-----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, KaEFn3AabzkJvqeloLAhwY1uAo99lcLvt4DJT6BxF0A6qwIDg2ffR1+ehlwUNNTC 4uQgeopn52iLJCvXhDS1aw== 0001022581-02-000006.txt : 20020501 0001022581-02-000006.hdr.sgml : 20020501 ACCESSION NUMBER: 0001022581-02-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020501 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: 02630263 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 q1200210q.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 March 31, 2002 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 March 31, 2002: 22,324,669 CONSOLIDATED FREIGHTWAYS CORPORATION FORM 10-Q Quarter Ended March 31, 2002 ____________________________________________________________________________ ____________________________________________________________________________ INDEX PART I. FINANCIAL INFORMATION Page Item 1. Financial Statements Consolidated Balance Sheets - March 31, 2002 and December 31, 2001 3 Statements of Consolidated Operations - Three Months Ended March 31, 2002 and 2001 5 Statements of Consolidated Cash Flows - Three Months Ended March 31, 2002 and 2001 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 Item 3. Quantitative and Qualitative Disclosures About Market Risk 18 PART II. OTHER INFORMATION Item 1. Legal Proceedings 18 Item 6. Exhibits and Reports on Form 8-K 19 SIGNATURES 20 PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements CONSOLIDATED FREIGHTWAYS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, December 31, 2002 2001 (Dollars in thousands) ASSETS CURRENT ASSETS Cash and cash equivalents $ 13,277 $ 28,067 Trade accounts receivable, net of allowances 282,766 292,851 Other receivables 8,178 6,045 Operating supplies, at lower of average cost or market 6,161 6,670 Prepaid expenses 49,747 35,772 Deferred income taxes 57,228 59,897 Total Current Assets 417,357 429,302 PROPERTY, PLANT AND EQUIPMENT, at cost Land 86,258 87,024 Buildings and improvements 343,854 353,102 Revenue equipment 510,171 519,546 Other equipment and leasehold improvements 165,095 158,963 1,105,378 1,118,635 Accumulated depreciation and amortization (762,254) (761,044) 343,124 357,591 OTHER ASSETS Deposits and other assets 97,943 93,687 Deferred income taxes 714 -- 98,657 93,687 TOTAL ASSETS $ 859,138 $ 880,580 The accompanying notes are an integral part of these statements. CONSOLIDATED FREIGHTWAYS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, December 31, 2002 2001 ... (Dollars in thousands) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 104,800 $ 85,043 Accrued liabilities 207,702 189,361 Accrued claims costs 82,671 85,593 Federal and other income taxes 1,806 2,264 Current maturities of long-term debt 2,239 -- Short-term borrowings 38,350 83,900 Total Current Liabilities 437,568 446,161 LONG-TERM LIABILITIES Long-term debt 39,355 15,100 Accrued claims costs 88,817 94,187 Employee benefits 126,117 124,284 Deferred income taxes -- 1,978 Other liabilities 54,434 50,631 Total Liabilities 746,291 732,341 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 73,592 74,020 Accumulated other comprehensive loss (13,162) (13,712) Retained earnings 59,276 95,814 Treasury stock, at cost (809,179 and 1,298,812 shares, respectively) (7,090) (8,114) Total Shareholders' Equity 112,847 148,239 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 859,138 $ 880,580 The accompanying notes are an integral part of these statements. CONSOLIDATED FREIGHTWAYS CORPORATION STATEMENTS OF CONSOLIDATED OPERATIONS (Dollars in thousands except per share amounts) For the Three Months Ended March 31, 2002 2001 REVENUES $ 462,991 $ 574,578 COSTS AND EXPENSES Salaries, wages and benefits 318,201 373,758 Operating expenses 92,611 103,133 Purchased transportation 42,959 52,988 Operating taxes and licenses 14,267 16,383 Claims and insurance 12,657 15,161 Depreciation 13,210 12,925 493,905 574,348 OPERATING INCOME (LOSS) (30,914) 230 OTHER INCOME (EXPENSE) Investment income 51 224 Interest expense (1,899) (1,856) Miscellaneous, net (2,673) (649) (4,521) (2,281) Loss before income taxes (benefits) (35,435) (2,051) Income taxes (benefits) 1,103 (224) NET LOSS $ (36,538) $ (1,827) Basic average shares outstanding 22,299,755 21,818,691 Diluted average shares outstanding 22,299,755 21,818,691 (a) Basic Loss per Share: $ (1.64) $ (0.08) Diluted Loss per Share: $ (1.64) $ (0.08) (a) Does not include 305,624 potentially dilutive securities 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 Three Months Ended March 31, 2002 2001 (Dollars in thousands) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD $ 28,067 $ 46,523 CASH FLOWS FROM OPERATING ACTIVITIES Net loss (36,538) (1,827) Adjustments to reconcile net loss to net cash provided (used) by operating activities: Depreciation and amortization 17,306 15,633 Increase (decrease) in deferred income taxes (23) 8,881 Gains from property disposals, net (2,320) (19,475) Issuance of common stock under stock and benefit plans 596 647 Changes in assets and liabilities: Receivables 7,952 (11,661) Prepaid expenses (13,975) (8,806) Accounts payable 19,757 (3,795) Accrued liabilities 18,341 18,124 Accrued claims costs (8,292) (1,699) Income taxes (458) -- Employee benefits 1,833 (83) Other (649) 410 Net Cash Provided (Used) by Operating Activities 3,530 (3,651) CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (1,059) (34,183) Software expenditures (116) (585) Proceeds from sales of property 4,311 2,093 Net Cash Provided (Used) by Investing Activities 3,136 (32,675) CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds from (repayments of) short-term borrowings (45,550) 28,000 Net proceeds from long-term borrowings 24,094 -- Net Cash Provided (Used) by Financing Activities (21,456) 28,000 Decrease in Cash and Cash Equivalents (14,790) (8,326) CASH AND CASH EQUIVALENTS, END OF PERIOD $ 13,277 $ 38,197 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 2001 Annual Report to Shareholders. There were no significant changes in the Company's commitments and contingencies as previously described in the 2001 Annual Report to Shareholders and related annual report to the Securities and Exchange Commission on Form 10-K. 2. Liquidity and Management's Plan The Company incurred a net loss of $104.3 million for the year ended December 31, 2001 and a net loss of $36.5 million in the quarter ended March 31, 2002. The Company expects to incur further operating losses in 2002 due to the continued economic slowdown. Cash used by operating activities for the year ended December 31, 2001 was $41.1 million. Cash provided by operating activities during the quarter ended March 31, 2002 was $3.5 million. The Company's financing requirements to fund operations and capital expenditures and to support letters of credit in 2002 are expected to be approximately $45 to $55 million. During the quarter ended March 31, 2002, the Company secured financing sufficient to meet these requirements. As discussed more fully in Note 5 "Debt" below, the Company secured a net $45 million financing agreement secured by real property. In addition, the Company completed a $4.1 million financing agreement secured by revenue equipment of a Canadian subsidiary and a $5.5 million financing agreement secured by real property of a Canadian subsidiary. The Company is currently negotiating additional financing agreements for approximately $20 million, secured by assets of the Canadian subsidiaries. Of this amount, the Company has credit committee approval and is in the documentation stages for approximately $13 million and expects to receive funding during the second quarter of 2002. Approximately $10 million of the $13 million will be available for transfer to the U.S. operations. However, there can be no assurance that the Company will be able to complete these transactions or that the final terms will be reasonable. The Company has significant additional unleveraged assets and is considering other asset backed borrowings and the sale of surplus real properties. However, there can be no assurance that the Company will be able to complete these transactions or that the final terms will be reasonable. The Company has an existing accounts receivable securitization agreement and an existing real estate backed credit facility to provide for working capital and letter of credit needs. The combined availability of funds under these agreements was $6.5 million as of March 31, 2002. Consistent with these types of agreements, the availability ranged from $0 to $15 million during the quarter ended March 31, 2002. The continued availability of funds under these agreements requires that the Company comply with certain financial covenants, the most restrictive of which are to maintain a minimum EBITDAL (earnings before interest, taxes, depreciation, amortization and lease expense) and fixed charge coverage ratio. On April 8, 2002, to cure violations of these covenants as of March 31, 2002, the covenants were amended for 2002. The amended covenants require the Company to achieve significant improvements in EBITDAL for the remainder of 2002. To achieve these improvements, the Company and the Board of Directors have developed plans that include an immediate and continuing reduction of workforce in line with lower business levels and expansion of programs aimed at increasing pick-up and delivery and dock efficiencies, increasing load factor and reducing claims expense that have proved successful at selected terminals during 2001. Management is also focused on improving revenue through better freight mix, emphasizing high margin services and increasing revenue per shipment. Additionally, starting in the fourth quarter of 2001, the Company began carefully reviewing its business activities with its customers in an effort to secure additional business and to ensure that it is fairly compensated for the services provided. As part of this plan, the Company began reviewing contract accounts as they came up for renewal during the fourth quarter of 2001 and is continuing this review in 2002. The Company and the Board of Directors believe that the above actions will be sufficient to allow the Company to meet the amended covenant requirements for the balance of 2002. If the Company does not achieve the operating improvements, it may violate the amended covenants in 2002. Although the Company has previously received amendments to the covenants, there can be no assurance that the lender will grant waivers or additional amendments if required. The inability of the Company to meet its covenants or obtain waivers or additional amendments, if required, would require the Company to secure alternative financing to fund operating activities and provide letters of credit necessary to support its self-insurance program. Failure to secure letters of credit to support the self-insurance program would require the Company to fund state insurance programs which would have a material adverse effect on the Company's financial position. 3. Segment and Geographic Information The Company primarily provides less-than-truckload transportation, air freight forwarding and supply chain management services throughout the United States, Canada and Mexico and international freight services between the United States and more than 80 countries. The Company does not present segment disclosures because 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 Months Ended March 31, 2002 2001 Revenues United States $426,171 $536,837 Canada and other 36,820 37,741 Total $462,991 $574,578 As of March 31, 2002 2001 Property, Plant and Equipment United States $309,026 $330,386 Canada and other 34,098 35,522 Total $343,124 $365,908 4. Comprehensive Loss Comprehensive loss for the three months ended March 31, 2002 and 2001 was as follows: (Dollars in thousands) Three Months Ended March 31, 2002 2001 Net Loss $(36,538) $(1,827) Other Comprehensive Loss: Foreign currency translation adjustments 550 (2,310) Comprehensive Loss $(35,988) $(4,137) 5. Debt In February 2002, the Company secured a net $45 million financing agreement secured by terminal properties, of which $20 million, after $2.4 million of deferred loan costs, was funded in February and $25 million, after deferred loan costs of $3.0 million, was funded in April. Under the agreement, the Company contributed 39 terminal properties with a net book value of approximately $67 million to CFCD 2002 LLC, a wholly owned, consolidated special purpose company. CFCD 2002 LLC used the properties as collateral for the borrowings. Borrowings bear interest at LIBOR plus 375 basis points. Principal and interest payments are due monthly over a 15- year period. The Company was required to issue $8.2 million of letters of credit to secure the first year's payment of principal, interest, property taxes and insurance. Those letters of credit were issued under the Company's $200 million accounts receivable securitization agreement, discussed below. The initial $20 million of proceeds was used to pay down short-term borrowings under the Company's $200 million accounts receivable securitization agreement. Subsequent to the paydown, the Company issued a $20 million letter of credit under the securitization agreement to support its self- insurance program. Also in February 2002, the Company completed a three-year, $4.1 million financing agreement secured by revenue equipment of a Canadian subsidiary. The revenue equipment had a net book value of approximately $12.3 million as of March 31, 2002. The borrowings bear interest at 7.2%. Principal and interest are payable monthly. In April 2002, the Company completed a three-year, $5.5 million financing agreement secured by a terminal property of a Canadian subsidiary. The terminal property had a net book value of approximately $0.4 million as of March 31, 2002. The borrowings bear interest at 6.25%. Principal and interest are payable monthly using a 25-year amortization schedule, with a remaining lump sum payment at the end of the three-year period. The Company has a $200 million accounts receivable securitization agreement to provide for working capital and letter of credit needs. As of March 31, 2002, outstanding borrowings were $3.7 million, bearing interest at LIBOR plus 250 basis points (4.87%). Letters of credit outstanding were $128.8 million, of which $117.0 million are used to support the Company's self-insurance program. Availability of the remaining borrowing capacity is dependent on a daily calculation of eligible accounts receivable which is subject to business level fluctuations which may further limit availability. To the extent that eligible accounts receivable are insufficient to support issued letters of credit, the Company is required to provide cash collateral to the lender. The Company was required to provide as much as $10 million of cash collateral in April 2002 due to fluctuation of the eligible accounts receivable. The Company also has a revolving credit agreement with the same lender, secured by real property to provide for short-term working capital needs and other general corporate purposes. During February 2002, this agreement was amended, extending the term until February 2004 and limiting borrowings to a maximum of $42 million. The agreement contains mandatory paydown provisions using a portion of the proceeds of future debt offerings and asset sales, which will limit future availability. Due to certain asset sales during the quarter, maximum availability was reduced to $41.2 million as of March 31, 2002, of which $34.7 million was outstanding, bearing interest at 10%. The combined availability of funds under the above financing agreements was $6.5 million as of March 31, 2002. Consistent with these types of agreements, the availability ranged from $0 to $15 million during the quarter ended March 31, 2002. The continued availability of funds under the above agreements requires that the Company comply with certain financial covenants, the most restrictive of which are to maintain a minimum EBITDAL (earnings before interest, taxes, depreciation, amortization and lease expense) and fixed charge coverage ratio. To cure violations of these covenants as of March 31, 2002, the covenants were amended on April 8, 2002. The following are the minimum EBITDAL and fixed charge coverage ratio covenant requirements for 2002. The Company's actual EBITDAL and fixed charge coverage ratio were $(10,723,000) and (1.17) to 1, respectively, for the quarter ended March 31, 2002. Minimum Required Covenant Levels (Dollars in thousands) Period Ended Fixed Charge Coverage EBITDAL Ratio Three months ended March 31, 2002 $(13,300) (1.80) Six months ended June 30, 2002 (16,400) (1.20) Nine months ended September 30, 2002 1,400 (0.30) Year ended December 31, 2002 20,500 0.20 6. Acquisition In February 2002, the Company entered into an agreement to acquire 100% ownership of the business operations of its joint venture in Mexico. The purchase price is approximately $2.1 million and is payable in installments through April 2003. Interest on unpaid installments is 7.5% annually. The Company previously accounted for the joint venture using the equity method and will fully consolidate the operations going forward. Total sales and assets of the Mexico operations were not material. 