-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, o/8V+yo0d7ajC2Wnoh8iGNnGi9VpOCGq/scGewtivf5jQI3LTs1T/ZA/8v2fx8vx qUMrkOr7Vco1j1610gzszw== 0000023675-95-000003.txt : 199507120000023675-95-000003.hdr.sgml : 19950711 ACCESSION NUMBER: 0000023675-95-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950328 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONSOLIDATED FREIGHTWAYS INC CENTRAL INDEX KEY: 0000023675 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 941444798 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05046 FILM NUMBER: 95523772 BUSINESS ADDRESS: STREET 1: 3240 HILLVIEW AVE CITY: PALO A LTO STATE: CA ZIP: 94304 BUSINESS PHONE: 4154942900 10-K 1 PAGE 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 1994 Commission File Number 132-3 CONSOLIDATED FREIGHTWAYS, INC. Incorporated in the State of Delaware I.R.S. Employer Identification No. 94-1444798 3240 Hillview Avenue, Palo Alto, California 94304 Telephone Number (415) 494-2900 Securities Registered Pursuant to Section 12(b) of the Act: Name of Each Exchange on Title of Each Class Which Registered ------------------------------ ------------------------ Common Stock ($.625 par value) New York Stock Exchange Pacific Stock Exchange Securities Registered Pursuant to Section 12(g) of the Act: 9-1/8% Notes Due 1999 Medium-Term Notes, Series A Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes ___X___ No _______ 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__________ Aggregate market value of voting stock held by persons other than Directors, Officers and those shareholders holding more than 5% of the outstanding voting stock, based upon the closing price per share Composite Tape on January 31, 1995: $599,276,244 Number of shares of Common Stock outstanding as of January 31, 1995: 36,357,915 Effective March 15, 1995, all of the 690,000 shares of the Company's Series C Preferred Stock converted to 6,900,000 shares of Common Stock. DOCUMENTS INCORPORATED BY REFERENCE Parts I, II and IV Consolidated Freightways, Inc. 1994 Annual Report to Shareholders (only those portions referenced herein are incorporated in this Form 10-K). Part III Proxy Statement dated March 17, 1995, (only those portions referenced herein are incorporated in this Form 10-K). PAGE 2 CONSOLIDATED FREIGHTWAYS, INC. FORM 10-K Year Ended December 31, 1994 - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- INDEX ----- Item Page - ---- ---- PART I ------ 1. Business 3 2. Properties 11 3. Legal Proceedings 13 4. Submission of Matters to a Vote of Security Holders 13 PART II ------- 5. Market for the Company's Common Stock and Related Security Holder Matters 13 6. Selected Financial Data 14 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 14 8. Financial Statements and Supplementary Data 14 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 14 PART III -------- 10. Directors and Executive Officers of the Company 14 11. Executive Compensation 16 12. Security Ownership of Certain Beneficial Owners and Management 16 13. Certain Relationships and Related Transactions 16 PART IV ------- 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 17 SIGNATURES 18 INDEX TO FINANCIAL INFORMATION 20 PAGE 3 CONSOLIDATED FREIGHTWAYS, INC. FORM 10-K Year Ended December 31, 1994 - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- PART 1 ------ ITEM 1. BUSINESS (a) General Development of Business - ----------------------------------- Consolidated Freightways, Inc. is a company which participates through subsidiaries in various forms of nationwide and regional trucking, truckload and intermodal rail, domestic and international air cargo services, contract logistics and related transportation activities. These operations are organized into three primary business groups: nationwide, full-service trucking (CF MotorFreight), regional trucking and full-service truckload (Con-Way Transportation Services), and air freight (Emery Worldwide). Consolidated Freightways, Inc. was incorporated in Delaware in 1958 as a successor to a business originally established in 1929. It is herein referred to as the "Registrant" or "Company". (b) Financial Information About Industry Segments - ------------------------------------------------- The operations of the Company are primarily conducted in the U.S. and Canada and to a lesser extent in major foreign countries. An analysis by industry group of revenues, operating income (loss), depreciation and capital expenditures for the years ended December 31, 1994, 1993 and 1992, and identifiable assets as of those dates is presented in Note 11 on pages 37 and 38 of the 1994 Annual Report to Shareholders and is incorporated herein by reference. Geographic group information is also presented therein. Intersegment revenues and earnings thereon have been eliminated. (c) Narrative Description of Business - ------------------------------------- The Company has designated three principal operating groups: the CF MotorFreight Group provides intermediate and long-haul, less-than-truckload freight service in the U.S. and portions of Mexico, Canada, the Caribbean, Latin and Central America, Europe and Asia; the Con-Way Transportation Services Group provides regional trucking and intermodal movements of truckload freight, and the Emery Worldwide Group is responsible for all domestic and international air freight activities and ocean container freight services. PAGE 4 CF MOTORFREIGHT ---------------- CF MotorFreight (CFMF), the Company's largest single operating unit, is based in Menlo Park, California. The