-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VjhWEhzskD4Zhz9UUil5VBtcO6+sBl+SvpcA7dPZr0BG0LddGmkznyYo4InL9yjd CGOnLPmB/ciDGgjmZBIBoQ== 0001022581-01-500013.txt : 20020410 0001022581-01-500013.hdr.sgml : 20020410 ACCESSION NUMBER: 0001022581-01-500013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONSOLIDATED FREIGHTWAYS CORP CENTRAL INDEX KEY: 0001022581 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 770425334 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12149 FILM NUMBER: 1789239 BUSINESS ADDRESS: STREET 1: 16400 SE CF WAY CITY: VANCOUVER STATE: WA ZIP: 98683 BUSINESS PHONE: 360-448-4000 MAIL ADDRESS: STREET 1: 16400 SE CF WAY CITY: VANCOUVER STATE: WA ZIP: 98683 10-Q 1 q3200110q.txt FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2001 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from N/A to N/A Commission File Number 1-12149 CONSOLIDATED FREIGHTWAYS CORPORATION Incorporated in the State of Delaware I.R.S. Employer Identification No. 77-0425334 16400 S.E. CF Way, Vancouver, WA 98683 Telephone Number (360) 448-4000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No . Number of shares of Common Stock, $.01 par value, outstanding as of October 31, 2001: 22,207,747 CONSOLIDATED FREIGHTWAYS CORPORATION FORM 10-Q Quarter Ended September 30, 2001 ____________________________________________________________________________ ____________________________________________________________________________ INDEX PART I. FINANCIAL INFORMATION Page Item 1. Financial Statements Consolidated Balance Sheets - September 30, 2001 and December 31, 2000 3 Statements of Consolidated Operations - Three and Nine Months Ended September 30, 2001 and 2000 5 Statements of Consolidated Cash Flows - Nine Months Ended September 30, 2001 and 2000 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 Item 3. Quantitative and Qualitative Disclosures About Market Risk 16 PART II. OTHER INFORMATION Item 1. Legal Proceedings 17 Item 6. Exhibits and Reports on Form 8-K 17 SIGNATURES 18 PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements CONSOLIDATED FREIGHTWAYS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS September 30, December 31, 2001 2000 (Dollars in thousands) ASSETS CURRENT ASSETS Cash and cash equivalents $ 31,435 $ 46,523 Trade accounts receivable, net of allowances 363,254 334,155 Other receivables 5,483 8,742 Operating supplies, at lower of average cost or market 7,424 8,419 Prepaid expenses 39,431 41,286 Deferred income taxes 68,033 70,610 Total Current Assets 515,060 509,735 PROPERTY, PLANT AND EQUIPMENT, at cost Land 87,670 81,697 Buildings and improvements 354,904 350,137 Revenue equipment 527,391 518,086 Other equipment and leasehold improvements 155,793 149,123 1,125,758 1,099,043 Accumulated depreciation and amortization (758,304) (750,249) 367,454 348,794 OTHER ASSETS Deposits and other assets 88,030 68,153 88,030 68,153 TOTAL ASSETS $ 970,544 $ 926,682 The accompanying notes are an integral part of these statements. CONSOLIDATED FREIGHTWAYS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS September 30, December 31, 2001 2000 (Dollars in thousands) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 99,053 $ 97,741 Accrued liabilities 212,583 211,043 Accrued claims costs 85,252 86,674 Federal and other income taxes 2,677 -- Short-term borrowings 96,000 -- Total Current Liabilities 495,565 395,458 LONG-TERM LIABILITIES Long-term debt 15,100 15,100 Accrued claims costs 97,080 99,074 Employee benefits 123,285 120,317 Deferred income taxes 9,953 6,282 Other liabilities 44,834 38,267 Total Liabilities 785,817 674,498 SHAREHOLDERS' EQUITY Preferred stock, $.01 par value; authorized 5,000,000 shares; issued none -- -- Common stock, $.01 par value; authorized 50,000,000 shares; issued 23,133,848 shares 231 231 Additional paid-in capital 74,596 75,767 Accumulated other comprehensive loss (14,088) (11,293) Retained earnings 133,266 200,067 Treasury stock, at cost (1,058,937 and 1,436,712 shares, respectively) (9,278) (12,588) Total Shareholders' Equity 184,727 252,184 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 970,544 $ 926,682 The accompanying notes are an integral part of these statements.
CONSOLIDATED FREIGHTWAYS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands except per share amounts) For the Three For the Nine Months Ended Months Ended September 30, September 30, 2001 2000 2001 2000 REVENUES $ 571,947 $ 592,902 $ 1,736,940 $ 1,772,632 COSTS AND EXPENSES Salaries, wages and benefits 381,181 372,923 1,146,796 1,130,554 Operating expenses 113,164 109,279 340,123 336,040 Purchased transportation 56,231 54,010 169,371 149,465 Operating taxes and licenses 17,079 16,932 49,910 53,492 Claims and insurance 15,587 21,490 46,750 57,001 Depreciation 14,776 12,674 41,553 39,596 598,018 587,308 1,794,503 1,766,148 OPERATING INCOME (LOSS) (26,071) 5,594 (57,563) 6,484 OTHER INCOME (EXPENSE) Investment income 167 339 557 1,231 Interest expense (2,334) (1,273) (6,227) (3,580) Miscellaneous, net 236 (95) (77) (4,327) (1,931) (1,029) (5,747) (6,676) Income (loss) before income taxes (28,002) 4,565 (63,310) (192) Income taxes 1,923 3,244 3,491 1,359 NET INCOME (LOSS) $ (29,925) $ 1,321 $ (66,801) $ (1,551) Basic average shares outstanding 22,045,529 21,507,159 21,929,171 21,439,193 Diluted average shares outstanding (a) 22,045,529 21,531,817 21,929,171 21,439,193 Basic Earnings (Loss) per Share: $ (1.36) $ 0.06 $ (3.05) $ (0.07) Diluted Earnings (Loss) per Share: $ (1.36) $ 0.06 $ (3.05) $ (0.07) (a) The three and nine months ended September 30, 2001 do not include 229,093 and 325,445 potentially dilutive stock options, respectively, because to do so would be anti-dilutive. The three months ended September 30, 2000 includes the dilutive effects of stock options. The nine months ended September 30, 2000 does not include 8,219 potentially dilutive stock options, because to do so would be anti-dilutive. The accompanying notes are an integral part of these statements.
CONSOLIDATED FREIGHTWAYS CORPORATION AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS Nine Months Ended September 30, 2001 2000 (Dollars in thousands) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD $ 46,523 $ 49,050 CASH FLOWS FROM OPERATING ACTIVITIES Net loss (66,801) (1,551) Adjustments to reconcile net loss to net cash provided (used) by operating activities: Depreciation and amortization 48,380 44,779 Increase (decrease) in deferred income taxes 6,248 (33,862) Gains from property disposals, net (24,508) (11,849) Issuance of common stock under stock and benefit plans 1,832 1,902 Changes in assets and liabilities Receivables (25,840) 12,635 Prepaid expenses 1,855 1,290 Accounts payable 1,312 (13,446) Accrued liabilities 2,540 21,539 Accrued claims costs (3,416) 2,577 Income taxes 2,677 230 Employee benefits 2,968 1,832 Other 774 5,117 Net Cash Provided (Used) by Operating Activities (51,979) 31,193 CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (69,799) (30,062) Software expenditures (2,451) (5,114) Proceeds from sales of property 12,834 19,536 Acquisition of First Air, net of cash acquired -- (1,176) Net Cash Used by Investing Activities (59,416) (16,816) CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds from (repayments of) short-term borrowings 96,000 (691) Proceeds from exercise of stock options 307 -- Purchase of common stock -- (267) Net Cash Provided (Used) by Financing Activities 96,307 (958) Increase (Decrease) in Cash and Cash Equivalents (15,088) 13,419 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 31,435 $ 62,469 The accompanying notes are an integral part of these statements. CONSOLIDATED FREIGHTWAYS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation The accompanying consolidated financial statements of Consolidated Freightways Corporation and subsidiaries (the Company) have been prepared by the Company, without audit by independent public accountants, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the consolidated financial statements include all normal recurring adjustments necessary to present fairly the information required to be set forth therein. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted from these statements pursuant to such rules and regulations and, accordingly, should be read in conjunction with the consolidated financial statements included in the Company's 2000 Annual Report to Shareholders. Certain amounts in prior year's financial statements have been reclassified to conform to the current year presentation. 2. Segment and Geographic Information The Company primarily provides less-than-truckload transportation, air freight forwarding and supply chain management services throughout the United States and Canada, as well as in Mexico through a joint venture, and international freight services between the United States and more than 80 countries. The Company does not present segment disclosures as the air freight forwarding, supply chain management and international service offerings do not meet the quantitative thresholds of Statement of Financial Accounting Standards No. 131 "Disclosures about Segments of an Enterprise and Related Information." The following information sets forth revenues and property, plant and equipment by geographic location. Revenues are attributed to geographic location based upon the location of the customer. No one customer provides 10% or more of total revenues. Geographic Information (Dollars in thousands) Three Nine Months Ended Months Ended September 30, September 30, 2001 2000 2001 2000 Revenues United States $534,420 $555,917 $1,625,213 $1,663,169 Canada 37,527 36,985 111,727 109,463 Total $571,947 $592,902 $1,736,940 $1,772,632 Geographic Information (continued) As of September 30, 2001 2000 Property, Plant and Equipment United States $334,000 $315,454 Canada 33,454 36,337 Total $367,454 $351,791 3. Comprehensive Income (Loss) Comprehensive income (loss) for the three and nine months ended September 30, 2001 and 2000 is as follows: (Dollars in thousands) Three Nine Months Ended Months Ended September 30, September 30, 2001 2000 2001 2000 Net Income (Loss) $(29,925) $1,321 $(66,801) $(1,551) Other comprehensive income (loss): Foreign currency translation adjustments (1,377) (5) (2,795) (68) Comprehensive Income (Loss) $(31,302) $1,316 $(69,596) $(1,619) 4. Credit Facility On April 27, 2001, the Company entered into a five-year, $200 million credit facility, securitized by accounts receivable, to provide for working capital and letter of credit needs. This facility replaced a $155 million unsecured credit facility. Letters of credit are limited to $100 million and borrowings are limited to an agreed upon availability calculation of eligible accounts receivable. Borrowings bear interest at either the commercial paper rate or LIBOR, plus a margin (125 basis points as of September 30, 2001). The continued availability of funds under the facility requires that the Company comply with certain financial convenants, the most restrictive of which is to maintain a minimum EBITDAL (earnings before interest, taxes, depreciation, amortization and lease expense). Subsequent amendments to the facility provided for more flexible financial covenants, allowing the Company to be in compliance, and increased the margin on borrowings to 250 basis points effective October 24, 2001. Given current economic uncertainties and the Company's operating performance, there can be no assurance that the Company will be in compliance with the covenants at December 31, 2001, nor that the lender will grant additional amendments, if required. As of September 30, 2001, the Company had $96.0 million of short-term borrowings and $73.4 million of letters of credit outstanding. Availability of the remaining $30.6 million of borrowing capacity is dependent on the calculation of eligible accounts receivable. As a condition of a previous amendment, the Company was required to have $50 million of additional financing in place by October 15, 2001. The proceeds were to be applied to outstanding short-term borrowings under the facility. In subsequent negotiations with the lender, the requirement to obtain the $50 million of additional financing was waived. On October 24, 2001, the Company entered into a six-month, $50 million revolving credit facility with the current lender, secured by real property, to provide for short-term working capital needs and other general corporate purposes. Borrowings bear interest at LIBOR plus 350 basis points. Of the $50 million, $25 million was available and was used to reduce outstanding borrowings under the Company's existing credit facility discussed above. Of the availability created under the existing credit facility, $15 million was used for letter of credit needs and $10 million was restricted for existing credit facility needs. The remaining $25 million under the new facility will be available on or after November 30, 2001, provided the Company achieves a minimum required EBITDA (earnings before interest, taxes, depreciation and amortization), as well as minimum load factor and revenue per hundredweight measures. Given current economic uncertainties and the Company's operating performance, it is unlikely that the Company will meet these measures in 2001 and there can be no assurance that the Company will achieve these measures in 2002. Please refer to Management's Discussion and Analysis of Financial Condition and Results of Operations for an update on the Company's liquidity. 5. Income Taxes Deferred tax assets and liabilities in the Consolidated Balance Sheets are classified based upon the related asset or liability creating the deferred tax. Deferred taxes not related to a specific asset or liability are classified based upon the estimated period of reversal. As a result of the domestic losses during the second and third quarters, the Company recorded income tax benefits and related deferred tax assets of $14.1 million and $11.5 million, respectively. However, due to recent cumulative domestic losses, current accounting standards required valuation allowances of $14.1 million and $11.5 million be recorded in the respective quarters. The Company assessed the need for a valuation allowance against the existing $62.7 million net deferred tax asset of its domestic subsidiaries. Through the use of tax planning strategies, involving the sale of certain appreciated assets, the Company has determined that it is more likely than not that the net deferred tax asset as of September 30, 2001 will be realized. As a result, no additional valuation allowance was recorded. Until the cumulative loss is eliminated, the Company will record additional valuation allowance against any tax benefit arising from future losses. The Company will continue to assess the realizability of its deferred tax assets and adjust the valuation allowance as appropriate. 6. Recently Adopted Accounting Standards The Company adopted the provisions of Statement of Financial Accounting Standards No. 133 (SFAS 133) "Accounting for Derivative Instruments and Hedging Activities" effective January 1, 2001. SFAS 133 requires that an organization recognize all derivatives as either assets or liabilities on the balance sheet at fair value and establishes the timing of recognition of the gain/loss based upon the derivative's intended use. Adoption of this standard did not have an impact on the Company's financial position or results of operations. 7. Contingencies There were no significant changes in the Company's commitments and contingencies as previously described in the 2000 Annual Report to Shareholders and related annual report to the Securities and Exchange Commission on Form 10-K, except as discussed below. In October 1997, lawsuits were filed against the Company and its principal operating subsidiary in Riverside County Superior Court of California, claiming invasion of privacy and related tort claims for intentional and negligent infliction of emotional distress and seeking the recovery of punitive, statutory and emotional distress damages in unspecified amounts. Those lawsuits arose out of the use of hidden cameras at a California terminal facility, including restrooms, in order to combat a problem with theft and drugs. There are approximately 500 plaintiffs, mostly unionized employees. Subsequently, the United States District Court for the Central District of California dismissed the lawsuit as to employees on the basis that the claims and issues in question are matters covered by the collective bargaining agreement and subject to the arbitration and grievance procedures. The decision was affirmed by the 9th U.S. Circuit Court of Appeals, but later reversed by an en banc panel of the 9th Circuit in June 2001, and returned to state court for trial under state law. The Company is in the process of filing a petition for certiorari to the U.S. Supreme Court. It is the opinion of management that the ultimate outcome of the claims will not have a material adverse effect on the Company's financial position or results of operation. Reliance, the Company's insurer of record from October 1, 1996 to October 1, 2000, has been placed in liquidation and may be unable to pay $5 million the insurance carrier committed to plaintiffs in the settlement of a casualty case. The Company maintains that plaintiffs accepted the risk of payment when they settled the case, that the insurance carrier with the next layer of insurance is required to make the payment if the liquidating carrier cannot, and that otherwise there has been no settlement. The Company is unable to determine whether it will be liable for any portion of the excess policy not paid and, if so, how much. The Company and its subsidiaries are involved in various other lawsuits incidental to their businesses. It is the opinion of management that the ultimate outcome of these actions will not have a material adverse effect on the Company's financial position or results of operations. CONSOLIDATED FREIGHTWAYS CORPORATION AND SUBSIDIARIES ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Revenues for the quarter ended September 30, 2001 decreased 3.5% on a 0.8% decrease in tonnage, compared with the prior year. Tonnage decreased due primarily to the continued economic slowdown. Revenue per hundredweight decreased 3.2% to $17.24, despite the benefits of an August rate increase, due to unfavorable changes in the freight mix, including a decrease in higher-rated expedited freight. Revenue per hundredweight was also impacted by a decrease in the fuel surcharge as fuel