7. Recently Adopted Accounting Principles The Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 142 (SFAS 142) "Goodwill and Other Intangibles" and SFAS No. 144 (SFAS 144)"Accounting for the Impairment or Disposal of Long-Lived Assets" effective January 1, 2002. SFAS 142 requires 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 estimated finite useful lives will continue to be amortized. SFAS 144 provides a single accounting methodology to be applied to all long- lived assets to be disposed of, including discontinued operations. Adoption of these standards did not have a material impact 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 The economic slowdown that impacted the Company in 2001 continued throughout the first quarter of 2002. As a result, revenues decreased 19.4% as tonnage decreased 17.1% compared with the same period last year. Shipments decreased 14.3% and the average weight per shipment decreased 3.2% to 969 lbs. The Company was also impacted by negative perceptions in the marketplace regarding the Company's liquidity and by the loss of a large customer in the fourth quarter of 2001, due to aggressive competitive pricing. Revenue per hundredweight decreased 3.3% to $17.13 due to a continued unfavorable freight mix as well as a decrease in the fuel surcharge, as fuel prices continued to decline. Excluding the fuel surcharge, revenue per hundredweight decreased 1.4%. Salaries, wages and benefits decreased 14.9% from the prior year due primarily to lower tonnage levels. Beginning in the third quarter of 2001, management implemented workforce reductions to adjust to continued lower tonnage levels. The workforce was approximately 17% lower in the first quarter of 2002 compared with the same period last year. Additionally, cost savings from improved cross-dock and pick-up and delivery efficiencies as a result of process improvement programs helped mitigate the impact of a 3.4% contractual wage and benefit increase that was effective April 1, 2001. Operating expenses decreased 10.2% from the prior year. Excluding gains on sales of properties of $2.6 million in the first quarter of 2002 and $19.6 million in the same period last year, operating expenses decreased 22.4%. Lower tonnage levels combined with an approximate 30% decrease in the average fuel cost per gallon and aggressive cost control measures primarily accounted for the decrease. Additionally, the decrease reflects lower lease expense as revenue equipment previously under lease was purchased during the second quarter of 2001. Purchased transportation decreased 18.9% due to lower tonnage levels as well as a lower proportion of freight transported via rail. Rail miles as a percentage of inter-city miles decreased to 24.7% from 25.7% in the prior year. Operating taxes and licenses decreased 12.9% due to lower tonnage levels. Claims and insurance decreased 16.5% due to lower tonnage levels and improved vehicular claims experience. Depreciation increased 2.2% due to increased capital expenditures in 2001. The operating loss was $30.9 million for the quarter compared with operating income of $0.2 million for the same period last year. The operating ratio deteriorated to 106.7% from 99.9%. The Canadian operations contributed $2.5 million of operating income for the quarter compared with $2.8 million for the same period last year. Excluding gains on sales of operating properties, the operating loss was $33.5 million for the quarter compared with a $19.3 million operating loss for the same period last year. The operating ratio was 107.2% compared with 103.4%, excluding the gains. Other expense, net, increased $2.2 million to $4.5 million. The increase reflects the write-off of debt costs associated with financing transactions that the Company decided not to pursue and higher costs associated with increased letter of credit requirements to support the Company's self-insurance program. The Company's effective tax rate for the first quarter of 2002 differed from the statutory federal rate due to foreign taxes and the recording of deferred tax valuation allowances. As a result of domestic losses during the quarter, the Company recorded income tax benefits of $14.0 million and related deferred tax assets of $14.0 million offset by a $14.0 million valuation allowance, discussed below. As disclosed in the Company's 2001 Form 10-K, due to domestic cumulative losses over the past three years, current accounting standards require the Company to assess the realizability of its domestic net deferred tax asset ($116.6 million as of March 31, 2002). Through the use of tax planning strategies, involving the sale of appreciated assets, the Company has determined that it is more likely than not that $62.6 million of its domestic net deferred tax asset as of March 31, 2002 will be realized. Accordingly, the Company recorded an additional $14 million deferred tax valuation allowance in the first quarter of 2002. As of March 31, 2002, the valuation allowance was $54 million. Until the recent cumulative loss is eliminated, the Company will continue to record additional valuation allowance against any tax benefit arising from future domestic operating losses. The Company will assess the realizability of its deferred tax assets on an ongoing basis and adjust the valuation allowance as appropriate. The Company's effective income tax rate for the first quarter of 2001 differed from the statutory federal rate due primarily to foreign and state taxes and non-deductible items. Return to profitability by the latter portion of 2002 will be dependent on an improvement in the economic environment, improved operating performance and alignment of costs with lower business levels. In the interim, management will continue with aggressive cost control plans to align operating costs with lower business levels. These plans include an immediate and continuing reduction of workforce and expansion of programs aimed at increasing pick-up and delivery and dock efficiencies, increasing load factor and reducing claims expense that have proved successful at selected terminals during 2001. Management is also focused on improving revenue through better freight mix, emphasizing high margin services and increasing revenue per shipment. Starting in the fourth quarter of 2001, the Company began carefully reviewing its business activities with its customers in an effort to secure additional business and to ensure that it is fairly compensated for the services provided. As part of this plan, the Company began reviewing contract accounts as they came up for renewal during the fourth quarter of 2001 and is continuing this review in 2002. Further deterioration in the economic environment or failure of the Company to achieve a cost structure in line with lower business levels would have a material adverse effect on the Company's financial position and results of operations. As of March 31, 2002, approximately 80% of the Company's domestic employees were represented by various labor unions, primarily the International Brotherhood of Teamsters (IBT). The Company and the IBT are parties to the National Master Freight Agreement, which expires on March 31, 2003. Although the Company believes it will be able to successfully negotiate a new contract with the IBT, there can be no assurance that it will be able to do so, or that work stoppages will not occur, or that the terms of any such contract will not be substantially less favorable than those of the existing contract, any of which could have a material adverse effect on the Company's financial position and results of operations. On April 1, 2002, a 2.0% wage and benefit increase went into effect for employees covered by the National Master Freight Agreement. The increase is expected to add approximately $13.5 million of expense in 2002. As discussed above, the Company experienced lower average fuel costs per gallon during the first quarter of 2002 compared with the same period in the prior year. The Company's rules tariff implements a fuel surcharge when the average cost per gallon of on-highway diesel fuel exceeds $1.10, as determined from the Energy Information Administration of the Department of Energy's publication of weekly retail on-highway diesel prices. This provision of the rules tariff became effective in July 1999 and remains 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. LIQUIDITY AND CAPITAL RESOURCES As previously disclosed, the Company's financing requirements to fund operations and capital expenditures and to support letters of credit in 2002 are expected to be approximately $45 to $55 million. The Company will fund these requirements using the proceeds from asset backed financing agreements and availability under its existing credit facilities, each of which is discussed below. In February 2002, the Company secured a net $45 million financing agreement secured by terminal properties, of which $20 million, after $2.4 million of deferred loan costs, was funded in February and $25 million, after deferred loan costs of $3.0 million, was funded in April. Under the agreement, the Company contributed 39 terminal properties with a net book value of approximately $67 million to CFCD 2002 LLC, a wholly owned, consolidated special purpose company. CFCD 2002 LLC used the properties as collateral for the borrowings. Borrowings bear interest at LIBOR plus 375 basis points. Principal and interest payments are due monthly over a 15- year period. The Company was required to issue $8.2 million of letters of credit to secure the first year's payment of principal, interest, property taxes and insurance. Those letters of credit were issued under the Company's $200 million accounts receivable securitization agreement, discussed below. The initial $20 million of proceeds was used to pay down short-term borrowings under the Company's $200 million accounts receivable securitization agreement. Subsequent to the paydown, the Company issued a $20 million letter of credit under the securitization agreement to support its self- insurance program. Also in February 2002, the Company completed a three-year, $4.1 million financing agreement secured by revenue equipment of a Canadian subsidiary. The revenue equipment had a net book value of approximately $12.3 million as of March 31, 2002. The borrowings bear interest at 7.2%. Principal and interest are payable monthly. In April 2002, the Company completed a three-year, $5.5 million financing agreement secured by a terminal property of a Canadian subsidiary. The terminal property had a net book value of approximately $0.4 million as of March 31, 2002. The borrowings bear interest at 6.25%. Principal and interest are payable monthly using a 25-year amortization schedule, with a remaining lump sum payment at the end of the three-year period. The Company is currently negotiating additional financing agreements for approximately $20 million, secured by assets of the Canadian subsidiaries. Of this amount, the Company has credit committee approval and is in the documentation stages for approximately $13 million and expects to receive funding during the second quarter of 2002. Approximately $10 million of the $13 million will be available for transfer to the U.S. operations. However, there can be no assurance that the Company will be able to complete these transactions or that the final terms will be reasonable. The Company is focused on improving both short and long-term liquidity. The Company has significant additional unleveraged assets and is considering other asset-backed borrowings and the sale of surplus real properties. However, there can be no assurance that the Company will be able to complete these transactions or that the final terms will be reasonable. If business conditions and the Company's performance do not improve and the Company is unable to align its cost structure with lower business levels, cash requirements to fund operations could be significantly higher than anticipated and would have a material adverse effect on the Company's financial position and would require additional financing. The ability of the Company to continue to fund operations and meet its obligations as they come due will be dependent on reducing operating losses and maintaining adequate liquidity. Existing Credit Facilities The Company has a $200 million accounts receivable securitization agreement to provide for working capital and letter of credit needs. As of March 31, 2002, outstanding borrowings were $3.7 million, bearing interest at LIBOR plus 250 basis points (4.87%). Letters of credit outstanding were $128.8 million, of which $117.0 million are used to support the Company's self-insurance program. Availability of the remaining borrowing capacity is dependent on a daily calculation of eligible accounts receivable which is subject to business level fluctuations which may further limit availability. To the extent that eligible accounts receivable are insufficient to support issued letters of credit, the Company is required to provide cash collateral to the lender. The Company was required to provide as much as $10 million of cash collateral in April 2002 due to fluctuation of the eligible accounts receivable. The Company also has a revolving credit agreement with the same lender, secured by real property to provide for short-term working capital needs and other general corporate purposes. During February 2002, this agreement was amended, extending the term until February 2004 and limiting borrowings to a maximum of $42 million. The agreement contains mandatory paydown provisions using a portion of the proceeds of future debt offerings and asset sales, which will limit future availability. Due to certain asset sales during the quarter, maximum availability was reduced to $41.2 million as of March 31, 2002, of which $34.7 million was outstanding, bearing interest at 10%. The combined availability of funds under the above financing agreements was $6.5 million as of March 31, 2002. Consistent with these types of agreements, the availability ranged from $0 to $15 million during the quarter ended March 31, 2002. The continued availability of funds under the above agreements requires that the Company comply with certain financial covenants, the most restrictive of which are to maintain a minimum EBITDAL (earnings before interest, taxes, depreciation, amortization and lease expense) and fixed charge coverage ratio. To cure violations of these covenants as of March 31, 2002, the covenants were amended on April 8, 2002. The following are the minimum EBITDAL and fixed charge coverage ratio covenant requirements for 2002. The Company's actual EBITDAL and fixed charge coverage ratio were $(10,723,000) and (1.17) to 1, respectively, for the quarter ended March 31, 2002. Minimum Required Covenant Levels (Dollars in thousands) Period Ended Fixed Charge Coverage EBITDAL Ratio Three months ended March 