 52 85 1,708 5,127 3,726
Interest expense 39,766 33,407 27,065 29,890 33,023
Income (loss) from continuing operations
before income taxes (benefits) 147,132 152,942 165,129 66,202 (26,783)
Income taxes (benefits) 66,951 66,723 69,304 28,736 (6,058)
Income (loss) from continuing operations (a) 71,589 75,420 76,762 18,499 (79,911)(e)
Discontinued operations: (b)
Income (loss) from discontinued operations, net of
income taxes (benefits) (36,386) (28,854) (37,442)(d) 13,108 (17,817)(e)
Loss from discontinuance,
net of income tax benefits (16,247) - - - -
Income (loss) from discontinued operations (52,633) (28,854) (37,442) 13,108 (17,817)
Net Income (loss) applicable to common shareholders 18,956 46,566 35,710 (d) 31,607 (97,728)(e)
PER SHARE
Income (loss) from continuing operations 1.59 1.75 1.90 (d) 0.51 (2.27)(e)
Discontinued operations: (b)
Income (loss) from discontinued operations, net of
income taxes (benefits) (0.81) (0.65) (0.85)(d) 0.36 (0.51)(e)
Loss from discontinuance,
net of tax benefits (0.36) - - - -
Net income (loss) applicable to common shareholders 0.42 1.10 1.05 (d) 0.87 (2.78)(e)
Dividends paid on common stock 0.40 0.40 - - -
Common shareholders' equity 10.86 15.76 14.58 13.65 12.64
STATISTICS
Capital expenditures $200,835 $167,253 $149,808 $151,815 $58,399
Effective income tax rate 45.5% 43.6% 42.0% 43.4% (22.6)%
Primary average shares 45,062,576 44,362,485(c) 44,116,044 36,187,682 35,195,743
Market price range $29.38-$17.25 $27.88-$20.25 $29.25-$18.00 $24.00-$13.63 $19.63-$12.50
Number of shareholders 16,090 15,980 16,015 15,785 15,260
Number of employees 25,100 21,400 18,500 17,000 14,700
<FN>
(a) Includes preferred stock dividends.
(b) Reflects the results of CFC as described in Note 2 to the consolidated financial statements.
(c) Reflects the conversion of Series C Preferred stock to Common stock.
(d) Continuing operations include $3.6 million extraordinary charge ($.08 per share primary and $.07 per share
fully diluted), and discontinued operations $1.9 million ($.04 per share), net of related tax benefits, for the
write-off of intrastate operating rights.
(e) Continuing operations include $39.8 million ($1.13 per share) cumulative effect of change in method of accounting
for post retirement benefits and $2.8 million ($.08 per share) extraordinary charge from early retirement of debt.
Discontinued operations include $30.2 million ($.86 per share) cumulative effect for the accounting change and
$4.5 million ($.13 per share) extraordinary charge from early retirement of debt.
</TABLE>
Page 1
EXHIBIT 21
CONSOLIDATED FREIGHTWAYS, INC.
DBA CNF TRANSPORTATION INC.
SIGNIFICANT SUBSIDIARIES OF THE COMPANY
December 31, 1996
The Company and its significant subsidiaries were:
State or
Percent of Province or
Stock Owned Country of
Parent and Significant Subsidiaries by Company Incorporation
Consolidated Freightways, Inc.
(dba CNF Transportation Inc.) Delaware
Significant Subsidiaries of Consolidated Freightways, Inc.
Con-Way Transportation Services, Inc. 100 Delaware
Con-Way Truckload Services, Inc. 100 Delaware
Emery Air Freight Corporation 100 Delaware
Emery Worldwide Airlines, Inc. 100 Nevada
Menlo Logistics, Inc. 100 California
Road Systems, Inc. 100 California
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 82094
<SECURITIES> 0
<RECEIVABLES> 561093
<ALLOWANCES> (18712)
<INVENTORY> 32916
<CURRENT-ASSETS> 815895
<PP&E> 1259368
<DEPRECIATION> (506719)
<TOTAL-ASSETS> 2081866
<CURRENT-LIABILITIES> 815086
<BONDS> 477201
0
133117
<COMMON> 275126
<OTHER-SE> 100036
<TOTAL-LIABILITY-AND-EQUITY> 2081866
<SALES> 0
<TOTAL-REVENUES> 3662183
<CGS> 0
<TOTAL-COSTS> 3470035
<OTHER-EXPENSES> 45016
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39766
<INCOME-PRETAX> 147132
<INCOME-TAX> 66951
<INCOME-CONTINUING> 80181
<DISCONTINUED> (52633)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18956
<EPS-PRIMARY> 1.59
<EPS-DILUTED> 1.47
</TABLE>