prices moderated during the quarter. Shipments increased 0.4% and the average weight per shipment decreased 1.2% to 996 lbs. Revenues for the nine-month period decreased 2.0% on a tonnage decrease of 1.7%. The tonnage decrease reflects the impact of the economic slowdown and the effects of severe winter weather in the first quarter. Revenue per hundredweight decreased 1.0% to $17.42 for the reasons noted above. Shipments decreased 1.5% and the average weight per shipment decreased 0.3% to 996 lbs. Salaries, wages and benefits increased 2.2% in the quarter and 1.4% in the nine-month period, despite lower tonnage, due primarily to a 3.4% contractual wage and benefit increase effective April 1st and sales force incentive bonuses. These increased costs were partially offset by improved cross-dock and pick-up and delivery efficiencies as a result of process improvement programs, and headcount reductions as management began adjusting the workforce to reflect lower business levels. The prior year nine-month period includes $4.3 million of severance pay due to an administrative reorganization. Operating expenses increased 3.6% in the quarter compared with the prior year. The quarter includes $4.8 million of gains on sale of property compared with $8.8 million in the prior year. Excluding the gains, operating expenses were flat, despite lower tonnage and lower fuel costs per gallon. For the nine-month period, operating expenses increased 1.2%, despite lower tonnage. Excluding gains on sale of property of $24.5 million in the nine-month period and $11.8 million in the prior year, operating expenses increased 4.8%. The quarter and nine-month periods were impacted by increased lease expense on revenue equipment, professional services expense and software amortization. The nine-month period was also impacted by severe winter weather in January and February. Operating expenses in both the quarter and nine-month period were partially offset by increased use of rail services. Purchased transportation increased 4.1% in the quarter and 13.3% in the nine-month period due to increased use of rail services in strategic lanes. Rail miles as a percentage of inter-city miles increased to 26.7% during the quarter compared with 25.4% in the prior year. For the nine- month period, rail miles increased to 27.3% compared with 23.4% in prior year. Operating taxes and licenses increased 1.0% in the quarter, despite lower tonnage, due primarily to property taxes on recently purchased terminals. Operating taxes and licenses decreased 6.7% in the nine-month period due primarily to lower tonnage. Claims and insurance decreased 27.5% in the quarter and 18.0% in the nine-month period due to lower tonnage and improved claims experience. The Company continued to benefit from process improvement programs directed at reducing freight damage and increasing vehicular safety. Depreciation increased 16.6% in the quarter and 4.9% in the nine- month period due to increased capital expenditures. Capital expenditures were $69.8 million in the nine-month period, compared with $30.1 million in the prior year, and include the additions of terminal properties in Brooklyn, NY, Laredo, TX, and Phoenix, AZ, as well as revenue equipment previously under lease. The operating loss for the quarter was $26.1 million compared with an operating profit of $5.6 million in the prior year. The operating ratio deteriorated to 104.6% from 99.1%. The Canadian operations contributed $3.6 million of operating income in the quarter compared with $3.5 million in the prior year. Excluding gains on sale of real property, the operating loss was $30.9 million in the quarter compared with a $3.2 million operating loss in the prior year. For the nine-month period, the operating loss was $57.6 million compared with an operating profit of $6.5 million in the prior year. The operating ratio deteriorated to 103.3% from 99.6%. The Canadian operations contributed $10.1 million of operating income in the nine-month period compared with $9.6 million in the prior year. Excluding gains on sale of real property, the operating loss for the nine-month period was $82.1 million compared with a loss of $5.4 million in the prior year. Other expense, net, increased $0.9 million in the quarter primarily due to increased interest expense on higher average short- term borrowings. The nine-month period, also impacted by higher interest expense on increased debt levels, decreased $0.9 million due to the fact that the prior year included a $4.0 million charge for settlement of a tax sharing liability with the former parent. Excluding the settlement charge, other expense, net increased $3.1 million in the nine-month period. The Company's effective tax rate differs from the statutory federal rate due to foreign taxes and the recording of deferred tax valuation allowances. As a result of the domestic losses during the second and third quarters, the Company recorded income tax benefits and related deferred tax assets of $14.1 million and $11.5 million, respectively. However, due to recent cumulative domestic losses, current accounting standards required valuation allowances of $14.1 million and $11.5 million be recorded in the respective quarters. The Company also assessed the need for a valuation allowance against the existing $62.7 million net deferred tax asset of its domestic subsidiaries. Through the use of tax planning strategies, involving the sale of certain appreciated assets, the Company has determined that it is more likely than not that the net deferred tax asset as of September 30, 2001 will be realized. As a result, no additional valuation allowance was recorded. Until the cumulative loss is eliminated, the Company will record additional valuation allowance against any tax benefit arising from future losses. The Company will continue to assess the realizability of its deferred tax assets and adjust the valuation allowance as appropriate. Due to continued economic deterioration, the Company will not return to profitability in 2001. To reduce operating costs, management is continuing with aggressive cost control measures including headcount reductions, as well as other general and administrative expense reductions. Programs aimed at increasing pick- up and delivery and dock efficiencies, increasing load factor and reducing claims expense are proving successful at select terminals and will be expanded across the terminal system. In an effort to improve yields, the Company is reviewing its pricing, especially in the under 500 lbs. weight bracket. Additionally, the Company is reviewing the pricing of those contract accounts coming up for renewal. The above improvements should help offset a contractual wage and benefit increase in April 2002 that is expected to add approximately $20 million of expense. As discussed in the Company's Annual Report on Form 10-K, the Company has various stock incentive plans under which restricted stock has been granted. There are approximately 928,000 restricted shares that had not achieved the pre-determined increases in stock price required for vesting as of September 30, 2001. Compensation expense will be recognized for those shares if the stock price meets the required levels. Of the 928,000 shares, 843,000 will be forfeited if the stock price does not meet the required levels by December 2, 2001. The remaining shares must meet the required stock prices by May 12, 2002. The Company continues to experience fluctuations in fuel costs per gallon. The Company's rules tariff implements a fuel surcharge when the average cost per gallon of on-highway diesel fuel exceeds $1.10, as determined from the Energy Information Administration of the Department of Energy's publication of weekly retail on-highway diesel prices. The Company currently has a fuel surcharge in effect. However, there can be no assurance that the Company will be able to maintain this surcharge or successfully implement such surcharges in response to increased fuel costs in the future. In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 142 (SFAS 142) "Goodwill and Other Intangibles." SFAS 142 will require that goodwill and other intangible assets that have indefinite lives no longer be amortized, but will be subject to impairment review annually. Intangible assets with finite useful lives will continue to be amortized. The Company will adopt SFAS 142 effective January 1, 2002. The Company expects that adoption of this statement will not have material adverse affect on the Company's financial position or results of operations. Also in June 2001, the FASB issued SFAS 143 "Accounting for Asset Retirement Obligations." This standard will require that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of the fair value can be made. The associated asset retirement costs will be capitalized as part of the carrying amount of the asset. This statement is effective for fiscal years beginning after June 15, 2002. The Company expects that adoption of this statement will not have material adverse affect on the Company's financial position or results of operations. In August 2001, the FASB issued SFAS 144 "Accounting for the Impairment or Disposal of Long-Lived Assets." This statement supercedes current accounting guidance relating to the impairment of long-lived assets and provides a single accounting methodology to be applied to all long-lived assets to be disposed of, including discontinued operations. This statement is effective for fiscal years beginning after December 15, 2001. The Company is currently assessing the impact of adoption of this statement. LIQUIDITY AND CAPITAL RESOURCES Current Financing Requirements The Company currently projects that it will need to raise approximately $30 million of financing to fund operations and support letter of credit requirements through December 31, 2001 and an additional $45 million in 2002. The Company believes that it has a reasonable prospect of securing a $50 million revolving credit facility collateralized with accounts receivable, real property and revenue equipment to provide for working capital needs. The Company expects funding over various dates through December 31, 2001. However, there can be no assurances that the Company will be able to secure this financing. The Company is pursuing a number of options to improve both short and long-term liquidity. The Company has significant unleveraged assets and is pursuing asset-backed borrowings, the sale of surplus real properties and the sale and leaseback of real properties and revenue equipment. However, there can be no assurance that the Company will be able to complete these transactions or that they will be on reasonable terms. During the first week of November 2001, the Company completed the sale of 3 surplus properties. It also anticipates completing the sale of 2 surplus properties by November 30, 2001 and is in active negotiations to sell 7 more. The Company has the ability to sell other surplus properties with an aggregate market value of approximately $30 million. The ability of the Company to continue to fund operations and meet its obligations as they come due will be dependent on accomplishing its financing initiatives and performance goals. Existing Credit Agreements On April 27, 2001, the Company entered into a five-year, $200 million credit facility, securitized by accounts receivable, to provide for working capital and letter of credit needs. This facility replaced a $155 million unsecured credit facility. Letters of credit are limited to $100 million and borrowings are limited to an agreed upon availability calculation of eligible accounts receivable. Borrowings bear interest at either the commercial paper rate or LIBOR, plus a margin (125 basis points as of September 30, 2001). The continued availability of funds under the facility requires that the Company comply with certain financial convenants, the most restrictive of which is to maintain a minimum EBITDAL (earnings before interest, taxes, depreciation, amortization and lease expense). Subsequent amendments to the facility provided for more flexible financial covenants, allowing the Company to be in compliance, and increased the margin on borrowings to 250 basis points effective October 24, 2001. Given current economic uncertainties and the Company's operating performance, there can be no assurance that the Company will be in compliance with the covenants at December 31, 2001, nor that the lender will grant additional amendments, if required. As of September 30, 2001, the Company had $96.0 million of short-term borrowings and $73.4 million of letters of credit outstanding. Availability of the remaining $30.6 million of borrowing capacity is dependent on the calculation of eligible accounts receivable. As a condition of a previous amendment, the Company was required to have $50 million of additional financing in place by October 15, 2001. The proceeds were to be applied to outstanding short-term borrowings under the facility. In subsequent negotiations with the lender, the requirement to obtain the $50 million of additional financing was waived. On October 24, 2001, the Company entered into a six-month, $50 million revolving credit facility with the current lender, secured by real property, to provide for short-term working capital needs and other general corporate purposes. Borrowings bear interest at LIBOR plus 350 basis points. Of the $50 million, $25 million was available and was used to reduce outstanding borrowings under the Company's existing credit facility discussed above. Of the availability created under the existing credit facility, $15 million was used for letter of credit needs and $10 million was restricted for existing credit facility needs. The remaining $25 million under the new facility will be available on or after November 30, 2001, provided the Company achieves a minimum required EBITDA (earnings before interest, taxes, depreciation and amortization), as well as minimum load factor and revenue per hundredweight measures. Given current economic uncertainties and the Company's operating performance, it is unlikely that the Company will meet these measures in 2001 and there can be no assurance that the Company will achieve these measures in 2002. Cash Flows for the Nine Months Ended September 30, 2001 and 2000 As of September 30, 2001, the Company had $31.4 million in cash and cash equivalents. Net cash used by operating activities of $52.0 million in the nine-month period compares with $31.2 million provided by operating activities for the same period last year. The decrease was due primarily to increased operating losses (adjusted for non- cash items) and increased accounts receivable. Net cash used by investing activities of $59.4 million compares with $16.8 million in the same period last year. The increase primarily reflects the additions of terminal properties in Brooklyn, NY, Laredo, TX, and Phoenix, AZ, as well as revenue equipment previously under lease. The Company expects capital expenditures to be approximately $5 million for the remainder of the year, primarily for the purchase of revenue equipment and real estate, but has the ability to defer these expenditures. Net cash provided by financing activities of $96.3 million primarily reflects net short-term borrowings under the Company's credit facility. Net borrowings of $96.0 million compares with net repayments of $0.7 million in the same period last year. The increased borrowings were used to fund the operating activities and capital expenditures discussed above. OTHER On August 2, 2001, Patrick J. Brady resigned as Senior Vice President-Sales and Marketing. On February 9, 2001, Henry C. Montgomery was elected to the Board of Directors for a one-year term, replacing John M. Lillie. Raymond F. O'Brien resigned from Board of Directors on May 24, 2001. Certain statements included or incorporated by reference herein constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to a number of risks and uncertainties. Any such forward-looking statements included or incorporated by reference herein should not be relied upon as predictions of future events. Certain such forward- looking statements can be identified by the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," "seeks," "approximately," "intends," "plans," "pro forma," "estimates," or "anticipates" or the negative thereof or other variations thereof or comparable terminology, or by discussions of strategy, plans or intentions. Such forward-looking statements are necessarily dependent on assumptions, data or methods that may be incorrect or imprecise and they may be incapable of being realized. In that regard, the following factors, among others, and in addition to matters discussed elsewhere herein and in documents incorporated by reference herein, could cause actual results and other matters to differ materially from those in such forward-looking statements: general economic conditions; general business conditions of customers served and other shifts in market demand; increases in domestic and international competition; pricing pressures, rate levels and capacity in the motor-freight industry; future operating costs such as employee wages and benefits, fuel prices and workers' compensation and self-insurance claims; shortages of drivers; weather; environmental and tax matters; changes in governmental regulation; technology costs; legal claims; timing and amount of capital expenditures; successful execution of operating plans, customer service initiatives, marketing plans, process and operational improvements and cost reduction efforts and adequate financing. ITEM 3. Quantitative and Qualitative Disclosures About Market Risk The Company is subject to market risks related to changes in interest rates and foreign currency exchange rates, primarily the Canadian dollar and Mexican peso. Management believes that the impact on the Company's financial position, results of operations and cash flows from fluctuations in interest rates and foreign currency exchange rates would not be material. Consequently, management does not currently use derivative instruments to manage these risks; however, it may do so in the future. PART II. OTHER INFORMATION ITEM 1. Legal Proceedings As previously disclosed, the Company has received notices from the Environmental Protection Agency (EPA) and others that it has been identified as a potentially responsible party (PRP) under the Comprehensive Environmental Response Compensation and Liability Act (CERCLA) or other Federal and state environmental statutes at various Superfund sites. Under CERCLA, PRP's are jointly and severally liable for all site remediation and expenses. Based upon the advice of local environmental attorneys and cost studies performed by environmental engineers hired by the EPA (or other Federal or state agencies), the Company believes its obligations with respect to such sites would not have a material adverse effect on its financial position or results of operations. Please refer to Footnote 7 above for a discussion of certain legal proceedings. ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits 10.1 Fourth Amendment to the Letter of Credit Agreement between Consolidated Freightways Corporation and General Electric Capital Corporation dated October 18, 2001. 10.2 Fourth Amendment to the Securitization Agreement between Consolidated Freightways Corporation and General Electric Capital Corporation dated as of October 18, 2001. 10.3 Fifth Amendment to the Letter of Credit Agreement between Consolidated Freightways Corporation and General Electric Capital Corporation dated October 24, 2001. 10.4 Fifth Amendment to the Securitization Agreement between Consolidated Freightways Corporation and General Electric Capital Corporation dated as of October 24, 2001. (b) Reports on Form 8-K A Form 8-K was filed on October 25, 2001 disclosing a short- term financing arrangement between the Company and General Electric Capital Corporation. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company (Registrant) has duly caused this Form 10-Q Quarterly Report to be signed on its behalf by the undersigned, thereunto duly authorized. Consolidated Freightways Corporation (Registrant) November 14, 2001 /s/Robert E. Wrightson Robert E. Wrightson Executive Vice President and Chief Financial Officer November 14, 2001 /s/James R. Tener James R. Tener Vice President and Controller EX-10 3 geec4thamendloc.txt EXHIBIT 10.1 Exhibit 10.1 FOURTH AMENDMENT TO LETTER OF CREDIT AGREEMENTS THIS FOURTH AMENDMENT TO LETTER OF CREDIT AGREEMENTS (this "Amendment"), is made and entered into as of October 18, 2001 (the "Effective Date"), by and between CONSOLIDATED FREIGHTWAYS CORPORATION, a Delaware corporation ("Debtor"), the other Credit Parties signatory to the Letter of Credit Agreements described below (collectively, together with the Debtor, the "Credit Parties") and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation ("GE Capital"). W I T N E S E T H: WHEREAS, Debtor and GE Capital are parties to that certain Letter of Credit Agreement, dated as of April 27, 2001 (as amended to the date hereof, the "Letter of Credit Agreement"; capitalized terms used herein and not otherwise defined herein shall have the meanings given such terms in the Letter of Credit Agreement), pursuant to which GE Capital has committed to make certain letters of credit available to Debtor; and WHEREAS, Debtor, the other Credit Parties and GE Capital desire to modify the Letter of Credit Agreement, the Security Agreement and the Cash Collateral Account Agreement and the Subsidiary Guaranty (collectively, the "Letter of Credit Agreements") in certain respects and that certain waivers with respect thereto be granted, all in accordance with and subject to the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the premises, the covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Debtor, the other Credit Parties and GE Capital do hereby agree that all capitalized terms used herein shall have the meanings ascribed thereto in the Letter of Credit Agreement (except as otherwise expressly defined or limited herein) and do hereby further agree as follows: 1. Waivers of Certain Defaults. Subject to the terms and conditions of this Amendment, including without limitation the fulfillment of the conditions to effectiveness specified in Section 7 below, the Creditor hereby waives any Default or Event of Default under Section 8.1(n)(i) of the Letter of Credit Agreement (as such section was in effect immediately prior to the effectiveness of this Amendment) which may have resulted from the failure of Debtor prior to October 15, 2001, to receive the proceeds of the Debt specified therein; provided that the aforesaid waivers relate solely to the specific covenants, period and event described above, and nothing in this Amendment is intended, or shall be construed, to waive any other Default or Event of Default (including without limitation any Default or Event of Default with may result from any failure by Debtor and its Subsidiaries to comply with any of the financial covenants in Annex C to the Letter of Credit Agreement or Annex 4.02(p) to the Receivables Sale and Contribution Agreement, as such annexes are in effect after giving effect to this Amendment and the Fourth Securitization Agreement Amendment, for the Fiscal Quarter ending September 30, 2001). 2. Amendments of the Letter of Credit Agreements. Subject to the terms and conditions of this Amendment, including without limitation the fulfillment of the conditions precedent specified in Section 7 below, the Letter of Credit Agreements are hereby amended as follows: (A) Amendments to Letter of Credit Agreement. The Letter of Credit Agreement shall be amended as follows: (1) Section 1.1(a) of the Letter of Credit Agreement is deleted in its entirety and the following new Section 1.1(a) is substituted in lieu thereof: (a) Issuance. Subject to the terms and conditions of this Agreement, Creditor agrees to incur from time to time prior to the earlier of the Election Notice Date or the Commitment Termination Date, upon the request of Debtor, Letter of Credit Obligations by causing Letters of Credit to be issued by a bank or other legally authorized Person selected by or acceptable to Creditor in its sole discretion and acceptable to the proposed beneficiary of the Letter of Credit (each, an "L/C Issuer") for the account of Debtor and guaranteed by Creditor; provided, however, that the aggregate amount of all such Letter of Credit Obligations shall not at any time exceed the lesser of (i) the Commitment less the aggregate outstanding principal balance of the Reimbursement Obligations, and (ii) the sum of (A) the Pledged Entity Value less (B) the sum of the aggregate outstanding principal balance of the Reimbursement Obligations for any and all payments made by Creditor on or pursuant to any and all Letter of Credit Obligations. No such Letter of Credit shall have an expiry date which is more than one year following the date of issuance thereof, and Creditor shall be under no obligation to incur Letter of Credit Obligations in respect of any Letter of Credit having an expiry date which is later than the Commitment Termination Date. Not later than 12:00 noon (New York time) on each Business Day, as well as on each date on which the Receivable Subsidiary delivers a Borrowing Base Certificate under (and as such term is defined in) the Funding Agreement, Debtor shall deliver to the Creditor an Officer's Certificate substantially in the form of Exhibit 1.1(a) (each, a "Pledged Entity Valuation Certificate"). The Pledged Entity Value shall be determined by the Creditor based on information related to the Pledged Entity Asset Base and Pledged Entity Adjusted Debt available to it, including (A) any information obtained in connection with any audit or reflected in the most recent Pledged Entity Valuation Certificate or (B) any other information that may be available to the Creditor. (2) Section 1.7(a) of the Letter of Credit Agreement is deleted in its entirety and the following new Section 1.7(a) is substituted in lieu thereof: (a) As to all payments made on any of the Obligations when a Default or Event of Default shall have occurred and be continuing or following the Commitment Termination Date, Debtor hereby irrevocably waives the right to direct the application of any and all payments received from or on behalf of Debtor, and Debtor hereby irrevocably agrees that Creditor shall have the continuing exclusive right to apply any and all such payments against the Obligations as Creditor may deem advisable notwithstanding any previous entry by Creditor in the Letter of Credit Account or any other books and records. In the absence of a specific determination by Creditor with respect thereto, payments shall be applied to amounts then due and payable in the following order: (1) to Fees and Creditor's expenses reimbursable hereunder; (2) to accrued but unpaid interest on the Obligations; (3) to the outstanding principal balance of the Obligations and to provide cash collateral for Letter of Credit Obligations in the manner described in Section 1.1(c), ratably to the aggregate, combined outstanding principal balance of the Obligations and outstanding Letter of Credit Obligations; and (4) to all other Obligations. In the event of any conflict between this Section 1.7(a) and Section 1.7(a) of the Revolving Credit Agreement, this Section 1.7(a) shall control for purposes of determining application and allocation of any payments received by the Creditor hereunder. (3) Section 4.1(b) of the Letter of Credit Agreement is deleted in its entirety and the following new Section 4.1(b) is substituted in lieu thereof: (b) The Debtor hereby agrees that, from and after the Closing Date and until the Termination Date, it shall deliver or cause to be delivered to Creditor (i) as soon as available and in any event no later than 12:00 noon (New York time) on each Business Day, a Pledged Entity Valuation Certificate, and (ii) such other reports, statements and reconciliations with respect to the Pledged Entity Asset Base or the Collateral as Creditor shall from time to time request in its reasonable discretion. (4) Section 4.3 of the Letter of Credit Agreement is deleted in its entirety and the following new Section 4.3 is substituted in lieu thereof: Section 4.3 Pledged Entity Valuation Certificate. Debtor hereby agrees that, from and after the Closing Date and until the Termination Date, it shall deliver or cause to be delivered to the Creditor (i) as soon as available and in any event not later than 12:00 noon (New York time) on each Business Day, a Pledged Entity Valuation Certificate, and (ii) such other reports, statements and reconciliations with respect to the Pledged Entity Asset Base or the Pledged Entity Adjusted Debt as the Creditor shall from time to time request in its reasonable discretion. (5) The Letter of Credit Agreement is hereby amended by adding thereto the following new Section 6.19: 6.19 Certain Transactions. Notwithstanding anything in this Agreement to the contrary, no Credit Party shall make, grant, incur, enter into, or otherwise consummate any of the following transactions on or after the Fourth Amendment Effective Date without the prior written consent of the Creditor: (i) any Permitted Acquisition, (ii) any of the Term Debt, the Sale-Leaseback Debt, the Vancouver Secured Debt, or the Additional Secured Debt, (iii) any of the Liens described in Section 6.7(d) or (e), (iv) any sale of the Menlo Park Property so long as it constitutes part of the Collateral, or (v) any Permitted Stock Repurchase. (6) Section 8.1(f) of the Letter of Credit Agreement is hereby deleted in its entirety and the following new Section 8.1(f) is substituted in lieu thereof: (f) (i) Any information contained in any Pledged Entity Valuation Certificate is untrue or incorrect in any respect, or (ii) any representation or warranty herein or in any Letter of Credit Document or in any written statement, report, financial statement or certificate (other than a Pledged Entity Valuation Certificate) made or delivered to Creditor by any Credit Party is untrue or incorrect in any material respect as of the date when made or deemed made. (7) Section 8.1(n) of the Letter of Credit Agreement is hereby deleted in its entirety and the following new Section 8.1(n) is substituted in lieu thereof: (n) (i) Debtor shall fail on or before October 31, 2001 to (x) enter into the Revolving Credit Agreement with Creditor on terms and conditions satisfactory in all respects to Creditor (but nothing in this Agreement is intended, or shall be construed, to be an offer, promise, commitment or agreement by Creditor to enter into the Revolving Credit Agreement or to extend any credit thereunder to Debtor) and (y) cause all conditions precedent to the effectiveness of Creditor's obligation thereunder to made loans to Debtor to be fulfilled or (ii) from and after the execution and delivery of the Credit Agreement, any Event of Default under (and as such term is defined in) the Revolving Credit Agreement shall occur. (8) Annex A to the Letter of Credit Agreement is hereby amended by adding the following new definitions thereto in the appropriate alphabetical order: "Fourth Amendment Effective Date" shall mean October 18, 2001. "Fourth Securitization Agreement Amendment" shall mean the Fourth Amendment to Securitization Agreements, dated as of October 18, 2001, among the Receivables Subsidiary, CF Delaware and GE Capital in various capacities. "Revolving Credit Agreement" shall mean the Credit Agreement contemplated to be entered into on or before October 31, 2001 among the Debtor, as Borrower, the Creditor, as Lender, and certain Subsidiaries of the Debtor as Credit Parties, pursuant to which (and subject to the terms and conditions of which) it is contemplated that Debtor may obtain a revolving loan facility from Creditor of up to $50,000,000, as such agreement may be amended, supplemented or replaced from time to time. "Revolving Credit Documents" shall mean the Revolving Credit Agreement and the other Loan Documents (as such term is defined in the Revolving Credit Agreement); provided, however, that the term "Revolving Credit Documents" as used herein shall not include any "Related Documents" as such term is defined in Annex X to the Receivables Funding Agreement or any of the Program Documents. "Revolving Credit Obligations" shall mean the Obligations as such term is defined in the Revolving Credit Agreement. (9) Annex A to the Letter of Credit Agreement is hereby amended by deleting therefrom the definitions of terms "Applicable L/C Margin", "Collateral Documents", "Letter of Credit Documents", "Obligations", and "Termination Date" in their entireties and by substituting the following amended respective definitions of such terms in lieu thereof: "Applicable L/C Margin" shall mean a per annum rate equal to 2.50%. "Collateral Documents" shall mean the Security Agreement, the Pledge Agreement, the Guaranties, the Cash Collateral Account Agreement, the Blocked Account Agreement, the Mortgages (as defined in the Revolving Credit Agreement), and all similar agreements entered into guaranteeing payment of, or granting a Lien upon property as security for payment of, the Obligations. "Letter of Credit Documents" shall mean this Agreement, the Collateral Documents, the Revolving Credit Documents, and all other agreements, instruments, documents and certificates identified in Annex B executed and delivered to, or in favor of, Creditor and including all other pledges, powers of attorney, consents, assignments, contracts, notices, and all other written matter whether heretofore, now or hereafter executed by or on behalf of any Credit Party, and delivered to Creditor in connection with this Agreement or the transactions contemplated hereby. Any reference in this Agreement or any other Letter of Credit Document to a Letter of Credit Document shall include all appendices, exhibits or schedules thereto, and all amendments, restatements, supplements or other modifications thereto, and shall refer to such Agreement as the same may be in effect at any and all times such reference becomes operative; provided, however, that the term "Letter of Credit Documents" as used herein shall not include any "Related Documents" as such term is defined in Annex X to the Receivables Funding Agreement or any of the Program Documents. "Obligations" shall mean (i) all Reimbursement Obligations, and (ii) all advances, debts, liabilities and obligations, for the performance of covenants, tasks or duties or for payment of monetary amounts (whether or not such performance is then required or contingent, or such amounts are liquidated or determinable) owing by any Credit Party to Creditor, and all covenants and duties regarding such amounts, of any kind or nature, present or future, whether or not evidenced by any note, agreement or other instrument, arising under this Agreement, the Revolving Credit Agreement, or any of the other Letter of Credit Documents. This term includes all principal, interest (including all interest which accrues after the commencement of any case or proceeding in bankruptcy after the insolvency of, or for the reorganization of any Credit Party, whether or not allowed in such proceeding), Fees, Charges, expenses, attorneys' fees and any other sum chargeable by Creditor to any Credit Party under this Agreement, the Revolving Credit Agreement, or any of the other Letter of Credit Documents. "Termination Date" shall mean the date on which the Reimbursement Obligations have been indefeasibly repaid in full and all other Obligations under this Agreement, the Revolving Credit Agreement and the other Letter of Credit Documents have been completely discharged and Letter of Credit Obligations have been cash collateralized, canceled or backed by stand-by letters of credit in accordance with Section 1.1(c)(ii), and Debtor shall not have any further right to obtain any letters of credit under this Agreement or borrow any monies under the Revolving Credit Agreement. (10) Annex C to the Letter of Credit Agreement is hereby deleted in its entirety and the replacement Annex C attached to this Amendment as Appendix I is substituted in lieu thereof. (B) Amendment of Security Agreement. Section 2(a) of the Security Agreement shall be amended by inserting the words "and the Revolving Credit Agreement" immediately after the words "all of Debtor's Obligations under the Letter of Credit Agreement" which appear in the third line of such Section 2(a). (C) Amendment of Cash Collateral Agreement. Section 1 of the Cash Collateral Account Agreement shall be amended by inserting the words "and the Revolving Credit Agreement (as defined in the L/C Agreement)" immediately after the words "the L/C Agreement" which appear in the second line of the first sentence of such Section 1. (D) Amendment of Subsidiary Guaranty. Section 1 of the Subsidiary Guaranty shall be amended by deleting the first sentence thereof in its entirety and by substituting the following replacement sentence in lieu thereof: Subject to the provisions of Section 7 below, each Guarantor hereby jointly, severally, absolutely, unconditionally and irrevocably guarantees to the Guaranteed Party the prompt payment when due, whether at stated maturity, by acceleration or otherwise, of all of the Obligations (as defined in each of the Letter of Credit Agreement and the Revolving Credit Agreement, and including all renewals, extensions, modifications, and refinancings thereof) now or hereafter existing, whether for principal, interest, fees, reasonable expenses or otherwise, and all reasonable expenses (including reasonable attorney's fees and expenses) in enforcing any of its rights under the Letter of Credit Agreement, the Revolving Credit Agreement and the other Letter of Credit Documents (all of the foregoing, collectively, the "Guaranteed Obligations"). 