31, 2002 $(13,300) (1.80) Six months ended June 30, 2002 (16,400) (1.20) Nine months ended September 30, 2002 1,400 (0.30) Year ended December 31, 2002 20,500 0.20 If the Company does not improve operating performance through improved business levels and additional cost reduction efforts, it may violate the amended covenants in 2002. There can be no assurance that the lender will grant waivers or additional amendments if required. The inability of the Company to meet its covenants or obtain waivers or additional amendments, if required, would require the Company to secure alternative financing to fund operating activities and provide letters of credit necessary to support its self-insurance program in 2002. Failure to secure letters of credit to support the self-insurance program would require the Company to fund state insurance programs which would have a material adverse effect on the Company's financial position. Cash Flows for the Quarter Ended March 31, 2002 and 2001 Cash and cash equivalents were $13.3 million as of March 31, 2002. Drafts outstanding, which are included in Accounts Payable on the Consolidated Balance Sheet, were $22.2 million. Cash flow provided by operations for the first quarter of 2002 was $3.5 million compared with $3.7 million used by operations in the same period of 2001. Cash flow provided from operations was primarily due to collections of accounts receivable and aggressive cash management during the quarter. Cash flows provided by investing activities of $3.1 million compares with cash flows used by investing activities of $32.7 million in the same period last year. The reduction in capital and software expenditures from $34.8 million in the prior year period to $1.2 million in the current year reflects management's efforts to improve the Company's liquidity by deferring all non-essential expenditures. The Company expects capital expenditures to be approximately $6 million for the remainder of 2002, primarily for the purchase of revenue and miscellaneous equipment, but has the ability to defer these expenditures into future years. Cash flows used by financing activities was $21.5 million compared with $28.0 million provided in the prior year. As discussed above, the Company completed a net $45 million financing agreement in February 2002, of which $20 million, net of deferred loan costs of $2.4 million, was funded in February. The $20 million of proceeds was used to pay down borrowings under the Company's $200 million credit facility in order to issue letters of credit to support the Company's self-insurance program. Also in February, the Company completed a $4.1 million financing agreement secured by Canadian assets. The Company repaid an additional $25.6 million of borrowings under its credit facilities during the quarter. Contractual Cash Obligations As of March 31, 2002 (Dollars in thousands) Payments Due In Less than 1 to 3 4 to 5 After 1 Year Years Years 5 Years Total Operating Leases $29,107 $51,263 $21,853 $15,485 $117,708 Long-Term Debt (a) 3,326 27,923 5,222 38,596 75,067 Interest on Long- Term Debt (b) 4,033 7,246 5,030 13,141 29,450 Total $36,466 $86,432 $32,105 $67,222 $222,225 (a) Includes agreements funded subsequent to March 31, 2002 as discussed above. (b) Assumes no change in LIBOR. OTHER 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; weather; environmental and tax matters; changes in governmental regulation; technology costs; legal claims; timing and amount of capital expenditures; and failure to execute operating plans, freight mix adjustment plans, yield improvements efforts, process and operations improvements, cost reduction efforts, customer service initiatives; pension funding requirements; and financing needs and availability. As a result of the foregoing, no assurance can be given as to future results of operations or financial condition. 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. ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits 10.01 Fifth Amendment, dated January 18, 2002, to the Credit Agreement among Consolidated Freightways Corporation, as Borrower and General Electric Capital Corporation, as Lender, dated October 24, 2001. 10.02 Sixth Amendment, dated February 19, 2002, to the Credit Agreement among Consolidated Freightways Corporation, as Borrower and General Electric Capital Corporation, as Lender, dated October 24, 2001. 10.03 Seventh Amendment, dated February 22, 2002, to the Credit Agreement among Consolidated Freightways Corporation, as Borrower and General Electric Capital Corporation, as Lender, dated October 24, 2001. 10.04 Seventh Amendment, dated January 18, 2002, to the Letter of Credit Agreement between Consolidated Freightways Corporation and General Electric Capital Corporation dated April 27, 2001. 10.05 Eighth Amendment, dated February 19, 2002, to the Letter of Credit Agreement between Consolidated Freightways Corporation and General Electric Capital Corporation dated April 27, 2001. 10.06 Seventh Amendment, dated February 19, 2002, to the Securitization Agreement between Consolidated Freightways Corporation and General Electric Capital Corporation dated April 27, 2001. (b) No reports on Form 8-K were filed in the quarter ended March 31, 2002. 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) April 30, 2002 /s/Robert E. Wrightson Robert E. Wrightson Executive Vice President and Chief Financial Officer April 30, 2002 /s/James R. Tener James R. Tener Vice President and Controller EX-10 3 ex1001.txt EXHIBIT 10.01 Exhibit 10.01 FIFTH AMENDMENT TO CREDIT AGREEMENT THIS FIFTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), is made and entered into as of January 18, 2002 (the "Effective Date"), by and between CONSOLIDATED FREIGHTWAYS CORPORATION, a Delaware corporation ("Borrower"), the other Credit Parties signatory to the Credit Agreement described below (collectively, together with the Borrower, the "Credit Parties") and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation ("Lender"). W I T N E SS E T H: WHEREAS, Borrower, the other Credit Parties and Lender are parties to that certain Credit Agreement, dated as of October 24, 2001 (as amended to the date hereof, the "Credit Agreement"; capitalized terms used herein and not otherwise defined herein shall have the meanings given such terms in the Credit Agreement), pursuant to which Lender has committed to make certain loans to Borrower upon the terms and conditions set forth therein; and WHEREAS, Borrower, the other Credit Parties and Lender desire to modify the Credit Agreement in certain respects 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, Borrower, the other Credit Parties and Lender do hereby agree that all capitalized terms used herein shall have the meanings ascribed thereto in the Credit Agreement (except as otherwise expressly defined or limited herein) and do hereby further agree as follows: 1. Amendments to the Credit Agreement. Subject to the terms and conditions of this Amendment, including without limitation the fulfillment of the conditions precedent specified in Section 7 below, the Credit Agreement is hereby amended as follows: (A) Annex A to the Credit Agreement is hereby amended by deleting therefrom definitions of "Borrowing Base" and "Additional Mortgaged Properties" in their entirety and substituting the following amended definitions of such terms in lieu thereof: "Additional Mortgaged Properties" shall mean the real property owned by one or more of the Credit Parties and located at (a) 918 Del Paso Road, Sacramento, California, (b) 6767 West 75th Street, Chicago, Illinois, and (c) 11888 Mission Boulevard, Mira Loma, California. "Borrowing Base" shall mean, as of any date of determination by Lender, from time to time, an amount equal to the sum of (a) forty-two percent (42%) of the Appraised Value of Eligible Mortgaged Property less (b) any and all Reserves established by Lender at such time including, without limitation, Reserves for environmental remediation costs, accrued but unpaid taxes, insurance and other Charges and expenses pertaining to such Mortgaged Property. Notwithstanding the foregoing, irrespective of whether any of the conditions in Section 2 have been satisfied, the Borrowing Base shall not at any time exceed an amount equal to $42,000,000 less the total amount of any mandatory prepayments required to be made pursuant to Section 1.2(b)(iii) as a result of the incurrence from time to time of any Funded Debt by any Foreign Subsidiary under the Canadian Credit Facility. (B) Annex A to the Credit Agreement is hereby further amended by adding in alphabetical order the definition of "Canadian Credit Facility" to read in its entirety as follows: "Canadian Credit Facility" shall mean a credit facility in the maximum principal amount of Cnd$6,500,000 to be provided by Tyco Capital (Canada) Inc. ("Tyco") to Canadian Freightways Limited and/or one or more Canadian Foreign Subsidiaries, having the terms as set forth in that certain commitment letter dated December 21, 2001 between Canadian Freightways Limited and Tyco. 2. Covenants. Borrower shall utilize the entire proceeds of the initial Revolving Credit Advances made on the date of this Amendment to make a capital contribution to the Receivables Subsidiary in the aggregate amount of $7,000,000 (the "Capital Contribution"). Borrower shall cause the Receivables Subsidiary immediately upon receipt of the Capital Contribution to apply the entire amount of the Capital Contribution to the repayment of outstanding Receivables Advances in the aggregate principal amount of $7,000,000 to create additional availability under the Receivables Funding Agreement. The initial Revolving Credit Advances made on the date of this Amendment shall be disbursed by the Lender solely in accordance with the disbursement direction letter in the form of Exhibit A attached hereto (the "Disbursement Direction Letter"). 3. No Other Amendments. Except for the amendments expressly set forth and referred to in Section 1 above, the Credit Agreement shall remain unchanged and in full force and effect. 4. Representations and Warranties. To induce Lender to enter into this Amendment, Borrower and each of the other Credit Parties hereby warrant, represent and covenant to Lender that: (a) this Amendment has been duly authorized, executed and delivered by Borrower and each other Credit Party signatory thereto, (b) after giving effect to this Amendment, no Default 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 Borrower and each other Credit Party in the 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 Borrower or any other Credit Party of any of its representations and warranties contained in this Section 4 shall be an Event of Default under the Credit Agreement. 5. Ratification and Acknowledgment. Borrower and each of the other Credit Parties hereby ratify and reaffirm each and every term, covenant and condition set forth in the Credit Agreement and all other documents delivered by such company in connection therewith (including without limitation the other Loan Documents to which Borrower or any other Credit Party is a party), effective as of the date hereof. 6. Estoppel. To induce Lender to enter into this Amendment, Borrower 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 Borrower or any Credit Party as against Lender with respect to the obligations of Borrower or any Credit Party to Lender under the Credit Agreement or the other Loan 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 Lender of the following, in each case, in form and substance satisfactory to Lender: (a) this Amendment, duly executed, completed and delivered by Borrower and each other Credit Party. (b) the Seventh Amendment to Letter of Credit Agreements dated as of the date hereof, duly executed, completed and delivered by Borrower and each other Credit Party. (c) a copy of the credit agreement executed by HSBC Bank Canada ("HSBC"), pursuant to which HSBC commits to provide an accounts receivable credit facility to one or more Canadian Foreign Subsidiaries, having such terms and conditions as are reasonably satisfactory to Lender. (d) a letter from Discovery Re insurance company ("Discovery Re") confirming that (i) they have not canceled any workers' compensation insurance policies of the Credit Parties or their Subsidiaries (the "Insurance Policies"), (ii) upon receipt of a letter of credit in the amount of $7,000,000, issued for the account of Borrower or any other Credit Party for the benefit of United States Fidelity and Guaranty, Co., the Insurance Policies shall remain in full force and effect through and including March 18, 2002, and (iii) confirming Discovery Re's agreement not to give a notice of cancellation with respect to any of the Insurance Policies prior to February 19, 2002. Lender shall also have received from Credit Parties a certificate of insurance issued by Discovery Re certifying as to the coverage under the existing Insurance Policies, together with such other documents, certificates and information as it may reasonably request in order to confirm that the Insurance Policies remain in effect as of the date of this Amendment and satisfy the requirements of applicable law. (e) a copy of a proposal letter by Special Value Management LLC ("Special Value") to Borrower and/or CF Delaware, pursuant to which Special Value, as lender, proposes to enter into a real estate loan facility with Borrower and/or CF Delaware to be closed by no later than February 18, 2002 and otherwise having such terms and conditions as are reasonably satisfactory to Lender. (f) each Credit Party owner of the Additional Mortgaged Properties located at 11888 Mission Boulevard, Mira Loma, California (the "Mira Loma Property") shall have (i) executed and delivered to Lender a Mortgage covering all of the Mira Loma Property, in proper form for recordation in all places to the extent necessary to create a valid and enforceable first priority lien (subject to Permitted Encumbrances) on the Mira Loma Property in favor of Lender (or in favor of such other trustee as may be required or desired under local law) and otherwise in form and substance satisfactory to Lender, (ii) delivered to Lender an opinion of California counsel regarding the Mortgage on the Mira Loma Property in form and substance and from counsel satisfactory to Lender, (iii) delivered to Lender a title report, all form and scope satisfactory to Lender, covering the Mira Loma Property, which report shall not show any Liens on the Mira Loma Property (other than Permitted Encumbrances), (iv) delivered to Lender written fair market value appraisals, in each case satisfactory in form and substance to Lender, in its sole discretion, and (v) fully cooperated with Lender by providing Lender and/or its consultants and agents with access to, and information concerning, the Mira Loma Property as may be requested by Lender (or such consultant or agent of Lender) and as may be necessary to ensure completion of Phase I Environmental Site Assessment Reports, consistent with American Society for Testing and Materials (ASTM) Standard E 1527-94 and applicable state requirements, prepared by environmental engineers satisfactory to Lender, all in form and substance satisfactory to Lender, in its reasonable discretion. (g) a Fee Letter dated the date hereof, duly executed, completed and delivered by Borrower and Lender. Upon the effective date of this Amendment, all of the amendments set forth in Section 1 of this Amendment shall become effective as of the effective date of this Amendment. 8. Reimbursement of Expenses. Borrower and each of the other Credit Parties hereby agree that Borrower and each of the other Credit Parties shall reimburse Lender on demand for all costs and expenses (including without limitation reasonable attorney's fees) incurred by Lender 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, Borrower 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 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 Fifth Amendment to Credit Agreement to be duly executed by their respective officers thereunto duly authorized, as of the date first above written. BORROWER: CONSOLIDATED FREIGHTWAYS CORPORATION By /s/Robert E. Wrightson Name: Robert E. Wrightson Title: Executive Vice President and Chief Financial Officer LENDER: GENERAL ELECTRIC CAPITAL CORPORATION By /s/Craig Winslow Name: Craig Winslow Title: Duly Authorized Signatory CREDIT PARTIES: 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/Kerry K. Morgan Name:Kerry K. Morgan Title:Vice President and Treasurer LELAND JAMES SERVICE CORPORATION By:/s/Kerry K. Morgan Name:Kerry K. Morgan Title:Vice President and Treasurer EX-10 4 ex1002.txt EXHIBIT 10.02 Exhibit 10.02 SIXTH AMENDMENT TO CREDIT AGREEMENT THIS SIXTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), is made and entered into as of February 19, 2002 (the "Effective Date"), by and among CONSOLIDATED FREIGHTWAYS CORPORATION, a Delaware corporation ("Borrower"), the other Credit Parties signatory to the Credit Agreement described below (collectively, together with the Borrower, the "Credit Parties") and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation ("Lender"). W I T N E S S E T H: WHEREAS, Borrower, the other Credit Parties and Lender are parties to that certain Credit Agreement, dated as of October 24, 2001 (as amended to the date hereof, the "Credit Agreement"; capitalized terms used herein and not otherwise defined herein shall have the meanings given such terms in the Credit Agreement), pursuant to which Lender has committed to make certain loans to Borrower upon the terms and conditions set forth therein; and WHEREAS, Borrower, the other Credit Parties and Lender desire to modify the Credit Agreement in certain respects 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, Borrower, the other Credit Parties and Lender do hereby agree that all capitalized terms used herein shall have the meanings ascribed thereto in the Credit Agreement (except as otherwise expressly defined or limited herein) and do hereby further agree as follows: 1. Waiver. Subject to the terms and conditions of this Amendment, including without limitation the fulfillment of the conditions to effectiveness specified in Section 8 below, the Lender hereby waives any Default or Event of Default arising under Sections 6.1, 6.2, 6.4, 6.5 and 6.8 of the Credit Agreement solely as a result of (a) the formation of CFL Holding Ltd, an Alberta corporation ("CFLH") as a new Subsidiary of CF Delaware and the issuance of stock by CFLH to CF Delaware in connection therewith, and (b) CF Delaware's exchange of shares of Canadian Freightways, Ltd. with CFLH for shares of CFLH prior to the date hereof, without Lender's prior written consent. Lender hereby further waives any Default or Event of Default (i) arising under Sections 4.1 and paragraph (f) of Annex C as a result of the failure by Borrower to give Lender timely notice of any of the foregoing Events of Default described in the immediately preceding sentence and (ii) solely for the period commencing on December 31, 2001 and ending on the Effective Date, any Default or Event of Default resulting from the failure of Borrower to meet the Minimum EBITDA financial covenant in paragraph (c) of Annex D solely for the Fiscal Quarter ending December 31, 2001, as such financial covenant is in effect immediately prior to the date of this Amendment. 2. Amendments to the Credit Agreement. Subject to the terms and conditions of this Amendment, including without limitation the fulfillment of the conditions precedent specified in Section 8 below, the Credit Agreement is hereby amended as follows: (A) Section 1.2(b)(ii) to the Credit Agreement is hereby amended by deleting such subsection in its entirety and substituting in lieu thereof the following amended Section 1.2(b)(ii) to read in its entirety as follows: (ii) Immediately upon receipt by any Credit Party or any Foreign or Domestic Subsidiary of any Credit Party of: (i) the proceeds of any Asset Disposition by such Credit Party or such Subsidiary (excluding (x) proceeds received by CF Delaware from any sales of accounts receivables and related rights made prior to an Incipient Termination Event or a Termination Event by CF Delaware to the Receivables Subsidiary pursuant to the Receivables Sale and Contribution Agreement and (y) proceeds received by one or more of the SPE Subsidiaries in connection with their formation and proceeds received by CF Delaware in connection with the transfer of the Conveyed Properties by CF Delaware to one or more of the SPE Subsidiaries), other than (1) the proceeds from Real Property Asset Dispositions occurring after the Sixth Amendment Effective Date, provided that the aggregate amount of net proceeds from all such Real Property Asset Dispositions does not at any time exceed $5,000,000, and (2) the proceeds from any other Asset Dispositions that individually are not in excess of $100,000; or (iii) the proceeds of any sale of Stock of any Credit Party or any Foreign or Domestic Subsidiary of any Credit Party (excluding any sale of Stock from the SPE Subsidiaries to any Credit Party in connection with the formation of the SPE Subsidiaries), Borrower shall prepay the Loans in an amount equal to all such proceeds, net of (A) commissions and other reasonable and customary transaction costs, fees and expenses properly attributable to such transaction and payable by Borrower in connection therewith (in each case, paid to non-Affiliates), (B) transfer taxes, (C) amounts payable to holders of senior Liens (to the extent such Liens constitute Permitted Encumbrances hereunder), if any, and (D) an appropriate reserve for income taxes in accordance with GAAP in connection therewith. Any such prepayment shall be applied in accordance with Section 1.2(c) below. (B) Section 1.2(b)(iii) to the Credit Agreement is hereby amended by deleting such subsection in its entirety and substituting in lieu thereof the following amended Section 1.2(b)(iii) to read in its entirety as follows: (iii) If any Credit Party or any Foreign or Domestic Subsidiary of any Credit Party (1) issues any Stock or debt securities (other than Excluded Debt Securities), or (2) incurs any Funded Debt (other than Excluded Funded Debt), no later than the Business Day following the date of receipt of the proceeds thereof, Borrower shall prepay the Loans in an amount equal to (x) in the case of any issuance of Stock, one hundred percent (100%) of all such proceeds, net of underwriting discounts and commissions and other reasonable costs paid to non-Affiliates in connection therewith, and (y) in the case of any issuance of debt securities or the incurrence of any Funded Debt, fifty percent (50%) of all such proceeds, net of underwriting discounts and commissions (in the case of the issuance of any debt securities) and other reasonable costs paid to non-Affiliates in connection therewith, provided, however, that no such prepayment of Loans shall be required pursuant to clause (y) of this Section 1.2(b)(iii) if at the time of receipt of such proceeds, the Revolving Loan Commitment has been permanently reduced to $25,000,000 or less. Any such prepayment shall be applied in accordance with Section 1.2(c) below. (C) Section 1.4(a) to the Credit Agreement is hereby amended by deleting such subsection in its entirety and substituting in lieu thereof the following amended Section 1.4(a) to read in its entirety as follows: (a) Borrower shall pay interest to Lender in arrears on each applicable Interest Payment Date at a rate per annum for each day during the calculation period related to such Interest Payment Date equal to the greater of (i) the Index Rate as then in effect plus the Applicable Revolver Index Margin as then in effect and (ii) ten percent (10%), computed in either case on the aggregate principal amount of Loans outstanding from time to time. (D) Section 5.10 to the Credit Agreement is hereby amended by deleting said Section and substituting in lieu thereof the following new Section 5.10 to read in its entirety as follows: Section 5.10 Additional Subsidiary Guarantors. Promptly (and in any event within five (5) Business Days) after the creation or acquisition of any Domestic Subsidiary of Borrower (other than the Receivables Subsidiary and the SPE Subsidiaries), Borrower shall cause to be executed and delivered, (i) by such new Domestic Subsidiary, a supplement to the Subsidiary Guaranty in substantially the form of Schedule 1 to the Subsidiary Guaranty, (ii) by such new Subsidiary, an Acknowledgement to the Security Agreement in substantially the form of Exhibit B to the Security Agreement, and (iii) such other related documents (including closing certificates and legal opinions) as Lender may reasonably request, all in form and substance reasonably satisfactory to Lender. (E) Section 6.1 to the Credit Agreement is hereby amended by deleting the word "or" from the end of clause (iii) and adding the word "or" to the end of clause (iv) and adding a new clause (v) to read in its entirety as follows: (v) the formation of the SPE Subsidiaries. (F) Section 6.2 to the Credit Agreement is hereby amended by deleting the word "and" from the end of clause (h) and adding the word "and" to the end of clause (i) and adding a new clause (j) to read in its entirety as follows: (j) Credit Parties may invest up to $1,000 in each of the SPE Subsidiaries. The Bayview Letter of Credit shall also constitute permitted investments under this Section 6.2. (G) Section 6.3 to the Credit Agreement is hereby amended by deleting the word "and" from the end of clause (m) and adding the word "and" to the end of clause (n) and adding a new clause (o) to read in its entirety as follows: (o) Indebtedness for borrowed money incurred by one or more of the SPE Subsidiaries from Bayview and any reimbursement obligations incurred by Borrower in respect of any Bayview Letters of Credit or other Letters of Credit (as defined in the Letter of Credit Agreement) issued after the date hereof in favor of Bayview as required under the Bayview Commitment Letter (each such Indebtedness being herein called a "Bayview Indebtedness"), provided that (i) the aggregate outstanding principal amount of all Bayview Indebtedness shall not exceed $45,000,000 plus any capitalized fees at any one time, (ii) the terms and conditions of all Bayview Indebtedness, including, without limitation, the interest, fees, other charges and payments of principal to be paid by the SPE Subsidiaries to Bayview under any notes, instruments or other documents from time to time evidencing any or all of the Bayview Indebtedness, are substantially the same as those set forth in the Bayview Commitment Letter, (iii) the form and substance of any note, instrument or other documents from time to time evidencing the Bayview Indebtedness shall be substantially the same as set forth as Exhibit B to the Sixth Amendment to Credit Agreement, (iv) all Bayview Indebtedness shall be secured only by Liens on assets of the SPE Subsidiaries permitted under Section 6.7(g), (v) the scheduled final maturity of all Bayview Indebtedness shall be at least fifteen years from the date of funding of the initial advance of funds pursuant to the Bayview Commitment Letter, and (vi) the proceeds of such Bayview Indebtedness shall be used to finance the transfer and lease-back transaction permitted under the proviso to Section 6.8(i) and closing costs and fees payable on account of the Bayview Commitment Letter. (H) Section 6.6 to the Credit Agreement is hereby amended by deleting the word "and" from the end of clause (e) and adding the word "and" to the end of clause (f) and adding a new clause (g) to read in its entirety as follows: (g) for unsecured Guaranteed Indebtedness of Borrower and CF Delaware incurred as a result of the guaranty by Borrower and CF Delaware of any Bayview Indebtedness to the extent such Bayview Indebtedness is permitted under Section 6.3(o). (I) Section 6.7 to the Credit Agreement is hereby amended by deleting the word "and" from the end of clause (e) and adding the word "and" to the end of clause (f) and adding a new clause (g) to read in its entirety as follows: (g) Liens granted by any SPE Subsidiaries in favor of Bayview in the Conveyed Property and any other assets (including real property) owned by the SPE Subsidiaries securing any Bayview Indebtedness to the extent such Bayview Indebtedness is permitted under Section 6.3(o), provided that such Liens do not attach to any of the Collateral, the "Collateral" (as such term is defined in the Letter of Credit Agreement) or the Receivables. (J) Section 6.8 to the Credit Agreement is hereby amended by deleting the word "and" from the end of clause (g) and adding the word "and" to the end of clause (h) and adding a new clause (i) to read in its entirety as follows: (i) the transfer of the Conveyed Properties or any other real property (provided that such real property does not constitute any of the Collateral, the "Collateral" (as such term is defined in the Letter of Credit Agreement) or the Receivables), by CF Delaware to CFCD 2002 LLC, a Delaware limited liability company ("CFCD 2002 LLC"), and the lease-back of such Conveyed Properties or other real property (provided that such real property does not constitute any of the Collateral, the "Collateral" (as such term is defined in the Letter of Credit Agreement) by CFCD 2002 LLC to CF Delaware provided that (a) the aggregate rent paid or payable by CF Delaware under all such lease-back transactions does not exceed an amount equal to the aggregate fixed monthly payment of principal and interest under all of the Bayview Indebtedness permitted under Section 6.3(o), subject to adjustments based on changes in the consumer price index as set forth in the leases between CF Delaware and CFCD 2002 LLC, (b) all such rent shall be used by the SPE Subsidiaries to pay such principal and interest when due and (c) the proceeds received by CF Delaware from CFCD 2002 LLC in connection with such transfer made (i) on the Sixth Amendment Effective Date, shall be used by CF Delaware to create additional Net Availability under and as defined in the Letter of Credit Agreement, and (ii) after the Sixth Amendment Effective Date, to be used by CF Delaware for working capital and general corporate purposes. (K) Section 6.18 to the Credit Agreement is hereby amended by adding a sentence to the to the end of Section 6.18 to read in its entirety as follows: Subject to compliance with all of the terms and conditions set forth in the Sixth Amendment to Credit Agreement and the compliance with all of the covenants contained in the Credit Agreement, as amended by the Sixth Amendment to Credit Agreement, Lender hereby agrees that this Section 6.18 shall not prohibit (i) the incurrence by any SPE Subsidiary of any Bayview Indebtedness to the extent permitted to be incurred under Section 6.3(o) and (ii) the formation by CF Delaware of the SPE Subsidiaries. (L) Section 8.1 to the Credit Agreement is hereby amended by adding a new subsection (p) and a new subsection (q) to read in their entirety as follows: (p) A drawing is made by Bayview under any Bayview Letter of Credit. (q) A default or breach occurs under any agreement, document or instrument relating to any Bayview Indebtedness that is not cured within the applicable grace period therefor and such default or breach (i) involves the failure to make any payment when due in respect of such Bayview Indebtedness or (ii) causes, or permits any holder of such Bayview Indebtedness to cause, such Bayview Indebtedness to become due prior to its stated maturity or prior to its regularly scheduled dates of payment, or cash collateral in respect thereof to be demanded, in each case, regardless of whether such default is waived, or such right is exercised, by such holder. (M) Disclosure Schedule 3.8 to the Credit Agreement is hereby amended by adding to such schedule the following Subsidiaries: CF MovesU.com Incorporated, a Delaware corporation CFCD 2002 Member LLC, a Delaware limited liability company CFCD 2002 LLC, a Delaware