3. No Other Waivers or Amendments. Except for the waiver and amendments expressly set forth and referred to in Section 1 and Section 2 above, respectively, each of the Letter of Credit Agreements shall remain unchanged and in full force and effect. 4. Representations and Warranties. To induce GE Capital to enter into this Amendment, Debtor and each of the other Credit Parties hereby warrant, represent and covenant to GE Capital that: (a) this Amendment has been duly authorized, executed and delivered by Debtor and each Credit Party signatory thereto, (b) after giving effect to this Amendment and the Fourth Securitization Agreement Amendment (as defined below), no Termination Event or Event of Default has occurred and is continuing as of this date, and (c) after giving effect to this Amendment, all of the representations and warranties made by Debtor and each Credit Party in the Letter of Credit Agreement are true and correct in all material respects on and as of the date of this Amendment (except to the extent that any such representations or warranties expressly referred to a specific prior date). Any breach in any material respect by Debtor or any Credit Party of any of its representations and warranties contained in this Section 4 shall be an Event of Default under the Letter of Credit Agreement. 5. Ratification and Acknowledgment. Debtor and each of the other Credit Parties hereby ratify and reaffirm each and every term, covenant and condition set forth in the Letter of Credit Agreement and all other documents delivered by such company in connection therewith (including without limitation the other Letter of Credit Documents to which Debtor or any Credit Party is a party), effective as of the date hereof. Without limiting the generality of the foregoing, Debtor and each of the other Credit Parties hereby acknowledge and agree that any and all Obligations of the Debtor arising under the Revolving Credit Agreement shall be guaranteed by the Domestic Subsidiaries of the Debtor (other than the Receivables Subsidiary) pursuant to the Subsidiary Guaranty and shall be secured by all of the Liens granted to GE Capital pursuant to the Collateral Documents. 6. Estoppel. To induce GE Capital to enter into this Amendment, Debtor and each of the other Credit Parties hereby acknowledge and agree that, as of the date hereof, there exists no right of offset, defense or counterclaim in favor of Debtor or any Credit Party as against GE Capital with respect to the obligations of Debtor or any Credit Party to GE Capital under the Letter of Credit Agreement or the other Letter of Credit Agreement Documents, either with or without giving effect to this Amendment. 7. Conditions to Effectiveness. This Amendment shall become effective, as of the Effective Date, subject to the prior or subsequent (i) receipt by the GE Capital of this Amendment, duly executed, completed and delivered by Debtor and each Credit Party, (ii) receipt by GE Capital of a Pledged Entity Valuation Certificate dated as of the date hereof, in form and substance satisfactory to GE Capital, and (iii) receipt by GE Capital of evidence satisfactory to it that all conditions precedent to the effectiveness of the Fourth Amendment to Securitization Agreements of even date among the Receivables Subsidiary, CF Delaware as Servicer, GE Capital as the Receivables Lenders and the Receivables Administrative Agent (the "Fourth Securitization Agreement Amendment") have been fulfilled (other than the effectiveness of this Amendment). GE Capital shall promptly notify the Credit Parties in writing when the conditions specified in clauses (i) and (ii) above are satisfied. Upon the effective date of this Amendment, (i) the amendment to the financial covenants in Annex C to the Letter of Credit Agreement as provided for in Appendix I attached hereto shall be deemed effective retroactively as of July 1, 2001, and (ii) all other amendments set forth in Section 2 of this Amendment shall become effective as of the Effective Date of this Amendment. 8. Reimbursement of Expenses. Debtor and each of the other Credit Parties hereby agree that Debtor and each of the other Credit Parties shall reimburse GE Capital on demand for all costs and expenses (including without limitation reasonable attorney's fees) incurred by GE Capital in connection with the negotiation, documentation and consummation of this Amendment and the other documents executed in connection herewith and therewith and the transactions contemplated hereby and thereby. 9. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK FOR CONTRACTS TO BE PERFORMED ENTIRELY WITHIN SAID STATE. 10. Severability of Provisions. Any provision of this Amendment which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. To the extent permitted by applicable law, Debtor and each of the other Credit Parties hereby waive any provision of law that renders any provision hereof prohibited or unenforceable in any respect. 11. Counterparts. This Amendment may be executed in any number of several counterparts, all of which shall be deemed to constitute but one original and shall be binding upon all parties, their successors and permitted assigns. 12. Entire Agreement. The Letter of Credit Agreement as amended by this Amendment embodies the entire agreement between the parties hereto relating to the subject matter hereof and supersedes all prior agreements, representations and understandings, if any, relating to the subject matter hereof. IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed by their respective officers thereunto duly authorized, as of the date first above written. DEBTOR: CONSOLIDATED FREIGHTWAYS CORPORATION By:/s/Robert E. Wrightson Name:Robert E. Wrightson Title:Executive Vice President and Chief Financial Officer CREDITOR: GENERAL ELECTRIC CAPITAL CORPORATION By:/s/Craig Winslow Name:Craig Winslow Title:Duly Authorized Signatory SUBSIDIARY GUARANTORS: CONSOLIDATED FREIGHTWAYS CORPORATION OF DELAWARE By:/s/Robert E. Wrightson Name:Robert E. Wrightson Title:Executive Vice President and Chief Financial Officer CF AIRFREIGHT CORPORATION By:/s/Robert E. Wrightson Name:Robert E. Wrightson Title:Executive Vice President and Chief Financial Officer CF MOVESU.COM INCORPORATED By:/s/Kerry K. Morgan Name:Kerry K. Morgan Title:Vice President and Treasurer REDWOOD SYSTEMS, INC. By:/s/Robert E. Wrightson Name:Robert E. Wrightson Title:Executive Vice President and Chief Financial Officer LELAND JAMES SERVICE CORPORATION By:/s/Robert E. Wrightson Name:Robert E. Wrightson Title:Executive Vice President and Chief Financial Officer APPENDIX I TO FOURTH AMENDMENT TO LETTER OF CREDIT AGREEMENTS ANNEX C (Section 6.10) to CREDIT AGREEMENT FINANCIAL COVENANTS (a) Minimum Fixed Charge Coverage Ratio. The Debtor and its Subsidiaries shall have on a consolidated basis, as of the end of each Fiscal Quarter set forth below, a Fixed Charge Coverage Ratio for the Rolling Period then ended of not less than the following: Fiscal Quarter Minimum Fixed Charge Coverage Ratio Fiscal Quarter ending 0.20 to 1.00 September 30, 2001 Fiscal Quarter ending 0.01 to 1.00 December 31, 2001 Fiscal Quarter ending -1.0 to 1.00 March 31, 2002 Fiscal Quarter ending 0.30 to 1.00 June 30, 2002 Fiscal Quarter ending 1.60 to 1.00 September 30, 2002 Fiscal Quarter ending 1.70 to 1.00 December 31, 2002 and each Fiscal Quarter thereafter (b) Minimum Tangible Net Worth. Debtor and its Subsidiaries on a consolidated basis shall have a Tangible Net Worth, (i) as of the Closing Date and as of the end of each of the second and third Fiscal Quarters of the Fiscal Year ending December 31, 2001, of not less than $180,000,000, (ii) as of the end of the fourth Fiscal Quarter of the Fiscal Year ending December 31, 2001, of not less than $150,000,000, (iii) as of the end of each of the first, second and third Fiscal Quarters of the Fiscal Year ending December 31, 2002, of not less than $120,000,000, and (iv) as of the end of the fourth Fiscal Quarter of the Fiscal Year ending December 31, 2002 and as of the end of each of the first, second and third Fiscal Quarters of the Fiscal Year ending December 31, 2003, of not less than $130,000,000. Thereafter, Debtor and its Subsidiaries on a consolidated basis shall have, as of the end of each Fiscal Year ending on or after December 31, 2003 (each such Fiscal Year herein called the "Subject Fiscal Year") and as of the end of the first three Fiscal Quarters of the immediately succeeding Fiscal Year, a Tangible Net Worth of not less than the sum of (i) the minimum Tangible Net Worth required hereunder for the Fiscal Year which immediately preceded the Subject Fiscal Year (or, where the Subject Fiscal Year is the Fiscal Year ending December 31, 2003, the sum of $130,000,000) plus (ii) an amount equal to fifty percent (50%) of the positive net income of the Debtor and its Subsidiaries on a consolidated basis for the Subject Fiscal Year plus (iii) an amount equal to one hundred percent (100%) of the amount of any equity raised by or capital contributed to the Debtor during the Subject Fiscal Year (in the case of equity raised or capital contributed, net of the bona fide, reasonable expenses, if any, relating to the raising of such equity or such capital contribution and paid to Persons who are not Affiliates of the Debtor). (c) Minimum EBITDA. Debtor and its Subsidiaries shall have on a consolidated basis for each Fiscal Quarter set forth below an EBITDA for the Rolling Period then ended of not less than the following: Fiscal Quarter Minimum EBITDA Fiscal Quarter ending $8,000,000 September 30, 2001 Fiscal Quarter ending $6,000,000 December 31, 2001 Fiscal Quarter ending -$17,000,000 March 31, 2002 Fiscal Quarter ending $15,000,000 June 30, 2002 Fiscal Quarter ending $53,000,000 September 30, 2002 Fiscal Quarter ending $80,000,000 December 31, 2002 and for each Fiscal Quarter thereafter (d) Maximum Capital Expenditures. Debtor and its Subsidiaries shall not make or incur any Capital Expenditures if, after giving effect thereto, the aggregate amount of all Capital Expenditures made or incurred by Debtor and its Subsidiaries during any period of four (4) consecutive Fiscal Quarters would exceed the amounts set forth below for such period: Four Consecutive Fiscal Maximum Capital Quarters Ending Expenditures Fiscal Quarter ending $35,000,000 June 30, 2001 Fiscal Quarter ending $36,000,000 September 30, 2001 Fiscal Quarter ending $30,000,000 December 31, 2001 Fiscal Quarter ending $25,000,000 March 31, 2002 and for each Fiscal Quarter thereafter Capitalized terms used in this Annex C and not otherwise defined below shall have the respective meanings ascribed to them in Annex A. The following terms shall have the respective meanings set forth below: "Capital Expenditures" shall mean, with respect to any Person, all expenditures (by the expenditure of cash or the incurrence of Indebtedness) by such Person during any measuring period for any fixed assets or improvements or for replacements, substitutions or additions thereto, that have a useful life of more than one year and that are required to be capitalized under GAAP, but excluding (i) Capital Expenditures of the Debtor or any Subsidiary Guarantor financed by the incurrence of Term Debt to the extent that such Term Debt is permitted to be incurred under Section 6.3, provided that on or prior to the date of incurrence of such Term Debt, Debtor has furnished to Creditor a written statement of sources and uses of such Term Debt, which statement describes with particularity the principal amount of the Term Debt to be used for the proposed Capital Expenditure and the fixed assets or improvements to be acquired, replaced, substituted or added to in connection with such proposed Capital Expenditure, (ii) the purchase of the Vancouver Property by the Debtor, provided that to the extent the purchase price of the Vancouver Property exceeds $25,000,000, such excess shall be included as a Capital Expenditure for purposes of determining compliance with the Maximum Capital Expenditure covenant set forth in paragraph (d) of this Annex C, (iii) any Capital Expenditures incurred by the Debtor in connection with the refinancing of the Participation Agreement, provided that to the extent that such Capital Expenditures exceed $22,500,000, such excess shall be included as a Capital Expenditure for purposes of determining compliance with the Maximum Capital Expenditure covenant set forth in paragraph (d) of this Annex C, (iv) any purchase by the Debtor or any Subsidiary of fixed assets or improvements to the extent that such purchase qualifies for like- kind tax treatment under Section 1031 of the IRC, provided that such exclusion from Capital Expenditures under this clause (iv) shall be limited to an amount not to exceed the lesser of (x) the cash proceeds received from the transfer of the property relinquished in the like-kind exchange, assuming for purposes hereof that the Debtor or Subsidiary does not qualify for like- kind tax treatment under Section 1031 of the IRC in connection with such transfer and (y) the value of the fixed assets or improvements purchased by the Debtor in the subject transaction which qualifies for like-kind tax treatment under Section 1031 of the IRC, (v) any purchase by the Debtor or any Subsidiary of fixed assets or improvements with the proceeds received from the sale of the Menlo Park Property, provided that on or prior to the date of any such Capital Expenditures, Debtor has furnished to Creditor a written statement of sources and uses of the proceeds from the sale of the Menlo Park Property, which statement describes with particularity the amount of the proceeds from the sale of the Menlo Park Property to be used for the proposed Capital Expenditure and the fixed assets or improvements to be acquired, replaced, substituted or added to in connection with such proposed Capital Expenditures, and (vi) such other items as Debtor and Creditor may agree in writing to exclude. "EBITDA" shall mean, with respect to any Person for any fiscal period, the amount equal to (a) consolidated net income of such Person for such period, plus (b) the sum of (i) any provision for income taxes, (ii) Interest Expense, (iii) loss from extraordinary items for such period, (iv) depreciation and amortization for such period, (v) amortized debt discount for such period, (vi) the amount of any deduction to consolidated net income as the result of any grant to any members of the management of such Person of any Stock, and (vii) Lease Expenses, in each case to the extent included in the calculation of consolidated net income of such Person for such period in accordance with GAAP, but without duplication, minus (c) the sum of (i) income tax credits, (ii) interest income, (iii) gain from extraordinary items for such period, (iv) any aggregate net gain (but not any aggregate net loss) during such period arising from the sale, exchange or other disposition of capital assets by such Person (including any fixed assets, whether tangible or intangible, all inventory sold in conjunction with the disposition of fixed assets and all securities), provided that there shall be excluded from the amount of any aggregate net gain under this clause (iv), in solely the Fiscal Quarter ending March 31, 2001, an amount equal to the lesser of (x) $19,200,000 and (y) the actual gain recognized by the Debtor and its Subsidiaries from the sale of its Portland, Oregon administrative complex and (v) any other non-cash gains that have been added in determining consolidated net income (including LIFO adjustments), in each case to the extent included in the calculation of consolidated net income of such Person for such period in accordance with GAAP, but without duplication,. For purposes of this definition, the following items shall be excluded in determining consolidated net income of a Person: (A) the income (or deficit) of any other Person accrued prior to the date it became a Subsidiary of, or was merged or consolidated into, such Person or any of such Person's Subsidiaries; (B) the income (or deficit) of any other Person (other than a Subsidiary) in which such Person has an ownership interest, except to the extent any such income has actually been received by such Person in the form of cash dividends or distributions; (C) the undistributed earnings of any Subsidiary of such Person to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any contractual obligation or requirement of law applicable to such Subsidiary; (D) any restoration to income of any contingency reserve, except to the extent that provision for such reserve was made out of income accrued during such period; (E) any write-up of any asset; (F) any net gain from the collection of the proceeds of life insurance policies; (G) any net gain arising from the acquisition of any securities, or the extinguishment, under GAAP, of any Indebtedness, of such Person, (H) in the case of a successor to such Person by consolidation or merger or as a transferee of its assets, any earnings of such successor prior to such consolidation, merger or transfer of assets, and (I) any deferred credit representing the excess of equity in any Subsidiary of such Person at the date of acquisition of such Subsidiary over the cost to such Person of the investment in such Subsidiary. "Fixed Charges" shall mean, with respect to any Person for any fiscal period, the aggregate of, without duplication, (a) all Interest Expense and Lease Expense paid or accrued during such period, plus (b) all regularly scheduled payments of principal or implied principal with respect to Indebtedness (including any lease payments by