limited liability company CFL Holding Ltd., an Alberta corporation (N) Annex A to the Credit Agreement is hereby amended by deleting therefrom definitions of "Applicable Revolver Index Margin," "Borrowing Base," "Commitment Termination Date," "Guarantors," "Index Rate," and "Subsidiary Guaranty" in their entirety and substituting the following amended definitions of such terms in lieu thereof: "Applicable Revolver Index Margin" means the per annum interest rate equal to five percent (5%). "Borrowing Base" shall mean, as of any date of determination by Lender, from time to time, an amount equal to the sum of (a) forty-two percent (42%) of the Appraised Value of Eligible Mortgaged Property less (b) any and all Reserves established by Lender at such time including, without limitation, Reserves for environmental remediation costs, accrued but unpaid taxes, insurance and other Charges and expenses pertaining to such Mortgaged Property. Notwithstanding the foregoing, irrespective of whether any of the conditions in Section 2 have been satisfied, the Borrowing Base shall not at any time exceed an amount equal to $42,000,000 less the following amounts (x) the total amount of any mandatory prepayments required to be made pursuant to Section 1.2(b)(ii) as a result of the consummation from time to time of any Asset Dispositions, (y) the total amount of any mandatory prepayments required to be made pursuant to Section 1.2(b)(iii) as a result of any issuance from time to time of Stock and (z) the total amount of any mandatory prepayments required to be made pursuant to Section 1.2(b)(iii) as a result of the issuance from time to time of any debt securities or the incurrence from time to time of any Funded Debt, provided, however, that the amount in this clause (z) shall be deemed to be Zero Dollars ($0) if at the time of receipt of the proceeds from the issuance of such debt securities or the incurrence of such Funded Debt, the Revolving Loan Commitment is then equal to or less than $25,000,000. "Commitment Termination Date" means the earliest of (a) February 18, 2004, (b) the date of termination of Lender's obligation to make Revolving Credit Advances or permit existing Loans to remain outstanding pursuant to Section 8.2(b), and (c) the date of indefeasible prepayment in full by Borrower of the Loans and other Obligations (other than Letter of Credit Obligations and Other Secured Obligations) and the permanent reduction of the Revolving Loan Commitment to zero dollars ($0). "Guarantors" means each Domestic Subsidiary of Borrower (other than the Receivables Subsidiary and SPE Subsidiaries) and each other Person, if any, which executes a guarantee or other similar agreement in favor of Lender in connection with the transactions contemplated by this Agreement and the other Loan Documents. "Index Rate" means, for any day, a floating rate equal to the higher of (i) the rate publicly quoted from time to time by The Wall Street Journal as the "base rate on corporate loans posted by at least 75% of the nation's 30 largest banks" (or, if The Wall Street Journal ceases quoting a base rate of the type described, the highest per annum rate of interest published by the Federal Reserve Board in Federal Reserve statistical release H.15 (519) entitled "Selected Interest Rates" as the Bank prime loan rate or its equivalent), and (ii) the Federal Funds Rate plus 50 basis points per annum. Each change in any interest rate provided for in the Agreement based upon the Index Rate shall take effect at the time of such change in the Index Rate. "Subsidiary Guaranty" shall mean the Subsidiary Guaranty, dated as of April 27, 2001, executed by all Domestic Subsidiaries of Borrower (other than the Receivables Subsidiary and SPE Subsidiaries) in favor of Lender. (O) Annex A to the Credit Agreement is hereby further amended by adding in alphabetical order the following definitions: "Bayview" shall mean Bayview Financial Trading Group, L.P., together with its successors and assigns. "Bayview Commitment Letter" shall mean that certain commitment letter dated as of January 18, 2002 from Bayview to Borrower, as amended by that certain letter amendment dated as of February 1, 2002 from Bayview to Borrower and that certain letter amendment dated as of February 7, 2002 from Bayview to Borrower, and without giving effect to any other amendments, supplements, replacements or restatements thereof or thereto that have not been consented to in writing by Lender. "Bayview Indebtedness" shall have the meaning ascribed to such term in Section 6.3(o). "Bayview Letters of Credit" shall mean , collectively, those certain Letters of Credit issued by Lender under the Letter of Credit Agreement to Bayview on the Sixth Amendment Effective Date and identified on Schedule 1 to the Sixth Amendment to Credit Agreement, to secure a portion of (i) the principal and interest payments owing by the SPE Subsidiaries to Bayview in respect of the Bayview Indebtedness and (ii) the obligations of the SPE Subsidiaries in respect of real estate taxes or property or casualty insurance covering the Conveyed Properties.. "Conveyed Properties" shall mean and include the real properties listed on Schedule 2 to the Sixth Amendment to Credit Agreement, together with all buildings and improvements located thereon and all fixtures, equipment and appliances used in the operation of such buildings as buildings, including heating and air conditioning systems and other building systems used to provide utility services, heating, air conditioning and ventilation, life safety, or other services thereto, but excluding the trucks, forklifts, scales, computers, trade signage showing any Credit Party's name, and other personal property which is part of any Credit Party's business operations being conducted on such real properties or accounts receivable arising from any Credit Party's business operations being conducted on such real properties. "Excluded Debt Securities" means (a) debt securities issued by one or more of the SPE Subsidiaries to Bayview evidencing any Bayview Indebtedness incurred in accordance with Section 6.3(o) and (b) debt securities issued by any Credit Party or any Foreign or Domestic Subsidiary of any Credit Party evidencing the obligations of such Person or Persons under the Canadian Credit Facility, provided, however, that to the extent any or all of such debt securities evidence obligations of any Credit Party or any Foreign or Domestic Subsidiary of any Credit Party to repay an aggregate outstanding principal amount of Indebtedness in excess of Cnd$6,500,000, such debt securities to the extent of such excess shall not be deemed to be "Excluded Debt Securities" within the meaning of this definition. "Excluded Funded Debt" means (a) any Bayview Indebtedness incurred in accordance with Section 6.3(o), and (b) any Indebtedness incurred by any Credit Party or any Foreign or Domestic Subsidiary of any Credit Party under the Canadian Credit Facility, provided, however, that to the extent the aggregate outstanding principal amount of such Funded Debt at any time exceeds Cnd$6,500,000, such Funded Debt to the extent of such excess shall not be deemed to be "Excluded Funded Debt" within the meaning of this definition. "SPE Subsidiaries" shall mean, collectively, CFCD 2002 Member LLC, a Delaware limited liability company, and CFCD 2002 LLC, a Delaware limited liability company. "Sixth Amendment Effective Date" shall mean February 19, 2002. "Sixth Amendment to Credit Agreement" shall mean that certain Sixth Amendment to Credit Agreement dated as of February 19, 2002 by and among Borrower, the other Credit Parties signatory thereto and Lender. (P) Annex D to the Credit Agreement is hereby amended by deleting such annex in its entirety and replacing it with a new Annex D in the form attached hereto as Exhibit A. 3. No Other Amendments. Except for the waiver expressly set forth and referred to in Section 1 and the amendments expressly set forth and referred to in Section 2, the Credit Agreement 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 Credit Agreement or to affect, modify or impair the continuity or perfection of the Lenders Liens under the Collateral Documents. Without limiting the generality of the foregoing, the parties hereto hereby acknowledge and agree that this Amendment is not intended to nor shall it be construed as waiving any Default or Event of Default that now or hereafter may exist as a result of any transactions between or among CFLH and CF Delaware, except for those transactions specifically described in clauses (a) and (b) of Section 1 of this Amendment. 4. Representations and Warranties. To induce Lender to enter into this Amendment, Borrower and each of the other Credit Parties hereby warrant, represent and covenant to Lender that: (a) this Amendment has been duly authorized, executed and delivered by Borrower and each other Credit Party signatory thereto, (b) after giving effect to this Amendment, no Default or Event of Default has occurred and is continuing as of this date, (c) after giving effect to this Amendment, all of the representations and warranties made by Borrower and each other Credit Party in the 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) and (d) the Credit Parties have provided GE Capital with a true, correct and complete copy of the Bayview Commitment Letter and no amendment, supplement, replacement or restatement thereof or thereto has been made except as reflected in the copy of the Bayview Commitment Letter delivered to GE Capital. Any breach in any material respect by Borrower or any other Credit Party of any of its representations and warranties contained in this Section 4 shall be an Event of Default under the Credit Agreement. 5. Ratification and Acknowledgment. Borrower and each of the other Credit Parties hereby ratify and reaffirm each and every term, covenant and condition set forth in the Credit Agreement and all other documents delivered by such company in connection therewith (including without limitation the other Loan Documents to which Borrower or any other Credit Party is a party), effective as of the date hereof. 6. Estoppel. To induce Lender to enter into this Amendment, Borrower 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 Borrower or any Credit Party as against Lender with respect to the obligations of Borrower or any Credit Party to Lender under the Credit Agreement or the other Loan Documents, either with or without giving effect to this Amendment. 7. Release of Additional Mortgaged Properties. Lender hereby agrees to promptly release its Lien on the Additional Mortgaged Property located at 11888 Mission Boulevard, Mira Loma, California upon a permanent reduction in the Revolving Loan Commitment to $35,000,000 or less, provided that no Default or Event of Default then exists. Lender hereby further agrees to promptly release its Lien on the Additional Mortgaged Properties located at 918 Del Paso Road, Sacramento, California, and 6767 West 75th Street, Chicago, Illinois upon a permanent reduction in the Revolving Loan Commitment to $25,000,000 or less, provided that no Default or Event of Default then exists. 8. Conditions to Effectiveness. This Amendment shall become effective, as of the Effective Date, subject to the prior or subsequent receipt by the Lender of the following, in each case, in form and substance satisfactory to Lender: (a) this Amendment, duly executed, completed and delivered by Borrower and each other Credit Party. (b) the Sixth Amendment to Credit Agreement/Fee Letter dated the date hereof, duly executed, completed and delivered by Borrower and Lender. (c) a copy of the fully executed and effective notes, mortgages, deeds of trust or other instruments entered into as of the Sixth Amendment Effective Date by and among Bayview and any SPE Subsidiary. (d) evidence that, as of the Effective Date, the SPE Subsidiaries shall have incurred not less than $20,000,000 in Bayview Indebtedness in accordance with the terms of Section 6.3(o) of the Credit Agreement as amended hereby and evidence satisfactory to Lender that net proceeds of such Bayview Indebtedness shall have been applied or used in accordance with the requirements of Section 6.3(o) and Section 6.8(i)(c)(i) of the Credit Agreement as amended hereby. (e) evidence of the issuance of (i) that certain Letter of Credit in the face amount of $20,000,000 to United States Fidelity and Guaranty, Co. and (ii) the Bayview Letters of Credit, each issued pursuant to the Letter of Credit Agreement. Upon the effective date of this Amendment, all of the waivers set forth in Section 1 and the amendments set forth in Section 2 of this Amendment shall become effective as of the effective date of this Amendment. 9. Reimbursement of Expenses. Borrower and each of the other Credit Parties hereby agree that Borrower and each of the other Credit Parties shall reimburse Lender on demand for all costs and expenses (including without limitation reasonable attorney's fees) incurred by Lender 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. 10. 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. 11. 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, Borrower and each of the other Credit Parties hereby waive any provision of law that renders any provision hereof prohibited or unenforceable in any respect. 12. 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. 13. Entire Agreement. The 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 Sixth Amendment to Credit Agreement to be duly executed by their respective officers thereunto duly authorized, as of the date first above written. BORROWER: CONSOLIDATED FREIGHTWAYS CORPORATION By /s/Robert E. Wrightson Name: Robert E. Wrightson Title: Executive Vice President and Chief Financial Officer LENDER: GENERAL ELECTRIC CAPITAL CORPORATION By /s/Craig Winslow Name: Craig Winslow Its Duly Authorized Signatory CREDIT PARTIES: 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 CF MOVESU.COM INCORPORATED By /s/Robert E. Wrightson Name: Robert E. Wrightson Title: Executive Vice President and Chief Financial Officer EXHIBIT A ANNEX D (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 period set forth below of not less than the following: Fiscal Quarter Minimum Fixed Charge Coverage Ratio for the Rolling Period 0.20 to 1.00 ending September 30, 2001 for the Rolling Period 0.01 to 1.00 ending December 31, 2001 for the three month -1.00 to 1.00 period ending March 31, 2002 for the sixth month -0.10 to l.00 period ending June 30, 2002 for the nine month 0.50 to 1.00 period ending September 30, 2002 for the Rolling Period 0.80 to 1.00 ending December 31, 2002 for the Rolling Period 1.70 to 1.00 ending on 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 period set forth below, an EBITDA for such period of not less than the following: Fiscal Quarter Minimum EBITDA for the Rolling Period $8,000,000 ending September 30, 2001 for the Rolling Period -$3,200,000 ending December 31, 2001 for the three month -$7,900,000 period ending March 31, 2002 for the sixth month $5,600,000 period ending June 30, 2002 for the nine month $24,400,000 period ending September 30, 2002 for the Rolling Period $43,800,000 ending December 31, 2002 for the Rolling Period $80,000,000 ending on 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 D and not otherwise defined below shall have the respective meanings ascribed to them in Annex A to this Agreement. 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 D, (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 D, (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 or implied principal with respect to Indebtedness (including any lease payments by any Person in respect of any Capital Leases, any Sale-Leaseback Debt, any Vancouver Secured Debt or any Bayview Indebtedness) 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 Letter of Credit Agreement), plus (d) any cash payments made by such Person in connection with any Permitted Acquisitions (as such term is defined in the Letter of Credit Agreement). "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 ex1003.txt EXHIBIT 10.03 Exhibit 10.03 SEVENTH AMENDMENT TO CREDIT AGREEMENT THIS SEVENTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), is made and entered into as of February 22, 2002 (the "Effective Date"), by and among CONSOLIDATED FREIGHTWAYS CORPORATION, a Delaware corporation ("Borrower"), the other Credit Parties signatory to the Credit Agreement described below (collectively, together with the Borrower, the "Credit Parties") and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation ("Lender"). W I T N E S S E T H: WHEREAS, Borrower, the other Credit Parties and Lender are parties to that certain Credit Agreement, dated as of October 24, 2001 (as amended to the date hereof, the "Credit Agreement"; capitalized terms used herein and not otherwise defined herein shall have the meanings given such terms in the Credit Agreement), pursuant to which Lender has committed to make certain loans to Borrower upon the terms and conditions set forth therein; and WHEREAS, Borrower, the other Credit Parties and Lender desire to modify the Credit Agreement in certain respects 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, Borrower, the other Credit Parties and Lender do hereby agree that all capitalized terms used herein shall have the meanings ascribed thereto in the Credit Agreement (except as otherwise expressly defined or limited herein) and do hereby further agree as follows: 1. Consent, Waiver and Release. 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 hereby (i) consents to the sale of that certain real property located at 14371 Santa Anna Avenue, Fontana California (together with any improvements thereon and any fixtures affixed to such real property, collectively, the "Fontana Property"), (ii) waives any Default or Event of Default arising under Section 6.8 of the Credit Agreement solely in connection with the sale of the Fontana Property, (iii) releases its Lien on the Fontana property and (iv) waives the requirements in paragraphs (b) through (e), inclusive, of Annex G to the Credit Agreement solely in connection with the consummation of the sale of the Fontana Property. In order to induce Lender to grant such consent, waiver and release, Borrower hereby agrees that it shall cause $800,000 of the net sale proceeds to be paid directly to Lender to be applied to repay the principal amount of the Loans. 2. Amendments to the Credit Agreement. Subject to the terms and conditions of this Amendment, including without limitation the fulfillment of the conditions precedent specified in Section 7 below, the Credit Agreement is hereby amended as follows: (A) Section 1.2(b)(ii) to the Credit Agreement is hereby amended by deleting such subsection in its entirety and substituting in lieu thereof the following amended Section 1.2(b)(ii) to read in its entirety as follows: (ii) Immediately upon receipt by any Credit Party or any Foreign or Domestic Subsidiary of any Credit Party of: (i) the proceeds of any Asset Disposition by such Credit Party or such Subsidiary (excluding (x) proceeds received by CF Delaware from any sales of accounts receivables and related rights made prior to an Incipient Termination Event or a Termination Event by CF Delaware to the Receivables Subsidiary pursuant to the Receivables Sale and Contribution Agreement and (y) proceeds received by one or more of the SPE Subsidiaries in connection with their formation and proceeds received by CF Delaware in connection with the transfer of the Conveyed Properties by CF Delaware to one or more of the SPE Subsidiaries), other than (1) the proceeds from Real Property Asset Dispositions occurring after the Seventh Amendment Effective Date, provided that the aggregate amount of net proceeds from all such Real Property Asset Dispositions does not at any time exceed $4,100,000, and (2) the proceeds from any other Asset Dispositions that individually are not in excess of $100,000; or (ii) the proceeds of any sale of Stock of any Credit Party or any Foreign or Domestic Subsidiary of any Credit Party (excluding any sale of Stock from the SPE Subsidiaries to any Credit Party in connection with the formation of the SPE Subsidiaries), Borrower shall prepay the Loans in an amount equal to all such proceeds, net of (A) commissions and other reasonable and customary transaction costs, fees and expenses properly attributable to such transaction and payable by Borrower in connection therewith (in each case, paid to non-Affiliates), (B) transfer taxes, (C) amounts payable to holders of senior Liens (to the extent such Liens constitute Permitted Encumbrances hereunder), if any, and (D) an appropriate reserve for income taxes in accordance with GAAP in connection therewith. Any such prepayment shall be applied in accordance with Section 1.2(c) below. (B) Annex A to the Credit Agreement is hereby amended by deleting therefrom definitions of "Borrowing Base" and "Revolving Loan Commitment" in their entirety and substituting the following amended definitions of such terms in lieu thereof: "Borrowing Base" shall mean, as of any date of determination by Lender, from time to time, an amount equal to the sum of (a) thirty nine and twenty-one hundredths percent (39.21%) of the Appraised Value of Eligible Mortgaged Property less (b) any and all Reserves established by Lender at such time including, without limitation, Reserves for environmental remediation costs, accrued but unpaid taxes, insurance and other Charges and expenses pertaining to such Mortgaged Property. Notwithstanding the foregoing, irrespective of whether any of the conditions in Section 2 have been satisfied, the Borrowing Base shall not at any time exceed an amount equal to $41,200,000 less the following amounts (x) the total amount of any mandatory prepayments required to be made pursuant to Section 1.2(b)(ii) as a result of the consummation from time to time of any Asset Dispositions after the Seventh Amendment Effective Date, (y) the total amount of any mandatory prepayments required to be made pursuant to Section 1.2(b)(iii) as a result of any issuance from time to time of Stock and (z) the total amount of any mandatory prepayments required to be made pursuant to Section 1.2(b)(iii) as a result of the issuance from time to time of any debt securities or the incurrence from time to time of any Funded Debt, provided, however, that the amount in this clause (z) shall be deemed to be Zero Dollars ($0) if at the time of receipt of the proceeds from the issuance of such debt securities or the incurrence of such Funded Debt, the Revolving Loan Commitment is then equal to or less than $25,000,000. "Revolving Loan Commitment" means the commitment of Lender to make Revolving Credit Advances, which commitment shall be Forty Nine Million Two Hundred Thousand Dollars ($49,200,000) on the Seventh Amendment Effective Date, as such amount may be adjusted, if at all, from time to time thereafter in accordance with this Agreement. (C) Annex A to the Credit Agreement is hereby further amended by adding in alphabetical order the following definitions: "Seventh Amendment Effective Date" shall mean February 22, 2002. (D) Annex F to the Credit Agreement is hereby amended by deleting the reference to the 14371 Santa Anna Avenue, Fontana, California property from such annex. 3. No Other Amendments. Except for the covenant, waiver and release expressly set forth and referred to in Section 1 and the amendments expressly set forth and referred to in Section 2, the Credit Agreement 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 Credit Agreement or to affect, modify or impair the continuity or perfection of the Lenders Liens under the Collateral Documents. 4. Representations and Warranties. To induce Lender to enter into this Amendment, Borrower and each of the other Credit Parties hereby warrant, represent and covenant to Lender that: (a) this Amendment has been duly authorized, executed and delivered by Borrower and each other Credit Party signatory thereto, (b) after giving effect to this Amendment, no Default 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 Borrower and each other Credit Party in the 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 Borrower or any other Credit Party of any of its representations and warranties contained in this Section 4 shall be an Event of Default under the Credit Agreement. 5. Ratification and Acknowledgment. Borrower and each of the other Credit Parties hereby ratify and reaffirm each and every term, covenant and condition set forth in the Credit Agreement and all other documents delivered by such company in connection therewith (including without limitation the other Loan Documents to which Borrower or any other Credit Party is a party), effective as of the date hereof. 6. Estoppel. To induce Lender to enter into this Amendment, Borrower 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 Borrower or any Credit Party as against Lender with respect to the obligations of Borrower or any Credit Party to Lender under the Credit Agreement or the other Loan 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 Lender of the following, in each case, in form and substance satisfactory to Lender: (a) this Amendment, duly executed, completed and delivered by Borrower and each other Credit Party. (b) evidence of the consummation of the sale of the Fontana Property. (c) evidence that CF Delaware has received net proceeds of $902,305.88 in immediately available funds from the sale of the Fontana Property. (d) a payment directly from buyer's escrow agent to Lender of $800,000 in immediately available funds representing a portion of the sale proceeds in connection with the sale of the Fontana Property, to be applied to the repayment of the principal amount of the Loans. Upon the effective date of this Amendment, all of the waivers set forth in Section 1 and the amendments set forth in Section 2 of this Amendment shall become effective as of the effective date of this Amendment. 8. Reimbursement of Expenses. Borrower and each of the other Credit Parties hereby agree that Borrower and each of the other Credit Parties shall reimburse Lender on demand for all costs and expenses (including without limitation reasonable attorney's fees) incurred by Lender 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, Borrower 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 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 Seventh Amendment to Credit Agreement to be duly executed by their respective officers thereunto duly authorized, as of the date first above written. BORROWER: CONSOLIDATED FREIGHTWAYS CORPORATION By /s/Robert E. Wrightson Name: Robert E. Wrightson Title: Executive Vice President and Chief Financial Officer LENDER: GENERAL ELECTRIC CAPITAL CORPORATION By /s/Craig Winslow Name: Craig Winslow Title: Duly Authorized Signatory CREDIT PARTIES: 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/Kerry K. Morgan Name:Kerry K. Morgan Title:Vice President and Treasurer LELAND JAMES SERVICE CORPORATION By:/s/Kerry K. Morgan Name:Kerry K. Morgan Title:Vice President and Treasurer EX-10 6 ex1004.txt EXHIBIT 10.04 Exhibit 10.04 SEVENTH AMENDMENT TO LETTER OF CREDIT AGREEMENTS THIS SEVENTH AMENDMENT TO LETTER OF CREDIT AGREEMENTS (this "Amendment"), is made and entered into as of January 18, 2002 (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 in certain respects, 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. Waiver. 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)(A) and (ii)(A) of Section 2.2(f) of the Letter of Credit Agreement solely with respect to a Letter of Credit in the amount of $7,000,000 to be issued to United States Fidelity and Guaranty, Co. (the "January 2002 Letter of Credit"); provided that the aforesaid waiver relates solely to the issuance of the January 2002 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. Amendment of the Letter of Credit Agreement. 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 Agreement is hereby amended (A) Annex A to the Letter of Credit Agreement is hereby amended by deleting therefrom the definition of "Commitment" in its entirety and substituting the following amended definition of such term in lieu thereof: "Commitment" shall mean commitment of Creditor to incur Letter of Credit Obligations, which commitment shall be One Hundred Twenty-Five Million Dollars ($125,000,000) on the Closing Date, as such amount may be adjusted, if at all, from time to time in accordance with this Agreement. (B) Section 1.1(a) to the Letter of Credit Agreement is hereby amended by adding a new sentence at the end of Section 1.1(a) to read in its entirety as follows: Notwithstanding anything to the contrary contained in this Agreement, at no time shall the sum of the Pledged Entity Adjusted Debt plus the outstanding balance of the Letter of Credit Exposure exceed Two Hundred Million Dollars ($200,000,000). (C) Section 2.2(d) to the Letter of Credit Agreement is hereby deleted and a new Section 2.2(d) is hereby substituted in lieu thereof to read in its entirety as follows: (d) After giving effect to the incurrence of such Letter of Credit Obligation, either (i) a Letter of Credit Exposure Excess would exist, or (ii) the sum of the Pledged Entity Adjusted Debt plus the outstanding balance of the Letter of Credit Exposure would exceed Two Hundred Million Dollars ($200,000,000); or 3. No Other Amendments. Except for the waiver expressly set forth and referred to in Section 1 and the amendments expressly set forth and referred to in Section 2, 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 3 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. 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 Creditor of the following, in each case, in form and substance satisfactory to Creditor: (a) this Amendment, duly executed, completed and delivered by Debtor and each other Credit Party. (b) Debtor shall have delivered to Creditor a certificate of the Chief Financial Officer of Debtor (the "Certificate of the Chief Financial Officer"), substantially in the form attached hereto as Exhibit A demonstrating: (i) the ability of Debtor and the other Credit Parties to pay all of their respective payroll obligations, payroll taxes and related amounts due on January 22, 2002, for services provided by employees of Debtor and Credit Parties for the period from January 6, 2002 through and including January 12, 2002; and (ii) the ability of Debtor and the other Credit Parties to pay all of their respective pension plan and employee benefit plan payment obligations for the period from December 2, 2001 to December 31, 2001. The Certificate of the Chief Financial Officer shall also contain a certification, based upon income statement and cash flow statement projections attached thereto and satisfactory to Creditor, that Debtor and the other Credit Parties have liquid assets available to fund any and all disbursements of the Credit Parties when due and payable (or, in the case of trade payables with reasonable promptness after such trade payables are due and payable) on or after the period commencing on the date hereof through and including February 17, 2002, including, without limitation, all trade payables of Debtor and the other Credit Parties, all payroll obligations, payroll taxes and related amounts of Debtor and the other Credit Parties and all pension plan and employee benefit plan payment obligations of Debtor and the other Credit Parties. Upon the effective date of this Amendment, the amendment 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 Seventh Amendment to Letter of Credit Agreements to be duly executed by their respective officers thereunto duly authorized, as of the date first above written. DEBTOR: CONSOLIDATED FREIGHTWAYS CORPORATION By Name: Title: CREDITOR: GENERAL ELECTRIC CAPITAL CORPORATION By Name: Craig Winslow Its Duly Authorized Signatory SUBSIDIARY GUARANTORS: CONSOLIDATED FREIGHTWAYS CORPORATION OF DELAWARE By: Name: Title: CF AIRFREIGHT CORPORATION By: Name: Title: REDWOOD SYSTEMS, INC. By: Name: Title: LELAND JAMES SERVICE CORPORATION By: Name: Title: EX-10 7 ex1005.txt EXHIBIT 10.05 Exhibit 10.05 EIGHTH AMENDMENT TO LETTER OF CREDIT AGREEMENTS THIS EIGHTH AMENDMENT TO LETTER OF CREDIT AGREEMENTS (this "Amendment"), is made and entered into as of February 19, 2002 (the "Effective Date"), by and among 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 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 in certain respects, 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. Waiver. 