any Person in respect of any Capital Leases, any Sale-Leaseback Debt or any Vancouver Secured Debt) due or made during such period, plus (c) all Restricted Payments made during such period (other than Permitted Stock Repurchases covered by Section 6.14(vii)) plus (d) any cash payments made by such Person in connection with any Permitted Acquisitions. "Fixed Charge Coverage Ratio" shall mean, with respect to any Person for any fiscal period, the ratio of (i) the sum of (x) EBITDA for such period less (y) cash taxes made during such period to (ii) Fixed Charges for such period. "Interest Expense" shall mean, with respect to any Person for any fiscal period, the sum of (a) interest expense (whether cash or non-cash) of such Person determined in accordance with GAAP for the relevant period ended on such date, including (i) amortization of original issue discount on any Indebtedness and of all fees payable in connection with the incurrence of such Indebtedness (to the extent included in interest expense), (ii) the interest portion of any deferred payment obligation, (iii) the interest component of any Capital Lease Obligation plus (b) the amount of any Letter of Credit Fee (as such term is defined in the Letter of Credit Agreement) paid during the relevant period ended on such date, plus (c) the amount of any payments by such Person, as lessee, under any sale- leaseback or synthetic lease transaction. "Lease Expenses" shall mean, with respect to any Person for any fiscal period, the aggregate rental obligations of such Person determined in accordance with GAAP that are payable in respect of such period under operating leases of equipment having an original non-cancelable term (as determined in accordance with GAAP) in excess of twelve months (net of income from subleases thereof, but including taxes, insurance, maintenance and similar expenses that the lessee is obligated to pay under the terms of such leases), whether or not such obligations are reflected as liabilities or commitments on a consolidated balance sheet of such Person or in the notes thereto, excluding, however, any such obligations under Capital Leases. "Net Worth" shall mean, with respect to any Person as of any date of determination, (a) the book value of the assets of such Person, minus (b) reserves applicable thereto, minus (c) all of such Person's liabilities on a consolidated basis (including accrued and deferred income taxes), all as determined in accordance with GAAP. "Rolling Period" shall mean, as of the end of any Fiscal Quarter, the immediately preceding four (4) Fiscal Quarters, including the Fiscal Quarter then ending. "Tangible Net Worth" shall mean, with respect to any Person at any date, the Net Worth of such Person at such date, (x) excluding, however, from the determination of the total assets at such date, (a) all goodwill, capitalized organizational expenses, capitalized research and development expenses, trademarks, trade names, copyrights, patents, patent applications, licenses (excluding software licenses) and rights in any thereof, and other intangible items (other than software licenses), (b) all unamortized debt discount and expense, (c) treasury Stock, and (d) any write-up in the book value of any asset resulting from a revaluation thereof, but (y) including any non-cash valuation reserves for deferred taxes and any foregone tax benefits provided that such reserves are established in accordance with Financial Accounting Standard Number 109 and do not result in an increase in such Person's future cash tax payments. Rules of Construction Concerning Financial Covenants. Unless otherwise specifically provided therein, any accounting term used in any Loan Document shall have the meaning customarily given such term in accordance with GAAP, and all financial computations thereunder shall be computed in accordance with GAAP consistently applied. That certain items or computations are explicitly modified by the phrase "in accordance with GAAP" shall in no way be construed to limit the foregoing. If any Accounting Changes occur and such changes result in a change in the calculation of the financial covenants, standards or terms used in any Loan Document, then the parties thereto agree to enter into negotiations in order to amend such provisions so as to equitably reflect such Accounting Changes with the desired result that the criteria for evaluating the financial condition of such Persons and their Subsidiaries shall be the same after such Accounting Changes as if such Accounting Changes had not been made. If the parties thereto agree upon the required amendments thereto, then after appropriate amendments have been executed and the underlying Accounting Change with respect thereto has been implemented, any reference to GAAP contained therein shall, only to the extent of such Accounting Change, refer to GAAP consistently applied after giving effect to the implementation of such Accounting Change. If such parties cannot agree upon the required amendments within 30 days following the date of implementation of any Accounting Change, then all financial statements delivered and all calculations of financial covenants and other standards and terms in accordance with the Related Documents shall be prepared, delivered and made without regard to the underlying Accounting Change. EX-10 4 geec4thamendsecur.txt EXHIBIT 10.2 Exhibit 10.2 FOURTH AMENDMENT TO SECURITIZATION AGREEMENTS THIS FOURTH AMENDMENT TO SECURITIZATION AGREEMENTS (this "Amendment"), is made and entered into as of October 18, 2001 (the "Effective Date"), by and between CONSOLIDATED FREIGHTWAYS FUNDING LLC, a Delaware limited liability company (the "Borrower"), CONSOLIDATED FREIGHTWAYS CORPORATION OF DELAWARE, a Delaware corporation ("CFCD"; the Borrower and CFCD are referred to herein individually as a "Company" and collectively as the "Companies"), and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation ("GE Capital"), in its capacities as (i) assignee of all rights, titles and interests of Redwood Receivables Corporation, a Delaware corporation ("Redwood") as Conduit Lender (in such capacity, the "Conduit Lender"), (ii) as Committed Lender (in such capacity, the "Committed Lender"; in its dual capacities as Conduit Lender and Committed Lender, GE Capital is herein referred to as "Lender"), and (iii) as Administrative Agent for the Lender (in such capacity, the "Administrative Agent"). W I T N E S E T H: WHEREAS, CFCD and the Borrower are parties to a certain Receivables Sale and Contribution Agreement, dated as of April 27, 2001 (as amended to the date hereof, the "Sale Agreement"; capitalized terms used herein and not otherwise defined herein shall have the meanings given such terms in Annex X to the Sale Agreement as amended by this Amendment), whereby CFCD has agreed to sell, contribute or otherwise transfer to the Borrower, and the Borrower has agreed to purchase or otherwise acquire from CFCD, all of the right, title and interest of CFCD in the Receivables; and WHEREAS, CFCD, the Borrower, the Lender and the Administrative Agent, are parties to a certain Servicing Agreement, dated as of April 27, 2001 (as amended to the date hereof, the "Servicing Agreement"), whereby the Borrower has appointed CFCD to service, administer and collect the Transferred Receivables pursuant to the Funding Agreement (defined below) on the terms and conditions set forth therein; and WHEREAS, the Borrower, the Lender and the Administrative Agent are parties to a certain Receivables Funding Agreement, dated as of April 27, 2001 (as amended to the date hereof, the "Funding Agreement") (the Sale Agreement, the Servicing Agreement and the Funding Agreement, together with all exhibits and annexes thereto, are referred to herein collectively as the "Securitization Agreements"), pursuant to which, among other things, the Lender has agreed, subject to certain terms and conditions, to make Advances to the Borrower to fund its purchases of the Receivables; and WHEREAS, pursuant to that certain Assignment Agreement, dated as of the date hereof, between Redwood and GE Capital (the "Redwood Assignment"), Redwood has assigned and transferred to GE Capital, and GE Capital has accepted, all of Redwood's rights, titles and interests as a Conduit Lender in and to Transferred Receivables, the Borrower Collateral, the Advances and other Borrower Secured Obligations owing to Redwood, the Funding Agreement and the other Related Documents (collectively, the "Redwood Interest"); and WHEREAS, the Companies have requested that the Securitization Agreements be amended in certain respects and that certain waivers be granted, and GE Capital (in its various capacities) is willing to agree to such amendments and grant such waivers subject to the terms and conditions of this Amendment. NOW THEREFORE, in consideration of the premises and mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Waivers of Certain Events. Subject to the terms and conditions of this Amendment, including without limitation the fulfillment of the conditions to effectiveness specified in Section 7 below, the Lender, the Administrative Agent, the Collateral Agent and the Liquidity Agent hereby waive any Termination Event or Incipient Termination Event under Section 9.01(b) or (m) of the Funding Agreement and any Event of Servicer Termination or Incipient Servicer Termination Event under Section 6.01(c) or (p) of the Servicing Agreement which may have resulted from the occurrence of an "Event of Default" under Section 8.1(n)(i) of the Standby Letter of Credit Agreement (as in effect immediately prior to the effectiveness of the Fourth Letter of Credit Agreement Amendment as defined below) on account of the Parent's failure to receive prior to October 15, 2001, the Debt proceeds specified therein; provided that the aforesaid waivers relate solely to the specific covenants, period and event described above and nothing in this Amendment is intended, or shall be construed, to waive any other Termination Event, Incipient Termination Event, Event of Servicer Termination or Incipient Servicer Termination Event (including without limitation any Termination Event, Incipient Termination Event, Event of Servicer Termination or Incipient Servicer Termination Event which may result from any failure by Parent and its Subsidiaries to comply with any of the financial covenants in Annex 4.02(p) to the Sale Agreement or Annex C to the Standby Letter of Credit Agreement, as such annexes are in effect after giving effect to this Amendment and the Fourth Standby Letter of Credit Amendment, for the fiscal quarter ending September 30, 2001). 2. Amendments of Securitization Agreements. Subject to the terms and conditions of this Amendment, including without limitation the fulfillment of the conditions to effectiveness specified in Section 7 below, the Securitization Agreements shall be amended as follows: (A) Amendments to Funding Agreement. The parties signatory to the Funding Agreement hereby agree that the Funding Agreement shall be amended as follows: (1) Section 5.02(b) of the Funding Agreement is hereby deleted in its entirety and the following new Section 5.02(b) is substituted in lieu thereof: The Borrower hereby agrees that, from and after the Closing Date and until the Termination Date, it shall deliver or cause to be delivered to the Lenders, the Administrative Agent and the Collateral Agent (i) as soon as available and in any event no later than 12:00 noon (New York time) on each Business Day, a Borrowing Base Certificate, and (ii) such other reports, statements and reconciliations with respect to the Borrowing Base or Borrower Collateral as any Lender, the Administrative Agent or the Collateral Agent shall from time to time request in its reasonable discretion. (2) Section 6.03 of the Funding Agreement is hereby amended by adding the following new subsection (d) at the end thereof: (d) Notwithstanding anything herein to the contrary, no distribution shall be made to the Servicer under Section 6.03(a)(ii)(3) or (4) if and for so long as the Originator is the Servicer. (3) Section 6.04 of the Funding Agreement is hereby amended by adding the following new subsection (c) at the end thereof: (c) Notwithstanding anything herein to the contrary, if and as for so long as the Originator is the Servicer, no distribution under Section 6.04(a)(ii) shall be made to the Servicer but rather the Borrower shall pay to the Servicer on each Settlement Date during the Revolving Period an amount equal to the Servicer's accrued but unpaid Servicing Fee as of the end of the immediately preceding Settlement Period. (4) Annex 5.02(a) to the Funding Agreement is hereby amended by adding the following new sentence at the end of paragraph (a) thereof: For each month in which the Servicer is the Originator, such Monthly Report also shall be accompanied by the written Certificate of the Chief Financial Officer of the Parent, substantially in the form attached hereto as Exhibit 5.02(a) that all Servicing Fees due to the Servicer with respect to the fiscal month covered by such Monthly Report have been paid to the Servicer by the Borrower in accordance with the terms and conditions of the Funding Agreement and the Servicing Agreement or, if that is not the case, describing the nature and status thereof and all efforts undertaken to cure such failure to pay. The Funding Agreement is hereby further amended by adding a new Exhibit 5.02(a) thereto in the form attached to this Amendment as Appendix II. (B) Amendment to Sale Agreement. The parties signatory to the Sale Agreement hereby agree that Annex 4.02(p) to the Sale Agreement shall be deleted in its entirety and the replacement Annex 4.02(p) attached to this Amendment as Appendix I shall be substituted in lieu thereof. (C) Amendments to Servicing Agreement. The parties signatory to the Servicing Agreement hereby agree that Section 6.01(p) of the Servicing Agreement is hereby deleted in its entirety and the following new Section 6.01(p) is substituted in lieu hereof (p) an "Event of Default" (as such term is defined in the Standby Letter of Credit Agreement or the Revolving Credit Agreement) shall occur, or the occurrence of the Standby Letter of Credit Commitment Termination Date; or (D) Amendments to Annex X. The parties signatory to each of the Funding Agreement, the Sale Agreement and the Servicing Agreement hereby agree to amend Annex X to the Funding Agreement, the Sale Agreement and the Servicing Agreement as follows: (1) The following definitions are hereby added to Annex X to the Funding Agreement, the Sale Agreement and the Servicing Agreement in the appropriate alphabetic order: "Fourth Standby Letter of Credit Amendment" shall mean the Fourth Amendment to Letter of Credit Agreements, dated as of October 18, 2001, between Parent, the Standby L/C Creditor and the other parties thereto. "Revolving Credit Agreement" shall mean the Credit Agreement contemplated to be entered into on or before October 31, 2001, among the Parent as Borrower, the other Credit Parties signatory thereto, and GE Capital as Lender and pursuant to which (and subject to the terms and conditions of which) it is contemplated that the Parent may obtain a revolving loan facility of up to $50,000,000 from GE Capital, together with any and all amendments, restatements supplements or modifications thereto or any refinancings, replacements or refundings thereof by GE Capital. Nothing in this Annex X or any other Related Document is intended, or shall be construed, to be an offer, promise, commitment or agreement by GE Capital to enter into the Revolving Credit Agreement or to extend any credit to the Parent thereunder. "Revolving Credit Agreement Closing Date" shall mean the date on which the initial loan is made by GE Capital to the Parent under the Revolving Credit Agreement. (2) The definitions of the terms "Committed Lender Funding Event" and "Payroll Reserve" set forth in Annex X to the Funding Agreement, the Sale Agreement and the Servicing Agreement are hereby deleted in their entireties and the following respective amended definitions of such terms are substituted in lieu thereof: "Committed Lender Funding Event" shall mean the occurrence of (a) any Redwood Termination Date (but only if both (i) no Termination Event has occurred and is continuing and (ii) the Committed Lender Expiry Date has not occurred) or (b) any Redwood Transfer Date. "Payroll Reserve" shall mean (i) at all times during the period from the Third Amendment Effective Date through the earlier of October 31, 2001 and the Revolving Credit Agreement Closing Date, an amount equal to $5,000,000 and (ii) at all times thereafter, an amount equal to $15,000,000. The imposition of the Payroll Reserve is not intended to modify or impair the Administrative Agent's discretion to impose additional reserves with respect to the unpaid employee payroll of the Parent and its Subsidiaries under clause (iv) of the definition of the term "Reserves" herein. 3. No Other Waivers or Amendments. Except for the waivers and amendments expressly set forth and referred to in Section 1 and Section 2 above, respectively, the Securitization Agreements shall remain unchanged and in full force and effect. 4. Representations and Warranties. Each Company hereby represents and warrants to the Lender and the Administrative Agent that (a) this Amendment has been duly authorized, executed and delivered by such Company, (b) after giving effect to this Amendment and the Fourth Letter of Credit Agreement Amendment, no Termination Event, Incipient Termination Event, Event of Servicer Termination or Incipient Servicer Termination Event in respect of such Company has occurred and is continuing as of this date, and (c) after giving effect to this Amendment and the Fourth Letter of Credit Agreement Amendment, all of the representations and warranties made by such Company in the Securitization Agreements are true and correct in all material respects on and as of the date of this Amendment (except to the extent that any such representations or warranties expressly referred to a specific prior date). Any breach in any material respect by any Company of any of its representations and warranties contained in this Section 4 shall be a Termination Event and an Event of Servicer Termination for all purposes of the Securitization Agreements. Any Advances made on the Effective Date shall be deemed to have been requested and funded after giving effect to this Amendment. 