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 (i) the minimum Excess Liquidity requirements in clauses (i)(A) and (ii)(A) of Section 2.2(f) of the Letter of Credit Agreement solely with respect to that certain Letter of Credit in the amount of $20,000,000 to be issued to United States Fidelity and Guaranty, Co. on or about the date hereof (the "Fidelity Letter of Credit") and the Bayview Letters of Credit (as such term is defined in Section 2 below); provided that the aforesaid waiver relates solely to the issuance of the Fidelity Letter of Credit and the Bayview Letters of Credit (as such term is defined in Section 2 below) and to the specific conditions precedent to issuance of each 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; (ii) any Default or Event of Default arising under Sections 6.1, 6.2, 6.4, 6.5 and 6.8 of the Letter of Credit Agreement solely as a result of (a) the formation of CFL Holding Ltd, an Alberta corporation ("CFLH") as a new Subsidiary of CF Delaware and the issuance of stock by CFLH to CF Delaware in connection therewith, and (b) CF Delaware's exchange of shares of Canadian Freightways, Ltd. with CFLH for shares of CFLH prior to the date hereof, without Creditor's prior written consent; and (iii) solely for the period commencing on December 31, 2001 and ending on the Effective Date, any Default or Event of Default resulting from the failure of Debtor to meet the Minimum EBITDA financial covenant solely for the Fiscal Quarter ending December 31, 2001, as such financial covenant is in effect immediately prior to the date of this Amendment. Creditor hereby further waives any Default or Event of Default arising under Sections 4.1 and paragraph (f) of Annex E as a result of the failure by Debtor to give Creditor timely notice of any of the foregoing Events of Default described in the immediately preceding sentence. 2. Amendment of the Letter of Credit Agreement. 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 Agreement is hereby amended as follows: (A) Section 1.1(c)(iv) to the Letter of Credit Agreement is hereby amended by deleting the first word of the first sentence of said Section 1.1(c)(iv) and substituting in lieu thereof the following words "Subject to Section 1.3, neither" to the beginning of the first sentence of said section. (B) Section 1.3 to the Letter of Credit Agreement is hereby amended by adding a new sentence at the end thereof to read in its entirety as follows: On Wednesday of each calendar week (or if Wednesday is not a Business Day, the immediately succeeding Business Day) (each, a "Cash Collateral Valuation Date"), Creditor shall determine whether a Letter of Credit Exposure Excess is then continuing, based upon the Pledged Entity Valuation Certificate dated as of the determination date, the amount of cash and Cash Equivalents on deposit in the Cash Collateral Account at such time and the Letter of Credit Exposure at such time. After taking into consideration the foregoing factors, if no Letter of Credit Exposure Excess exists on any such Cash Collateral Valuation Date, then Creditor will within two (2) Business Days after such Cash Collateral Valuation Date (the "Cash Collateral Return Date"), at the request of Debtor, return to Debtor the amount of cash and Cash Equivalents, if any, then on deposit in the Cash Collateral Account equal to the Cash Collateral Return Amount (defined below), free and clear of any lien granted in favor of Creditor hereunder, provided that Creditor shall have no obligation to return any such cash or Cash Equivalents on the Cash Collateral Return Date if, on such Cash Collateral Return Date and after giving effect to such return of the Cash Collateral Return Amount (i) a Letter of Credit Exposure Excess would exist, or (ii) a Default or an Event of Default would exist. As used herein, the term "Cash Collateral Return Amount" means, as of any date of determination thereof, an amount equal to (i) the aggregate amount of cash and Cash Equivalents then held in the Cash Collateral Account in accordance with Section 1.1(c)(i) that are in excess of the amount of the Letter of Credit Exposure Excess that would exist as of such determination date if there were no cash or Cash Equivalents on deposit in the Cash Collateral Account at such time divided by (ii) 105%. The Cash Collateral Return Amount if a negative number shall be deemed to be equal to Zero Dollars ($0). (C) Section 5.10 to the Letter of Credit Agreement is hereby amended by deleting said Section and substituting in lieu thereof the following new Section 5.10 to read in its entirety as follows: Section 5.10 Additional Subsidiary Guarantors. Promptly (and in any event within five (5) Business Days) after the creation or acquisition of any Domestic Subsidiary of Debtor (other than the Receivables Subsidiary and the SPE Subsidiaries), Debtor shall cause to be executed and delivered, (i) by such new Domestic Subsidiary, a supplement to the Subsidiary Guaranty in substantially the form of Schedule 1 to the Subsidiary Guaranty, (ii) by such new Subsidiary, an Acknowledgement to the Security Agreement in substantially the form of Exhibit B to the Security Agreement, and (iii) such other related documents (including closing certificates and legal opinions) as Creditor may reasonably request, all in form and substance reasonably satisfactory to Creditor. (D) Section 6.1 to the Letter of Credit Agreement is hereby amended by deleting the word "or" from the end of clause (iii) and adding the word "or" to the end of clause (iv) and adding a new clause (v) to read in its entirety as follows: (v) the formation of the SPE Subsidiaries. (E) Section 6.2 to the Letter of Credit Agreement is hereby amended by deleting the word "and" from the end of clause (h) and adding the word "and" to the end of clause (i) and adding a new clause (j) to read in its entirety as follows: (j) Credit Parties may invest up to $1,000 in each of the SPE Subsidiaries. (F) Section 6.3 to the Letter of Credit Agreement is hereby amended by deleting the word "and" from the end of clause (m) and adding the word "and" to the end of clause (n) and adding a new clause (o) to read in its entirety as follows: (o) Indebtedness for borrowed money incurred by one or more of the SPE Subsidiaries from Bayview and any reimbursement obligations incurred by Debtor in respect of any Bayview Letters of Credit or other Letters of Credit issued after the date hereof in favor of Bayview as required under the Bayview Commitment Letter (each such Indebtedness being herein called a "Bayview Indebtedness"), provided that (i) the aggregate outstanding principal amount of all Bayview Indebtedness shall not exceed $45,000,000 plus capitalized fees at any one time, (ii) the terms and conditions of all Bayview Indebtedness, including, without limitation, the interest, fees, other charges and payments of principal to be paid by the SPE Subsidiaries to Bayview under any notes, instruments or other documents from time to time evidencing any or all of the Bayview Indebtedness, are substantially the same as those set forth in the Bayview Commitment Letter, (iii) the form and substance of any note, instrument or other documents from time to time evidencing the Bayview Indebtedness shall be substantially the same as set forth as Exhibit B to the Eighth Amendment to Letter of Credit Agreement, (iv) all Bayview Indebtedness shall be secured only by Liens on assets of the SPE Subsidiaries permitted under Section 6.7(g), (v) the scheduled final maturity of all Bayview Indebtedness shall be at least fifteen years from the date of funding of the initial advance of funds pursuant to the Bayview Commitment Letter, and (vi) the proceeds of such Bayview Indebtedness shall be used to finance the transfer and lease-back transaction permitted under the proviso to Section 6.8(i) and closing costs and fees payable on account of the Bayview Commitment Letter. (G) The first sentence of Section 6.6 to the Letter of Credit Agreement is hereby amended by deleting the word "and" from the end of clause (e) and adding the word "and" to the end of clause (f) and adding a new clause (g) to read in its entirety as follows: (g) for unsecured Guaranteed Indebtedness of Debtor and CF Delaware incurred as a result of the guaranty by Debtor and CF Delaware of any Bayview Indebtedness to the extent such Bayview Indebtedness is permitted under Section 6.3(o). (H) Section 6.7 to the Letter of Credit Agreement is hereby amended by deleting the word "and" from the end of clause (e) and adding the word "and" to the end of clause (f) and adding a new clause (g) to read in its entirety as follows: (g) Liens granted by any SPE Subsidiaries in favor of Bayview in the Conveyed Property and any other assets (including real property) owned by the SPE Subsidiaries securing any Bayview Indebtedness to the extent such Bayview Indebtedness is permitted under Section 6.3(o), provided that such Liens do not attach to any of the Collateral, the "Collateral" (as such term is defined in the Revolving Credit Agreement) or the Receivables. (I) Section 6.8 to the Letter of Credit Agreement is hereby amended by deleting the word "and" from the end of clause (g) and adding the word "and" to the end of clause (h) and adding a new clause (i) to read in its entirety as follows: (i) the transfer of the Conveyed Properties or any other real property (provided that such real property does not constitute any of the Collateral, the "Collateral" (as such term is defined in the Revolving Credit Agreement) or the Receivables), by CF Delaware to CFCD 2002 LLC, a Delaware limited liability company ("CFCD 2002 LLC"), and the lease-back of such Conveyed Properties or other real property (provided that such real property does not constitute any of the Collateral, the "Collateral" (as such term is defined in the Revolving Credit Agreement) or the Receivables) by CFCD 2002 LLC to CF Delaware provided that (a) the aggregate rent paid or payable by CF Delaware under all such lease-back transactions does not exceed an amount equal to the aggregate fixed monthly prepayment of principal and interest under all of the Bayview Indebtedness permitted under Section 6.3(o), subject to adjustments based on changes in the consumer price index as set forth in the leases between CF Delaware and CFCD 2002 LLC, (b) all such rent shall be used by the SPE Subsidiaries to pay such principal and interest when due and (c) the proceeds received by CF Delaware from CFCD 2002 LLC in connection with such transfer made (i) on the Eighth Amendment Effective Date, shall be used by CF Delaware to create additional Net Availability under the Letter of Credit Agreement, and (ii) after the Eighth Amendment Effective Date, to be used by CF Delaware for working capital and general corporate purposes. (J) Section 6.19 to the Letter of Credit Agreement is hereby amended by adding a sentence to the to the end of Section 6.19 to read in its entirety as follows: Subject to compliance with all of the terms and conditions set forth in the Eighth Amendment to Letter of Credit Agreements and the compliance with all of the covenants contained in the Letter of Credit Agreement, as amended by the Eighth Amendment to Letter of Credit Agreement, Creditor hereby agrees that this Section 6.19 shall not prohibit (i) the incurrence by any SPE Subsidiary of any Bayview Indebtedness to the extent permitted to be incurred under Section 6.3(o) and (ii) the formation by CF Delaware of the SPE Subsidiaries. (K) Section 8.1 to the Letter of Credit Agreement is hereby amended by adding a new subsection (p) and a new subsection (q) to read in their entirety as follows: (p) A drawing is made by Bayview under any Bayview Letter of Credit. (q) A default or breach occurs under any agreement, document or instrument relating to any Bayview Indebtedness that is not cured within the applicable grace period therefor and such default or breach (i) involves the failure to make any payment when due in respect of such Bayview Indebtedness or (ii) causes, or permits any holder of such Bayview Indebtedness to cause, such Bayview Indebtedness to become due prior to its stated maturity or prior to its regularly scheduled dates of payment, or cash collateral in respect thereof to be demanded, in each case, regardless of whether such default is waived, or such right is exercised, by such holder. (L) Disclosure Schedule 3.8 to the Letter of Credit Agreement is hereby amended by adding to such schedule the following Subsidiaries: CF MovesU.com Incorporated, a Delaware corporation CFCD 2002 Member LLC, a Delaware limited liability company CFCD 2002 LLC, a Delaware limited liability company CFL Holding Ltd., an Alberta corporation (M) Annex A to the Letter of Credit Agreement is hereby amended by deleting therefrom the definitions of "Applicable L/C Margin", "Commitment" "Guarantors" and "Subsidiary Guaranty" in their entirety and substituting the following definitions in lieu thereof: "Applicable L/C Margin" shall mean a per annum rate equal to 2.25%. "Commitment" shall mean commitment of Creditor to incur Letter of Credit Obligations, which commitment shall be One Hundred Fifty Million Dollars ($150,000,000) on the Closing Date, as such amount may be adjusted, if at all, from time to time in accordance with this Agreement. "Guarantors" shall mean each Domestic Subsidiary of Debtor (other than the Receivables Subsidiary and SPE Subsidiaries) and each other Person, if any, which executes a guarantee or other similar agreement in favor of Creditor in connection with the transactions contemplated by this Agreement and the other Letter of Credit Documents. "Subsidiary Guaranty" shall mean the Subsidiary Guaranty, dated as of April 27, 2001, executed by all Domestic Subsidiaries of Debtor (other than the Receivables Subsidiary and SPE Subsidiaries) in favor of Creditor. (N) Annex A to the Letter of Credit Agreement is hereby further amended by adding in alphabetical order the following definitions: "Bayview" shall mean Bayview Financial Trading Group, L.P., together with its successors and assigns. "Bayview Commitment Letter" shall mean that certain commitment letter dated as of January 18, 2002 from Bayview to Debtor, as amended by those certain letter amendments dated as of February 1, 2002 and February 7, 2002 from Bayview to Debtor, and without giving effect to any other amendments, supplements, replacements or restatements thereof or thereto that have not been consented to in writing by Creditor. "Bayview Indebtedness" shall have the meaning ascribed to such term in Section 6.3(o). "Bayview Letters of Credit" shall mean, collectively, those certain Letters of Credit issued by Debtor to Bayview on the Eight Amendment Effective Date and identified on Schedule 1 to the Eighth Amendment to Letter of Credit Agreements, to secure a portion of (i) the principal and interest payments owing by the SPE Subsidiaries to Bayview in respect of the Bayview Indebtedness and (ii) the obligations of the SPE Subsidiaries in respect of real estate taxes or property or casualty insurance covering the Conveyed Properties. "Conveyed Properties" shall mean and include the real properties listed on Schedule 2 to the Eighth Amendment to Letter of Credit Agreements, together with all buildings and improvements located thereon and all fixtures, equipment and appliances used in the operation of such buildings as buildings, including heating and air conditioning systems and other building systems used to provide utility services, heating, air conditioning and ventilation, life safety, or other services thereto, but excluding the trucks, forklifts, scales, computers, trade signage showing any Credit Party's name, and other personal property which is part of any Credit Party's business operations being conducted on such real properties or accounts receivable arising from any Credit Party's business operations being conducted on such real properties. "Eighth Amendment Effective Date" shall mean February 19, 2002. "Eight Amendment to Letter of Credit Agreements" shall mean that certain Eighth Amendment to Letter of Credit Agreements dated as of February 19, 2002 by and among Debtor, the other Credit Parties signatory thereto and Creditor. "SPE Subsidiaries" shall mean, collectively, CFCD 2002 Member LLC, a Delaware limited liability company, and CFCD 2002 LLC, a Delaware limited liability company. (O) Annex C to the Letter of Credit Agreement is hereby amended by deleting such annex in its entirety and replacing it with a new Annex C in the form attached hereto as Exhibit A. 3. No Other Amendments. Except for the waiver expressly set forth and referred to in Section 1 and the amendments expressly set forth and referred to in Section 2, 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. Without limiting the generality of the foregoing, the parties hereto hereby acknowledge and agree that this Amendment is not intended to nor shall it be construed as (i) waiving any conditions precedent under Section 2.2 of the Letter of Credit Agreement with respect to any Letter of Credit now or hereafter requested by Debtor to be issued to Bayview Financial Trading Group, L.P. (or its successors and assigns) to secure any obligations of the SPE Subsidiaries (as such term is defined in Section 2 of this Amendment) in respect of any environmental condition on or relating to any of the Conveyed Properties (as such term is defined in Section 2 of this Amendment), or (ii) waiving any Default or Event of Default that now or hereafter may exist as a result of any transactions between or among CFLH and CF Delaware, except for those transactions specifically described in clauses (a) and (b) of Section 1 of this Amendment. 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, (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) and (d) the Credit Parties have provided GE Capital with a true, correct and complete copy of the Bayview Commitment Letter and no amendment, supplement, replacement or restatement thereof or thereto has been made except as reflected in the copy of the Bayview Commitment Letter delivered to GE Capital. 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. 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, upon (a) receipt by the Creditor of this Amendment, duly executed, completed and delivered by Debtor and each other Credit Party, in form and substance satisfactory to GE Capital (b) the Sixth Amendment to Credit Agreement dated February 19, 2002, among Debtor, the other credit parties signatory thereto and GE Capital shall have been executed and delivered to GE Capital and be in full force and effect, (c) the Seventh Amendment to Securitization Agreements, dated February 19, 2002, among Consolidated Freightways Funding LLC, Consolidated Freightways Corporation of Delaware and GE Capital shall have been executed and delivered to GE Capital and be in full force and effect, (d) receipt by the Creditor of Side Letter Agreement dated the date hereof, duly executed, completed and delivered by Debtor and Creditor, and (e) the SPE Subsidiaries shall have incurred not less than $20,000,000 in Bayview Indebtedness in accordance with the terms of Section 6.3(o) of the Letter of Credit Agreement as amended hereby and the proceeds of such Bayview Indebtedness shall have been used in accordance with the requirements of Section 6.3(o) and Section 6.8(i)(c)(i) of the Letter of Credit Agreement as amended hereby. Upon the effective date of this Amendment, the waivers set forth in Section 1 and the 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 Eighth Amendment to Letter of Credit Agreements to be duly executed by their respective officers thereunto duly authorized, as of the date first above written. DEBTOR: CONSOLIDATED FREIGHTWAYS CORPORATION By Name: Title: CREDITOR: GENERAL ELECTRIC CAPITAL CORPORATION By Name: Craig Winslow Its Duly Authorized Signatory SUBSIDIARY GUARANTORS: CONSOLIDATED FREIGHTWAYS CORPORATION OF DELAWARE By: Name: Title: CF AIRFREIGHT CORPORATION By: Name: Title: REDWOOD SYSTEMS, INC. By: Name: Title: LELAND JAMES SERVICE CORPORATION By: Name: Title: CF MOVESU.COM INCORPORATED By: Name: Title: EXHIBIT A 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 period set forth below of not less than the following: Fiscal Quarter Minimum Fixed Charge Coverage Ratio for the Rolling Period 0.20 to 1.00 ending September 30, 2001 for the Rolling Period 0.01 to 1.00 ending December 31, 2001 for the three month -1.00 to 1.00 period ending March 31, 2002 for the sixth month -0.10 to l.00 period ending June 30, 2002 for the nine month 0.50 to 1.00 period ending September 30, 2002 for the Rolling Period 0.80 to 1.00 ending December 31, 2002 for the Rolling Period 1.70 to 1.00 ending on 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). (b) Minimum EBITDA. Debtor and its Subsidiaries shall have on a consolidated basis, for each period set forth below, an EBITDA for such period of not less than the following: Fiscal Quarter Minimum EBITDA for the Rolling Period $8,000,000 ending September 30, 2001 for the Rolling Period -$3,200,000 ending December 31, 2001 for the three month -$7,900,000 period ending March 31, 2002 for the sixth month $5,600,000 period ending June 30, 2002 for the nine month $24,400,000 period ending September 30, 2002 for the Rolling Period $43,800,000 ending December 31, 2002 for the Rolling Period $80,000,000 ending on 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, any Vancouver Secured Debt or any Bayview Indebtedness) 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 8 ex1006.txt EXHIBIT 10.06 Exhibit 10.06 SEVENTH AMENDMENT TO SECURITIZATION AGREEMENTS THIS SEVENTH AMENDMENT TO SECURITIZATION AGREEMENTS (this "Amendment"), is made and entered into as of February 19, 2002 (the "Effective Date"), by and among 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 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; WHEREAS, the Parent, certain Subsidiaries of Parent signatory thereto, the Borrower, the Lender, the Conduit Lender and the Administrative Agent are parties to a certain Guaranty Agreement, dated as of April 27, 2001 (as amended to the date hereof, the "Guaranty Agreement"); 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, the Guaranty 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 GE Capital (in its various capacities) is willing to agree to such amendments 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. Waiver. Subject to the terms and conditions of this Amendment, including without limitation the fulfillment of the conditions to effectiveness specified in Section 7 below, any Incipient Termination Event or Termination Event resulting from any failure of the Parent to meet the Minimum EBITDA financial covenant in paragraph (c) to Annex 4.02(p) to the Sale Agreement solely for the Fiscal Quarter ending December 31, 2001, as such financial covenant is in effect immediately prior to the date of this Amendment; provided, however that any such Incipient Termination Event or Termination Event shall automatically be restored if the Parent shall fail or have failed to satisfy the financial covenant as amended hereby. 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 parties signatory to each of the Funding Agreement, the Sale Agreement and the Servicing Agreement hereby agree to amend the Securitization Agreements as follows: (A) Amendment to Sale Agreement. The parties signatory to the Sale Agreement hereby agree that the Sale Agreement shall be amended as follows: (1) Schedule 4.01 to the Sale Agreement is hereby amended by adding the following subsidiaries of Consolidated Freightways Corporation of Delaware under the listing at subsection I: CF MovesU.com Incorporated, a Delaware corporation CFCD 2002 Member LLC, a Delaware limited liability company CFCD 2002 LLC, a Delaware limited liability company CFL Holding Ltd., and Alberta corporation (2) Annex 4.02(p) to the Sale Agreement is hereby deleted in its entirety and the replacement Annex 4.02(p) attached to this Amendment as Exhibit A shall be substituted in lieu thereof. (B) Amendments to Guaranty Agreement. The parties signatory to the Guaranty Agreement hereby agree to amend Section 2.01(f) of the Guaranty Agreement by amending and restated the first sentence of said Section to read in its entirety as follows: Except as set forth in Schedule 2.01(f) to this Agreement, the Guarantors do not have any Subsidiaries (other than CFCD 2002 Member LLC, a Delaware limited liability company, and CFCD 2002 LLC, a Delaware limited liability company), and the Guarantors are not engaged in any joint venture or partnership with any other Person, under which any Guarantor is liable for any debts or liabilities of such Person, or as of the Closing Date or is an Affiliate of any other Person. (C) 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: The definitions of the term "Subsidiary Guarantor" set forth in Annex X to the Funding Agreement, the Sale Agreement and the Servicing Agreement is hereby deleted in its entirety and the following definition of such term is substituted in lieu thereof: "Subsidiary Guarantors" shall mean the each domestic Subsidiary of the Parent (other than the Originator, the Borrower, CFCD 2002 Member LLC, a Delaware limited liability company, and CFCD 2002 LLC, a Delaware limited liability company). 3. No Other Amendments. Except for the waiver expressly set forth and referred to in Section 1 and the amendments expressly set forth and referred to in Section 2, 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, 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 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 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. 7. Conditions to Effectiveness. This Amendment shall become effective, as of the Effective Date, upon receipt by the Administrative Agent, in form and substance satisfactory to Administrative Agent, of (i) this Amendment, duly executed, completed and delivered by each of the Companies and by GE Capital in its various capacities, and (ii) the Seventh Amendment to Securitization Agreements/Fee Letter dated of even date herewith between GE Capital and Borrower, duly executed by Borrower. 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. Certain Other Covenants. Borrower hereby covenants and agrees to deliver to the Administrative Agent on or before February 28, 2002, a copy of the audit report in respect of Borrower's financial statements, as prepared by Arthur Andersen LLP, which report shall be in form and substance reasonably satisfactory to GE Capital. Borrower further agrees that any default or breach by Borrower of the covenant set forth in the immediately preceding sentence shall constitute an immediate Termination Event. 10. 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. 11. 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. 12. 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. 13. 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. 14. 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. [Remainder of page intentionally blank; next page is signature page] IN WITNESS WHEREOF, the parties have caused this Seventh 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 Name: Title: CONSOLIDATED FREIGHTWAYS CORPORATION OF DELAWARE, as Originator and Servicer By Name: Title: CONSOLIDATED FREIGHTWAYS CORPORATION By: Name: Title: CF AIRFREIGHT CORPORATION By: Name: Title: CF MOVESU.COM INCORPORATED By: Name: Title: REDWOOD SYSTEMS, INC. By: Name: Title: LELAND JAMES SERVICE CORPORATION By: Name: Title: GENERAL ELECTRIC CAPITAL CORPORATION, as Conduit Lender, Committed Lender and Administrative Agent By Name: Craig Winslow Its Duly Authorized Signatory EXHIBIT A ANNEX 4.02(p) to RECEIVABLES SALE AND CONTRIBUTION AGREEMENT FINANCIAL COVENANTS (a) Minimum Fixed Charge Coverage Ratio. The Parent 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 period set forth below of not less than the following: Fiscal Quarter Minimum Fixed Charge Coverage Ratio for the Rolling Period 0.20 to 1.00 ending September 30, 2001 for the Rolling Period 0.01 to 1.00 ending December 31, 2001 for the three month -1.00 to 1.00 period ending March 31, 2002 for the sixth month -0.10 to l.00 period ending June 30, 2002 for the nine month 0.50 to 1.00 period ending September 30, 2002 for the Rolling Period 0.80 to 1.00 ending December 31, 2002 for the Rolling Period 1.70 to 1.00 ending on each Fiscal Quarter thereafter (b) Minimum Tangible Net Worth. Parent 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, Parent 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 Parent 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 Parent 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 Parent). (c) Minimum EBITDA. Parent and its Subsidiaries shall have on a consolidated basis, for each period set forth below, an EBITDA for such period of not less than the following: Fiscal Quarter Minimum EBITDA for the Rolling Period $8,000,000 ending September 30, 2001 for the Rolling Period -$3,200,000 ending December 31, 2001 for the three month -$7,900,000 period ending March 31, 2002 for the sixth month $5,600,000 period ending June 30, 2002 for the nine month $24,400,000 period ending September 30, 2002 for the Rolling Period $43,800,000 ending December 31, 2002 for the Rolling Period $80,000,000 ending on each Fiscal Quarter thereafter (d) Maximum Capital Expenditures. Parent 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 Parent 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 4.02(p) and not otherwise defined below shall have the respective meanings ascribed to them in Annex X. As used in this Annex 4.02(p), "Term Debt", "Vancouver Property", "Menlo Park Property", "Restricted Payments", "Permitted Stock Repurchases" and "Permitted Acquisitions" shall have the meanings ascribed to such terms in the Standby Letter of Credit Agreement. 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 Debt) 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 Parent, the Originator 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 of the Standby Letter of Credit Agreement, provided that on or prior to the date of incurrence of such Term Debt, Parent has furnished to Administrative Agent 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 Parent, 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 4.02(p), (iii) any Capital Expenditures incurred by the Parent 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 4.02(p), (iv) any purchase by the Parent 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 Parent 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 Parent in the subject transaction which qualifies for like-kind tax treatment under Section 1031 of the IRC, (v) any purchase by the Parent 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, Parent has furnished to Administrative Agent 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 Parent and Administrative Agent 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 Parent 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 Debt, 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, any Vancouver Secured Debt or any Bayview Indebtedness 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 Debt and of all fees payable in connection with the incurrence of such Debt (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 Related 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 Related 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. -----END PRIVACY-ENHANCED MESSAGE-----