5. Ratification. Each Company hereby ratifies and reaffirms each and every term, covenant and condition set forth in the Securitization Agreements and all other documents delivered by such Company in connection therewith (including without limitation the other Related Documents to which each Company is a party), effective as of the date hereof. 6. Estoppel. To induce GE Capital (in its various capacities) to enter into this Amendment, each Company hereby acknowledges and agrees that, as of the date hereof, there exists no right of offset, defense or counterclaim in favor of any Company as against Redwood or GE Capital (in its various capacities) with respect to the obligations of any Company to Redwood or GE Capital (in its various capacities) under the Securitization Agreements or the other Related Documents, either with or without giving effect to this Amendment. 7. Conditions to Effectiveness. This Amendment shall become effective, as of the Effective Date, subject to the prior or subsequent (i) receipt by the Administrative Agent of this Amendment, duly executed, completed and delivered by each of the Companies and by GE Capital in its various capacities; (ii) receipt by the Administrative Agent of the Amendment Fee Letter of even date between the Borrower and the Administrative Agent (the "Amendment Fee Letter"), duly executed and delivered by such parties, (iii) receipt by the Administrative Agent of a Borrowing Base Certificate dated the date hereof, in form and substance satisfactory to Agent, (iv) receipt by the Administrative Agent of evidence satisfactory to it that all conditions precedent to the effectiveness of the Fourth Amendment to Letter of Credit Agreements of even date between the Debtor, the other Credit Parties party thereto and the Standby L/C Creditor (the "Fourth Letter of Credit Document Amendment") have been fulfilled (other than the effectiveness of this Amendment), and (v) receipt by the Administrative Agent for the account of GE Capital of the Amendment Fee in the amount specified in the Amendment Fee Letter, which fee shall be non-refundable and fully earned upon payment thereof by the Borrower. The Administrative Agent shall promptly notify the Companies in writing when the conditions specified in clauses (i), (ii) and (iii) above are satisfied. It is the intention and agreement of the parties that the assignment and transfer of the Redwood Interest by Redwood to GE Capital under the Redwood Assignment shall be deemed to have occurred immediately prior to the effectiveness of this Amendment. Upon the effective date of this Amendment, (i) the amendments to the financial covenants in Annex 4.02 (p) to the Sale Agreement as provided for in Appendix I attached hereto shall be deemed effective retroactively as of July 1, 2001, and (ii) all other amendments set forth in Section 2 of this Amendment shall become effective as of the Effective Date of this Amendment. 8. Reimbursement of Expenses. Each Company hereby agrees that it shall reimburse the Administrative Agent on demand for all costs and expenses (including without limitation reasonable attorney's fees) incurred by the Administrative Agent in connection with the negotiation, documentation and consummation of this Amendment and the other documents executed in connection herewith and therewith and the transactions contemplated hereby and thereby. 9. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK FOR CONTRACTS TO BE PERFORMED ENTIRELY WITHIN SAID STATE. 10. Severability of Provisions. Any provision of this Amendment which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. To the extent permitted by Applicable Law, each Company hereby waives any provision of law that renders any provision hereof prohibited or unenforceable in any respect. 11. Counterparts. This Amendment may be executed in any number of several counterparts, all of which shall be deemed to constitute but one original and shall be binding upon all parties, their successors and permitted assigns. 12. Entire Agreement. The Securitization Agreements as amended by this Amendment embody the entire agreement between the parties hereto relating to the subject matter hereof and supersedes all prior agreements, representations and understandings, if any, relating to the subject matter hereof. 13. Originators' and GE Capital's Capacities. CFCD is executing and delivering this Amendment both in its capacity as an Originator under the Sale Agreement and as a Servicer under the Servicing Agreement, and all references herein to "CFCD" shall be deemed to include CFCD in both such capacities unless otherwise expressly indicated. GE Capital is executing and delivering this Amendment in its various capacities as Lender and the Administrative Agent, and all references herein to "GE Capital" shall be deemed to include it in all such capacities unless otherwise expressly indicated. IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed by their respective officers thereunto duly authorized, as of the date first above written. CONSOLIDATED FREIGHTWAYS FUNDING LLC, as Borrower By:/s/Kerry K. Morgan Name:Kerry K. Morgan Title:Vice President and Treasurer CONSOLIDATED FREIGHTWAYS CORPORATION OF DELAWARE, as Originator and Servicer By:/s/Robert E. Wrightson Name:Robert E. Wrightson Title:Executive Vice President and Chief Financial Officer GENERAL ELECTRIC CAPITAL CORPORATION, as Lender and Administrative Agent By:/s/Craig Winslow Name:Craig Winslow Duly Authorized Signatory APPENDIX I TO FOURTH AMENDMENT TO SECURITIZATION AGREEMENTS ANNEX 4.02(p) (Section 6.10) to CREDIT AGREEMENT FINANCIAL COVENANTS (a) Minimum Fixed Charge Coverage Ratio. The Borrower and its Subsidiaries shall have on a consolidated basis, as of the end of each Fiscal Quarter set forth below, a Fixed Charge Coverage Ratio for the Rolling Period then ended of not less than the following: Fiscal Quarter Minimum Fixed Charge Coverage Ratio Fiscal Quarter ending 0.20 to 1.00 September 30, 2001 Fiscal Quarter ending 0.01 to 1.00 December 31, 2001 Fiscal Quarter ending -1.0 to 1.00 March 31, 2002 Fiscal Quarter ending 0.30 to 1.00 June 30, 2002 Fiscal Quarter ending 1.60 to 1.00 September 30, 2002 Fiscal Quarter ending 1.70 to 1.00 December 31, 2002 and each Fiscal Quarter thereafter (b) Minimum Tangible Net Worth. Borrower and its Subsidiaries on a consolidated basis shall have a Tangible Net Worth, (i) as of the Closing Date and as of the end of each of the second and third Fiscal Quarters of the Fiscal Year ending December 31, 2001, of not less than $180,000,000, (ii) as of the end of the fourth Fiscal Quarter of the Fiscal Year ending December 31, 2001, of not less than $150,000,000, (iii) as of the end of each of the first, second and third Fiscal Quarters of the Fiscal Year ending December 31, 2002, of not less than $120,000,000, and (iv) as of the end of the fourth Fiscal Quarter of the Fiscal Year ending December 31, 2002 and as of the end of each of the first, second and third Fiscal Quarters of the Fiscal Year ending December 31, 2003, of not less than $130,000,000. Thereafter, Borrower and its Subsidiaries on a consolidated basis shall have, as of the end of each Fiscal Year ending on or after December 31, 2003 (each such Fiscal Year herein called the "Subject Fiscal Year") and as of the end of the first three Fiscal Quarters of the immediately succeeding Fiscal Year, a Tangible Net Worth of not less than the sum of (i) the minimum Tangible Net Worth required hereunder for the Fiscal Year which immediately preceded the Subject Fiscal Year (or, where the Subject Fiscal Year is the Fiscal Year ending December 31, 2003, the sum of $130,000,000) plus (ii) an amount equal to fifty percent (50%) of the positive net income of the Borrower and its Subsidiaries on a consolidated basis for the Subject Fiscal Year plus (iii) an amount equal to one hundred percent (100%) of the amount of any equity raised by or capital contributed to the Borrower during the Subject Fiscal Year (in the case of equity raised or capital contributed, net of the bona fide, reasonable expenses, if any, relating to the raising of such equity or such capital contribution and paid to Persons who are not Affiliates of the Borrower). (c) Minimum EBITDA. Borrower and its Subsidiaries shall have on a consolidated basis for each Fiscal Quarter set forth below an EBITDA for the Rolling Period then ended of not less than the following: Fiscal Quarter Minimum EBITDA Fiscal Quarter ending $8,000,000 September 30, 2001 Fiscal Quarter ending $6,000,000 December 31, 2001 Fiscal Quarter ending -$17,000,000 March 31, 2002 Fiscal Quarter ending $15,000,000 June 30, 2002 Fiscal Quarter ending $53,000,000 September 30, 2002 Fiscal Quarter ending $80,000,000 December 31, 2002 and for each Fiscal Quarter thereafter (d) Maximum Capital Expenditures. Borrower and its Subsidiaries shall not make or incur any Capital Expenditures if, after giving effect thereto, the aggregate amount of all Capital Expenditures made or incurred by Borrower and its Subsidiaries during any period of four (4) consecutive Fiscal Quarters would exceed the amounts set forth below for such period: Four Consecutive Fiscal Maximum Capital Quarters Ending Expenditures Fiscal Quarter ending $35,000,000 June 30, 2001 Fiscal Quarter ending $36,000,000 September 30, 2001 Fiscal Quarter ending $30,000,000 December 31, 2001 Fiscal Quarter ending $25,000,000 March 31, 2002 and for each Fiscal Quarter thereafter Capitalized terms used in this Annex C and not otherwise defined below shall have the respective meanings ascribed to them in Annex A. The following terms shall have the respective meanings set forth below: "Capital Expenditures" shall mean, with respect to any Person, all expenditures (by the expenditure of cash or the incurrence of Indebtedness) by such Person during any measuring period for any fixed assets or improvements or for replacements, substitutions or additions thereto, that have a useful life of more than one year and that are required to be capitalized under GAAP, but excluding (i) Capital Expenditures of the Borrower or any Subsidiary Guarantor financed by the incurrence of Term Debt to the extent that such Term Debt is permitted to be incurred under Section 6.3, provided that on or prior to the date of incurrence of such Term Debt, Borrower has furnished to Lender a written statement of sources and uses of such Term Debt, which statement describes with particularity the principal amount of the Term Debt to be used for the proposed Capital Expenditure and the fixed assets or improvements to be acquired, replaced, substituted or added to in connection with such proposed Capital Expenditure, (ii) the purchase of the Vancouver Property by the Borrower, provided that to the extent the purchase price of the Vancouver Property exceeds $25,000,000, such excess shall be included as a Capital Expenditure for purposes of determining compliance with the Maximum Capital Expenditure covenant set forth in paragraph (d) of this Annex C, (iii) any Capital Expenditures incurred by the Borrower in connection with the refinancing of the Participation Agreement, provided that to the extent that such Capital Expenditures exceed $22,500,000, such excess shall be included as a Capital Expenditure for purposes of determining compliance with the Maximum Capital Expenditure covenant set forth in paragraph (d) of this Annex C, (iv) any purchase by the Borrower or any Subsidiary of fixed assets or improvements to the extent that such purchase qualifies for like- kind tax treatment under Section 1031 of the IRC, provided that such exclusion from Capital Expenditures under this clause (iv) shall be limited to an amount not to exceed the lesser of (x) the cash proceeds received from the transfer of the property relinquished in the like-kind exchange, assuming for purposes hereof that the Borrower or Subsidiary does not qualify for like- kind tax treatment under Section 1031 of the IRC in connection with such transfer and (y) the value of the fixed assets or improvements purchased by the Borrower in the subject transaction which qualifies for like-kind tax treatment under Section 1031 of the IRC, (v) any purchase by the Borrower or any Subsidiary of fixed assets or improvements with the proceeds received from the sale of the Menlo Park Property, provided that on or prior to the date of any such Capital Expenditures, Borrower has furnished to Lender a written statement of sources and uses of the proceeds from the sale of the Menlo Park Property, which statement describes with particularity the amount of the proceeds from the sale of the Menlo Park Property to be used for the proposed Capital Expenditure and the fixed assets or improvements to be acquired, replaced, substituted or added to in connection with such proposed Capital Expenditures, and (vi) such other items as Borrower and Lender may agree in writing to exclude. "EBITDA" shall mean, with respect to any Person for any fiscal period, the amount equal to (a) consolidated net income of such Person for such period, plus (b) the sum of (i) any provision for income taxes, (ii) Interest Expense, (iii) loss from extraordinary items for such period, (iv) depreciation and amortization for such period, (v) amortized debt discount for such period, (vi) the amount of any deduction to consolidated net income as the result of any grant to any members of the management of such Person of any Stock, and (vii) Lease Expenses, in each case to the extent included in the calculation of consolidated net income of such Person for such period in accordance with GAAP, but without duplication, minus (c) the sum of (i) income tax credits, (ii) interest income, (iii) gain from extraordinary items for such period, (iv) any aggregate net gain (but not any aggregate net loss) during such period arising from the sale, exchange or other disposition of capital assets by such Person (including any fixed assets, whether tangible or intangible, all inventory sold in conjunction with the disposition of fixed assets and all securities), provided that there shall be excluded from the amount of any aggregate net gain under this clause (iv), in solely the Fiscal Quarter ending March 31, 2001, an amount equal to the lesser of (x) $19,200,000 and (y) the actual gain recognized by the Borrower and its Subsidiaries from the sale of its Portland, Oregon administrative complex and (v) any other non-cash gains that have been added in determining consolidated net income (including LIFO adjustments), in each case to the extent included in the calculation of consolidated net income of such Person for such period in accordance with GAAP, but without duplication,. For purposes of this definition, the following items shall be excluded in determining consolidated net income of a Person: (A) the income (or deficit) of any other Person accrued prior to the date it became a Subsidiary of, or was merged or consolidated into, such Person or any of such Person's Subsidiaries; (B) the income (or deficit) of any other Person (other than a Subsidiary) in which such Person has an ownership interest, except to the extent any such income has actually been received by such Person in the form of cash dividends or distributions; (C) the undistributed earnings of any Subsidiary of such Person to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any contractual obligation or requirement of law applicable to such Subsidiary; (D) any restoration to income of any contingency reserve, except to the extent that provision for such reserve was made out of income accrued during such period; (E) any write-up of any asset; (F) any net gain from the collection of the proceeds of life insurance policies; (G) any net gain arising from the acquisition of any securities, or the extinguishment, under GAAP, of any Indebtedness, of such Person, (H) in the case of a successor to such Person by consolidation or merger or as a transferee of its assets, any earnings of such successor prior to such consolidation, merger or transfer of assets, and (I) any deferred credit representing the excess of equity in any Subsidiary of such Person at the date of acquisition of such Subsidiary over the cost to such Person of the investment in such Subsidiary. "Fixed Charges" shall mean, with respect to any Person for any fiscal period, the aggregate of, without duplication, (a) all Interest Expense and Lease Expense paid or accrued during such period, plus (b) all regularly scheduled payments of principal and implied principal with respect to Debt (including any lease payments by any Person in respect of any Capital Leases, any Sale- Leaseback Debt and any Vancouver Secured Debt as such terms are defined in the Standby Letter of Credit Agreement) due or made during such period, plus (c) all Restricted Payments made during such period (other than Permitted Stock Repurchases covered by Section 6.14(vii) of the Standby Letter of Credit Agreement), plus (d) any cash payments made by such Person in connection with any Permitted Acquisitions. "Fixed Charge Coverage Ratio" shall mean, with respect to any Person for any fiscal period, the ratio of (i) the sum of (x) EBITDA for such period less (y) cash taxes made during such period to (ii) Fixed Charges for such period. "Interest Expense" shall mean, with respect to any Person for any fiscal period, the sum of (a) interest expense (whether cash or non-cash) of such Person determined in accordance with GAAP for the relevant period ended on such date, including (i) amortization of original issue discount on any Indebtedness and of all fees payable in connection with the incurrence of such Indebtedness (to the extent included in interest expense), (ii) the interest portion of any deferred payment obligation, (iii) the interest component of any Capital Lease Obligation plus (b) the amount of any Letter of Credit Fee (as such term is defined in the Letter of Credit Agreement) paid during the relevant period ended on such date, plus (c) the amount of any payments by such Person, as lessee, under any sale-leaseback or synthetic lease transaction. "Lease Expenses" shall mean, with respect to any Person for any fiscal period, the aggregate rental obligations of such Person determined in accordance with GAAP that are payable in respect of such period under operating leases of equipment having an original non-cancelable term (as determined in accordance with GAAP) in excess of twelve months (net of income from subleases thereof, but including taxes, insurance, maintenance and similar expenses that the lessee is obligated to pay under the terms of such leases), whether or not such obligations are reflected as liabilities or commitments on a consolidated balance sheet of such Person or in the notes thereto, excluding, however, any such obligations under Capital Leases. "Net Worth" shall mean, with respect to any Person as of any date of determination, (a) the book value of the assets of such Person, minus (b) reserves applicable thereto, minus (c) all of such Person's liabilities on a consolidated basis (including accrued and deferred income taxes), all as determined in accordance with GAAP. "Rolling Period" shall mean, as of the end of any Fiscal Quarter, the immediately preceding four (4) Fiscal Quarters, including the Fiscal Quarter then ending. "Tangible Net Worth" shall mean, with respect to any Person at any date, the Net Worth of such Person at such date, (x) excluding, however, from the determination of the total assets at such date, (a) all goodwill, capitalized organizational expenses, capitalized research and development expenses, trademarks, trade names, copyrights, patents, patent applications, licenses (excluding software licenses) and rights in any thereof, and other intangible items (other than software licenses), (b) all unamortized debt discount and expense, (c) treasury Stock, and (d) any write-up in the book value of any asset resulting from a revaluation thereof, but (y) including any non-cash valuation reserves for deferred taxes and any foregone tax benefits provided that such reserves are established in accordance with Financial Accounting Standard Number 109 and do not result in an increase in such Person's future cash tax payments. Rules of Construction Concerning Financial Covenants. Unless otherwise specifically provided therein, any accounting term used in any Loan Document shall have the meaning customarily given such term in accordance with GAAP, and all financial computations thereunder shall be computed in accordance with GAAP consistently applied. That certain items or computations are explicitly modified by the phrase "in accordance with GAAP" shall in no way be construed to limit the foregoing. If any Accounting Changes occur and such changes result in a change in the calculation of the financial covenants, standards or terms used in any Loan Document, then the parties thereto agree to enter into negotiations in order to amend such provisions so as to equitably reflect such Accounting Changes with the desired result that the criteria for evaluating the financial condition of such Persons and their Subsidiaries shall be the same after such Accounting Changes as if such Accounting Changes had not been made. If the parties thereto agree upon the required amendments thereto, then after appropriate amendments have been executed and the underlying Accounting Change with respect thereto has been implemented, any reference to GAAP contained therein shall, only to the extent of such Accounting Change, refer to GAAP consistently applied after giving effect to the implementation of such Accounting Change. If such parties cannot agree upon the required amendments within 30 days following the date of implementation of any Accounting Change, then all financial statements delivered and all calculations of financial covenants and other standards and terms in accordance with the Related Documents shall be prepared, delivered and made without regard to the underlying Accounting Change. EX-10 5 geec5thamendloc.txt EXHIBIT 10.3 Exhibit 10.3 FIFTH AMENDMENT TO LETTER OF CREDIT AGREEMENTS THIS FIFTH AMENDMENT TO LETTER OF CREDIT AGREEMENTS (this "Amendment"), is made and entered into as of October 24, 2001 (the "Effective Date"), by and between CONSOLIDATED FREIGHTWAYS CORPORATION, a Delaware corporation ("Debtor"), the other Credit Parties signatory to the Letter of Credit Agreements described below (collectively, together with the Debtor, the "Credit Parties") and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation ("GE Capital"). W I T N E SS E T H: WHEREAS, Debtor and GE Capital are parties to that certain Letter of Credit Agreement, dated as of April 27, 2001 (as amended to the date hereof, the "Letter of Credit Agreement"; capitalized terms used herein and not otherwise defined herein shall have the meanings given such terms in the Letter of Credit Agreement), pursuant to which GE Capital has committed to make certain letters of credit available to Debtor; and WHEREAS, Debtor, the other Credit Parties and GE Capital desire to modify the Letter of Credit Agreement, the Security Agreement, the Pledge Agreement and the Cash Collateral Account Agreement and the Subsidiary Guaranty (collectively, the "Letter of Credit Agreements") in certain respects and that certain waivers with respect thereto be granted, all in accordance with and subject to the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the premises, the covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Debtor, the other Credit Parties and GE Capital do hereby agree that all capitalized terms used herein shall have the meanings ascribed thereto in the Letter of Credit Agreement (except as otherwise expressly defined or limited herein) and do hereby further agree as follows: 1. Consent and Waivers. (A) Subject to the terms and conditions of this Amendment, including without limitation the fulfillment of the conditions to effectiveness specified in Section 7 below, the Creditor hereby consents to (i) the formation of a new Domestic Subsidiary to be known as "CF MovesU.com Incorporated" so long as Debtor timely complies with all of the requirements set forth in Section 5.10 of the Letter of Credit Agreement relating thereto, and (ii) to the investment by the Credit Parties of up to $1,000 in a new Domestic Subsidiary to be known as "CF MovesU.com Incorporated" prior to the date such Subsidiary becomes a Subsidiary Guarantor. (B) Subject to the terms and conditions of this Amendment, including without limitation the fulfillment of the conditions to effectiveness specified in Section 7 below, the Creditor hereby waives the minimum Excess Liquidity requirements in clauses (i)(B) and (ii)(B) of Section 2.2(f) of the Letter of Credit Agreement solely with respect to the October Letter of Credit; provided that the aforesaid waiver relates solely to the issuance of the October Letter of Credit and to the specific conditions precedent to issuance of such Letter of Credit, and nothing in this Amendment is intended, or shall be construed, to waive any of the conditions precedent in Section 2.2(f) with respect to the issuance of any other Letters of Credit. 2. Amendments of the Letter of Credit Agreements. Subject to the terms and conditions of this Amendment, including without limitation the fulfillment of the conditions precedent specified in Section 7 below, the Letter of Credit Agreements are hereby amended as follows: (A) Amendments to Letter of Credit Agreement. The Letter of Credit Agreement shall be amended as follows: (1) Section 1.7(a) of the Letter of Credit Agreement is deleted in its entirety and the following new Section 1.7(a) is substituted in lieu thereof: (a) As to all payments made on any of the Obligations when a Default or Event of Default shall have occurred and be continuing or following the Commitment Termination Date, Debtor hereby irrevocably waives the right to direct the application of any and all payments received from or on behalf of Debtor, and Debtor hereby irrevocably agrees that Creditor shall have the continuing exclusive right to apply any and all such payments against the Obligations as Creditor may deem advisable notwithstanding any previous entry by Creditor in the Letter of Credit Account or any other books and records. In the absence of a specific determination by Creditor with respect thereto, payments shall be applied to amounts then due and payable in the following order: (1) to Fees and Creditor's expenses reimbursable hereunder; (2) to accrued but unpaid interest on the Obligations (other than the Other Secured Obligations); (3) to the outstanding principal balance of the Obligations (other than the Other Secured Obligations) and to provide cash collateral for Letter of Credit Obligations in the manner described in Section 1.1(c), ratably to the aggregate, combined outstanding principal balance of the Obligations (other than the Other Secured Obligations) and outstanding Letter of Credit Obligations; (4) to all other Obligations (other than the Other Secured Obligations); and (5) to all Other Secured Obligations. In the event of any conflict between this Section 1.7(a) and Section 1.7(a) of the Revolving Credit Agreement, this Section 1.7(a) shall control for purposes of determining application and allocation of any payments received by the Creditor hereunder. (2) Annex A to the Letter of Credit Agreement is hereby amended by adding the following new definitions thereto in the appropriate alphabetical order: "October Letter of Credit" shall mean that certain Letter of Credit in an amount not to exceed $15,000,000 to be issued to United States Fidelity and Guaranty (or one of its subsidiaries) on or about October 24, 2001. "Other Credit Documents" shall mean (i) any agreement, note, instrument, lease or guarantee heretofore, now or hereafter executed or issued by any Credit Party in favor of any Affiliate of Creditor or entered into by a Credit Party with any Affiliate of Creditor, or held by any Affiliate of Creditor, and evidencing any debt, liabilities or obligations for the performance of covenants, tasks or duties or for payment of monetary amounts (whether or not such performance is then required or contingent, or such amounts are liquidated or determinable) of any kind or nature, present or future, owing by any Credit Party to any Affiliate of Creditor or entered into by a Credit Party with any Affiliate of Creditor, in each case, as such agreements, notes, instruments, leases and guarantees may be amended, supplemented or replaced from time to time, and (ii) any agreement, note, instrument, lease or guarantee (other than this Agreement, the other Letter of Credit Documents, the Revolving Credit Agreement and the other Revolving Credit Documents) heretofore, now or hereafter executed or issued by any Credit Party in favor of Creditor or entered into by a Credit Party with Creditor, or held by Creditor, and evidencing any debt, liabilities or obligations for the performance of covenants, tasks or duties or for payment of monetary amounts (whether or not such performance is then required or contingent, or such amounts are liquidated or determinable) of any kind or nature, present or future, owing by any Credit Party to Creditor, in each case, as such agreements, notes, instruments, leases and guarantees may be amended, supplemented or replaced from time to time; provided that the Other Credit Documents shall not include any of the Letter of Credit Documents or the Revolving Credit Documents. "Other Secured Obligations" shall mean (i) all advances, debts, liabilities and obligations, for the performance of covenants, tasks or duties or for payment of monetary amounts (whether or not such performance is then required or contingent, or such amounts are liquidated or determinable) owing by any Credit Party to any Affiliate of Creditor, and all covenants and duties regarding such amounts, of any kind or nature, present or future, whether or not evidenced by any Other Credit Documents, including, without limitation, all advances, debts, liabilities and obligations arising under any Other Credit Documents and any other agreement, note, instrument, lease or guarantee heretofore, now or hereafter executed or issued by any Credit Party in favor of any Affiliate of Creditor, and (ii) all advances, debts, liabilities and obligations for the performance of covenants, tasks or duties or for payment of monetary amounts (whether or not such performance is then required or contingent, or such amounts are liquidated or determinable) owing by any Credit Party to Creditor, and all covenants and duties regarding such amounts, of any kind or nature, present or future, whether or not evidenced by any Other Credit Documents, including, without limitation, all advances, debts, liabilities and obligations arising under any Other Credit Documents and any other agreement, note, instrument, lease or guarantee heretofore, now or hereafter executed or issued by any Credit Party in favor of Creditor. This term includes all principal, interest (including all interest which accrues after the commencement of any case or proceeding in bankruptcy after the insolvency of, or for the reorganization of any Credit Party, whether or not allowed in such proceeding), fees, charges, expenses, attorneys' fees and any other sum chargeable by Creditor or any Affiliate of Creditor to any Credit Party under any Other Credit Document. Notwithstanding anything herein to the contrary, the Other Secured Obligations shall not include any of the Obligations described in clauses (i) and (ii) of the definition of such term in this Annex A. (3) Annex A to the Letter of Credit Agreement is hereby amended by deleting therefrom the definition of "Obligations" in its entirety and by substituting the following amended definition of such term in lieu thereof: "Obligations" shall mean (i) all Reimbursement Obligations, (ii) all advances, debts, liabilities and obligations, for the performance of covenants, tasks or duties or for payment of monetary amounts (whether or not such performance is then required or contingent, or such amounts are liquidated or determinable) owing by any Credit Party to Creditor, and all covenants and duties regarding such amounts, of any kind or nature, present or future, whether or not evidenced by any note, agreement or other instrument, arising under this Agreement, the Revolving Credit Agreement, or any of the other Letter of Credit Documents or Revolving Credit Documents, and (iii) all Other Secured Obligations. This term includes all principal, interest (including all interest which accrues after the commencement of any case or proceeding in bankruptcy after the insolvency of, or for the reorganization of any Credit Party, whether or not allowed in such proceeding), Fees, Charges, expenses, attorneys' fees and any other sum chargeable by Creditor or any Affiliate of any Creditor, as applicable, to any Credit Party under this Agreement, the Revolving Credit Agreement, any of the other Revolving Credit Documents, any of the other Letter of Credit Documents or any of the Other Credit Documents. (B) Amendment of Security Agreement. Section 2 of the Security Agreement shall be amended by deleting said Section 2 in its entirety and substituting in lieu thereof the following new Section 2 to read in its entirety as follows: 2. GRANT OF LIEN. (a) To secure the prompt and complete payment, performance and observance of all of the Obligations (as such term is defined in the Letter of Credit Agreement), including, without limitation, all of Debtor's Obligations under the Letter of Credit Agreement, the Revolving Credit Agreement and the Other Credit Documents, all of the Grantor Subsidiaries' payment and performance obligations under the Guaranty and all obligations of the Grantors now or hereafter existing under this Agreement including, without limitation, all fees, costs and expenses whether in connection with collection actions hereunder or otherwise (collectively, the "Secured Obligations"), and subject to the terms and conditions of this Agreement, each Grantor hereby grants, assigns, conveys, mortgages, pledges, hypothecates and transfers to Secured Party, for the benefit of itself and its Affiliates, a Lien upon all of its right, title and interest in, to and under the following property, whether now owned by or owing to or hereafter acquired by or arising in favor of such Grantor (including under any trade names, styles or derivations thereof), and regardless of where located (all of which being hereinafter collectively referred to as the "Collateral"): (i) all Receivables; (ii) all monies, securities and other property now or hereafter in the possession or custody of, or in transit to, Secured Party, for any purpose (including safekeeping, collection or pledge), from or for any Grantor, or as to which any Grantor may have any right or power, and all of Secured Party's credits and balances with any Grantor existing at any time; and (iii) to the extent not otherwise included, all proceeds and products of the foregoing and all accessions to, and substitutions and replacements for, each of the foregoing. (b) In addition, to secure the prompt and complete payment, performance and observance of the Secured Obligations and in order to induce the Secured Party as aforesaid, each Grantor hereby grants to Secured Party, for the benefit of itself and its Affiliates, a right of setoff against the property of such Grantor held by Secured Party, consisting of property described above in Section 2(a) now or hereafter in the possession or custody of or in transit to Secured Party, for any purpose, including safekeeping, collection or pledge, for the account of such Grantor, or as to which such Grantor may have any right or power. (c) All Liens, security interests and other rights, titles and interests of Secured Party on behalf of itself and its Affiliates under this Security Agreement in and to the Collateral and all rights and remedies of Secured Party hereunder are subject to the terms and conditions of the Intercreditor Agreement. Notwithstanding anything herein to the contrary, the grant of the foregoing security interest shall be effective automatically (without notice or any other action) on (but not prior to) the Initial Funding Date and shall remain effective until the Termination Date. (C) Amendment of Cash Collateral Agreement. The parties hereto hereby agree that the security interest granted pursuant to Section 1 of the Cash Collateral Account Agreement shall be for the benefit of Creditor and its Affiliates and shall also secure Debtor's obligations under the Revolving Credit Agreement, the Revolving Credit Documents and the Other Credit Documents. (D) Amendment of Pledge Agreement. Section 1 of the Pledge Agreement shall be amended by deleting said Section in its entirety and substituting in lieu thereof the following new Section 1 to read in its entirety as follows: 1. SECURITY FOR OBLIGATIONS, ETC. This Agreement is for the benefit of the Pledgee on behalf of itself and its Affiliates and is security for the prompt payment in full when due, whether at stated maturity, by acceleration or otherwise, and performance of all Pledgor's payment and performance obligations of any kind under or in connection with the Guaranty and all obligations of Pledgor now or hereafter existing under this Agreement including, without limitation, all fees, costs and expenses whether in connection with collection actions hereunder or otherwise (collectively, the "Secured Obligations"). (E) Amendment of Pledge Agreement. Section 3.1 of the Pledge Agreement shall be amended by deleting said Section in its entirety and substituting in lieu thereof the following new Section 3.1 to read in its entirety as follows: 3.1 Pledge. Subject to the terms and conditions hereof, and in order to secure the Secured Obligations, the Pledgor hereby pledges to the Pledgee, for the benefit of itself and its Affiliates, all of its rights, titles and interests in and to the Pledged Interests, together with (i) subject to the rights of the Pledgor set forth in Section 5, all dividends (whether in cash, shares, warrants, options, or other interests or securities), cash, instruments or other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Interests, and (ii) all cash and non-cash proceeds of the foregoing, and the Pledgor hereby grants to the Pledgee on behalf of itself and its Affiliates a present and continuing security interests in, and hereby assigns, transfers, interests, hypothecates and sets over to the Pledgee, on behalf of itself and its Affiliates all of Pledgor's rights, titles and interests in and to the Pledged Interests (and in and to the certificates or instruments evidencing the items described in clauses (i), and (ii) above) to be held by the Pledgee, on behalf of itself and its Affiliates upon the terms and conditions set forth in this Agreement. The Pledgor agrees to deliver to the Pledgee on the date hereof any and all certificates representing the Pledged Interests accompanied by undated transfer powers duly executed in blank by the Pledgor and any and all certificates and instruments evidencing the items described in clauses (i) and (ii) above promptly upon Pledgor's receipt thereof. (F) Amendment of Subsidiary Guaranty. Section 1 of the Subsidiary Guaranty shall be amended by deleting the first sentence thereof in its entirety and by substituting the following replacement sentence in lieu thereof: Subject to the provisions of Section 7 below, each Guarantor hereby jointly, severally, absolutely, unconditionally and irrevocably guarantees to the Guaranteed Party and its Affiliates the prompt payment when due, whether at stated maturity, by acceleration or otherwise, of all of the Obligations (as defined in each of the Letter of Credit Agreement, the Revolving Credit Agreement and the Other Credit Documents, and including all renewals, extensions, modifications, and refinancings thereof) now or hereafter existing, whether for principal, interest, fees, reasonable expenses or otherwise, and all reasonable expenses (including reasonable attorney's fees and expenses) in enforcing any of its rights under the Letter of Credit Agreement, the Revolving Credit Agreement, the other Letter of Credit Documents, the other Revolving Credit Documents, and the Other Credit Documents (all of the foregoing, collectively, the "Guaranteed Obligations"). 3. No Other Waivers or Amendments. Except for the consent, waiver and amendments expressly set forth and referred to in Section 1 and Section 2 above, respectively, each of the Letter of Credit Agreements shall remain unchanged and in full force and effect. Nothing in this Amendment is intended or shall be construed to be a novation of any of the Letter of Credit Agreements or to affect, modify or impair the continuity or perfection of the Creditor's Liens under the Collateral Documents. 4. Representations and Warranties. To induce GE Capital to enter into this Amendment, Debtor and each of the other Credit Parties hereby warrant, represent and covenant to GE Capital that: (a) this Amendment has been duly authorized, executed and delivered by Debtor and each Credit Party signatory thereto, (b) after giving effect to this Amendment, no Termination Event or Event of Default has occurred and is continuing as of this date, and (c) after giving effect to this Amendment, all of the representations and warranties made by Debtor and each Credit Party in the Letter of Credit Agreement are true and correct in all material respects on and as of the date of this Amendment (except to the extent that any such representations or warranties expressly referred to a specific prior date). Any breach in any material respect by Debtor or any Credit Party of any of its representations and warranties contained in this Section 4 shall be an Event of Default under the Letter of Credit Agreement. 5. Ratification and Acknowledgment. Debtor and each of the other Credit Parties hereby ratify and reaffirm each and every term, covenant and condition set forth in the Letter of Credit Agreement and all other documents delivered by such company in connection therewith (including without limitation the other Letter of Credit Documents to which Debtor or any Credit Party is a party), effective as of the date hereof. Without limiting the generality of the foregoing, Debtor and each of the other Credit Parties hereby acknowledge and agree that any and all Obligations of the Debtor arising under the Revolving Credit Agreement, the other Revolving Credit Documents and the Other Credit Documents shall be guaranteed by the Domestic Subsidiaries of the Debtor (other than the Receivables Subsidiary) pursuant to the Subsidiary Guaranty and shall be secured by all of the Liens granted to GE Capital pursuant to the Collateral Documents. 6. Estoppel. To induce GE Capital to enter into this Amendment, Debtor and each of the other Credit Parties hereby acknowledge and agree that, as of the date hereof, there exists no right of offset, defense or counterclaim in favor of Debtor or any Credit Party as against GE Capital with respect to the obligations of Debtor or any Credit Party to GE Capital under the Letter of Credit Agreement or the other Letter of Credit Agreement Documents, either with or without giving effect to this Amendment. 7. Conditions to Effectiveness. This Amendment shall become effective, as of the Effective Date, subject to the prior or subsequent receipt by the GE Capital of this Amendment, duly executed, completed and delivered by Debtor and each Credit Party. Upon the effective date of this Amendment, the consent and waivers in Section 1 of this Amendment and all amendments set forth in Section 2 of this Amendment shall become effective as of the effective date of this Amendment. 8. Reimbursement of Expenses. Debtor and each of the other Credit Parties hereby agree that Debtor and each of the other Credit Parties shall reimburse GE Capital on demand for all costs and expenses (including without limitation reasonable attorney's fees) incurred by GE Capital in connection with the negotiation, documentation and consummation of this Amendment and the other documents executed in connection herewith and therewith and the transactions contemplated hereby and thereby. 9. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK FOR CONTRACTS TO BE PERFORMED ENTIRELY WITHIN SAID STATE. 10. Severability of Provisions. Any provision of this Amendment which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. To the extent permitted by applicable law, Debtor and each of the other Credit Parties hereby waive any provision of law that renders any provision hereof prohibited or unenforceable in any respect. 11. Counterparts. This Amendment may be executed in any number of several counterparts, all of which shall be deemed to constitute but one original and shall be binding upon all parties, their successors and permitted assigns. 12. Entire Agreement. The Letter of Credit Agreement as amended by this Amendment embodies the entire agreement between the parties hereto relating to the subject matter hereof and supersedes all prior agreements, representations and understandings, if any, relating to the subject matter hereof. [Remainder of page intentionally blank; next page is signature page] IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed by their respective officers thereunto duly authorized, as of the date first above written. DEBTOR: CONSOLIDATED FREIGHTWAYS CORPORATION By:/s/Robert E. Wrightson Name:Robert E. Wrightson Title:Executive Vice President and Chief Financial Officer CREDITOR: GENERAL ELECTRIC CAPITAL CORPORATION By:/s/Craig Winslow Name:Craig Winslow Title: Duly Authorized Signatory SUBSIDIARY GUARANTORS: CONSOLIDATED FREIGHTWAYS CORPORATION OF DELAWARE By:/s/Robert E. Wrightson Name:Robert E. Wrightson Title:Executive Vice President and Chief Financial Officer CF AIRFREIGHT CORPORATION By:/s/Robert E. Wrightson Name:Robert E. Wrightson Title:Executive Vice President and Chief Financial Officer REDWOOD SYSTEMS, INC. By:/s/Robert E. Wrightson Name:Robert E. Wrightson Title:Executive Vice President and Chief Financial Officer LELAND JAMES SERVICE CORPORATION By:/s/Robert E. Wrightson Name:Robert E. Wrightson Title:Executive Vice President and Chief Financial Officer EX-10 6 geec5thamendsecur.txt EXHIBIT 10.4 Exhibit 10.4 FIFTH AMENDMENT TO SECURITIZATION AGREEMENTS THIS FIFTH AMENDMENT TO SECURITIZATION AGREEMENTS (this "Amendment"), is made and entered into as of October 24, 2001 (the "Effective Date"), by and between CONSOLIDATED FREIGHTWAYS FUNDING LLC, a Delaware limited liability company (the "Borrower"), CONSOLIDATED FREIGHTWAYS CORPORATION OF DELAWARE, a Delaware corporation ("CFCD"; the Borrower and CFCD are referred to herein individually as a "Company" and collectively as the "Companies"), and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation ("GE Capital"), in its capacities (i) as Conduit Lender (in such capacity, the "Conduit Lender"), (ii) as Committed Lender (in such capacity, the "Committed Lender"; in its dual capacities as Conduit Lender and Committed Lender, GE Capital is herein referred to as "Lender"), and (iii) as Administrative Agent for the Lender (in such capacity, the "Administrative Agent"). W I T N E S E T H: WHEREAS, CFCD and the Borrower are parties to a certain Receivables Sale and Contribution Agreement, dated as of April 27, 2001 (as amended to the date hereof, the "Sale Agreement"; capitalized terms used herein and not otherwise defined herein shall have the meanings given such terms in Annex X to the Sale Agreement as amended by this Amendment), whereby CFCD has agreed to sell, contribute or otherwise transfer to the Borrower, and the Borrower has agreed to purchase or otherwise acquire from CFCD, all of the right, title and interest of CFCD in the Receivables; and WHEREAS, CFCD, the Borrower, the Lender and the Administrative Agent, are parties to a certain Servicing Agreement, dated as of April 27, 2001 (as amended to the date hereof, the "Servicing Agreement"), whereby the Borrower has appointed CFCD to service, administer and collect the Transferred Receivables pursuant to the Funding Agreement (defined below) on the terms and conditions set forth therein; and WHEREAS, the Borrower, the Lender and the Administrative Agent are parties to a certain Receivables Funding Agreement, dated as of April 27, 2001 (as amended to the date hereof, the "Funding Agreement") (the Sale Agreement, the Servicing Agreement and the Funding Agreement, together with all exhibits and annexes thereto, are referred to herein collectively as the "Securitization Agreements"), pursuant to which, among other things, the Lender has agreed, subject to certain terms and conditions, to make Advances to the Borrower to fund its purchases of the Receivables; and WHEREAS, the Companies have requested that the Securitization Agreements be amended in certain respects and that certain waivers be granted, and GE Capital (in its various capacities) is willing to agree to such amendments and grant such waivers subject to the terms and conditions of this Amendment. NOW THEREFORE, in consideration of the premises and mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Amendments of Securitization Agreements. Subject to the terms and conditions of this Amendment, including without limitation the fulfillment of the conditions to effectiveness specified in Section 6 below, the parties signatory to each of the Funding Agreement, the Sale Agreement and the Servicing Agreement hereby agree to amend Annex X to the Funding Agreement, the Sale Agreement and the Servicing Agreement as follows: (A) The definition of the term "Payroll Reserve" set forth in Annex X to the Funding Agreement, the Sale Agreement and the Servicing Agreement is hereby deleted in its entireties and the following amended definition of such term is substituted in lieu thereof: "Payroll Reserve" shall mean (i) at all times during the period from the Third Amendment Effective Date through November 1, 2001, an amount equal to $5,000,000 and (ii) at all times on and after November 2, 2001, an amount equal to $15,000,000. The imposition of the Payroll Reserve is not intended to modify or impair the Administrative Agent's discretion to impose additional reserves with respect to the unpaid employee payroll of the Parent and its Subsidiaries under clause (iv) of the definition of the term "Reserves" herein. 2. No Other Amendments. Except for the amendment expressly set forth and referred to in Section 1 above, the Securitization Agreements shall remain unchanged and in full force and effect. 3. Representations and Warranties. Each Company hereby represents and warrants to the Lender and the Administrative Agent that (a) this Amendment has been duly authorized, executed and delivered by such Company, (b) after giving effect to this Amendment, no Termination Event, Incipient Termination Event, Event of Servicer Termination or Incipient Servicer Termination Event in respect of such Company has occurred and is continuing as of this date, and (c) after giving effect to this Amendment, all of the representations and warranties made by such Company in the Securitization Agreements are true and correct in all material respects on and as of the date of this Amendment (except to the extent that any such representations or warranties expressly referred to a specific prior date). Any breach in any material respect by any Company of any of its representations and warranties contained in this Section 3 shall be a Termination Event and an Event of Servicer Termination for all purposes of the Securitization Agreements. Any Advances made on the Effective Date shall be deemed to have been requested and funded after giving effect to this Amendment. 4. Ratification. Each Company hereby ratifies and reaffirms each and every term, covenant and condition set forth in the Securitization Agreements and all other documents delivered by such Company in connection therewith (including without limitation the other Related Documents to which each Company is a party), effective as of the date hereof. 5. Estoppel. To induce GE Capital (in its various capacities) to enter into this Amendment, each Company hereby acknowledges and agrees that, as of the date hereof, there exists no right of offset, defense or counterclaim in favor of any Company as against GE Capital (in its various capacities) with respect to the obligations of any Company to GE Capital (in its various capacities) under the Securitization Agreements or the other Related Documents, either with or without giving effect to this Amendment. 6. Conditions to Effectiveness. This Amendment shall become effective, as of the Effective Date, upon receipt by the Administrative Agent of this Amendment, duly executed, completed and delivered by each of the Companies and by GE Capital in its various capacities. 7. Reimbursement of Expenses. Each Company hereby agrees that it shall reimburse the Administrative Agent on demand for all costs and expenses (including without limitation reasonable attorney's fees) incurred by the Administrative Agent in connection with the negotiation, documentation and consummation of this Amendment and the other documents executed in connection herewith and therewith and the transactions contemplated hereby and thereby. 8. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK FOR CONTRACTS TO BE PERFORMED ENTIRELY WITHIN SAID STATE. 9. Severability of Provisions. Any provision of this Amendment which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. To the extent permitted by Applicable Law, each Company hereby waives any provision of law that renders any provision hereof prohibited or unenforceable in any respect. 10. Counterparts. This Amendment may be executed in any number of several counterparts, all of which shall be deemed to constitute but one original and shall be binding upon all parties, their successors and permitted assigns. 11. Entire Agreement. The Securitization Agreements as amended by this Amendment embody the entire agreement between the parties hereto relating to the subject matter hereof and supersedes all prior agreements, representations and understandings, if any, relating to the subject matter hereof. 12. Originators' and GE Capital's Capacities. CFCD is executing and delivering this Amendment both in its capacity as an Originator under the Sale Agreement and as a Servicer under the Servicing Agreement, and all references herein to "CFCD" shall be deemed to include CFCD in both such capacities unless otherwise expressly indicated. GE Capital is executing and delivering this Amendment in its various capacities as Lender and the Administrative Agent, and all references herein to "GE Capital" shall be deemed to include it in all such capacities unless otherwise expressly indicated. IN WITNESS WHEREOF, the parties have caused this Fifth Amendment to Securitization Agreements be duly executed by their respective officers thereunto duly authorized, as of the date first above written. CONSOLIDATED FREIGHTWAYS FUNDING LLC, as Borrower By:/s/Kerry K. Morgan Name:Kerry K. Morgan Title:Vice President and Treasurer CONSOLIDATED FREIGHTWAYS CORPORATION OF DELAWARE, as Originator and Servicer By:/s/Robert E. Wrightson Name:Robert E. Wrightson Title:Executive Vice President and Chief Financial Officer GENERAL ELECTRIC CAPITAL CORPORATION, as Conduit Lender, Committed Lender and Administrative Agent By:/s/Craig Winslow Name:Craig Winslow Duly Authorized Signatory -----END PRIVACY-ENHANCED MESSAGE-----