group is composed of Consolidated Freightways Corporation of Delaware (CFCD), which includes CF MotorFreight and Canadian operating units, and three non-carrier component operations. Its carrier group provides general freight services nationwide and in portions of Canada, Mexico, the Caribbean area, Latin and Central America, Europe and the Pacific Rim countries. Operations consist of an extensive transportation network moving freight that is typically shipments of manufactured or non-perishable processed products having high value and requiring expedited service, compared to the bulk raw materials characteristically transported by railroads, pipelines and water carriers. The basic business of the general freight industry is to transport freight that is less-than-truckload (LTL), an industry designation for shipments weighing less than 10,000 pounds. CFMF is one of the nation's largest motor carriers in terms of 1994 revenues. Competition has increased with trends toward regionalization, continued pricing pressures and new competitors moving into the small shipment segment of the business. To address this, CFMF undertook major changes to its line- haul operations and terminals beginning in the fourth quarter of 1994. These changes are expected to create new efficiencies and flexibilities by reducing freight handling and make greater use of lower cost rail. When combined with innovative, value-added services, customer partnerships and sole-source contracts, among other services, CFMF expects to offset competitive trends. As a large carrier of LTL general commodity freight, CFMF has pick-up and delivery fleets in each area served, and a fleet of intercity tractors and trailers. It has a network of 437 U.S. and Canadian freight terminals, metro centers and regional consolidation centers. Certain regional consolidation centers have become metro centers. The metro centers reduce freight handling by allowing more direct city to city service, thereby improving productivity. CFMF operations are supported by a sophisticated data processing system for the control and management of the business. There is a broad diversity in the customers served, size of shipments, commodities transported and length of haul. No single customer or commodity accounts for more than a small fraction of total revenues. CFMF operates daily schedules utilizing primarily relay drivers driving approximately eight to ten hours each. Some schedules operate with sleeper teams driving designated routes. Road equipment consists of one tractor pulling two 28-foot double trailers or, to a limited extent, one semi-trailer or three 28-foot trailers. Legislation enacted in 1982 has provided for the use of 28-foot double trailers and 48-foot semi-trailers throughout the United States. (See "State Regulation" below.) Trailers in double or triple combination are more efficient and economical, and safer, than a tractor and single semi-trailer combination. CFMF utilizes trailer equipment 102-inches in width. In 1994, the Company operated in excess of 472 million linehaul miles in North America, about 90% of which was conducted by equipment in doubles and triples configuration. The accident frequency of the triples configuration was better than all other types of vehicle combinations used by the Company. CFMF and other subsidiaries of CFCD serve Canada through terminals in the PAGE 5 provinces of Alberta, British Columbia, Manitoba, New Brunswick, Nova Scotia, Ontario, Quebec, Saskatchewan and in the Yukon Territory. The Canadian operations utilize a fleet size of over 1,100 trucks, tractors and trailers. Employees --------- Approximately 85% of CFMF's domestic employees are represented by various labor unions, primarily the International Brotherhood of Teamsters (IBT). CFMF and the IBT are parties to a National Master Freight Agreement. The current agreement with the IBT expires in April 1998. Labor costs, including fringe benefits, average approximately 66% of revenues. CFMF's domestic employment has declined to 20,700 employees at December 31, 1994 from approximately 21,000 at December 31, 1993, primarily the result of several programs during 1994 to streamline the handling and movement of freight by restructuring its linehaul and terminal operations. Fuel ---- Fuel prices have steadily declined during the last three years. CFMF's average annual diesel fuel cost per gallon (without tax) declined from $.636 in 1992 to $.621 and $.578 in 1993 and 1994, respectively. These savings have been somewhat mitigated by an increase in fuel taxes. Federal and State Regulation ---------------------------- On July 1, 1980, the Motor Carrier Act of 1980 became effective. The Act made substantial changes in federal regulation of the motor carrier industry. It provided for easier access to the industry by new trucking companies and eased restrictions on expansion of services by existing carriers. In addition, CFMF's operations are subject to a variety of economic regulations by state authorities. Historically, such regulations also covered, among other things, size and weight of motor carrier equipment. Federal legislation applies to the interstate highway system and to other qualifying federal-aid primary system highways in all states. Full implementation of the federal legislation has been hampered by regulations in certain states, which have imposed trailer length, size and weight limitations on access and intercity routes. These limitations do not conform with the federal requirements and therefore are obstacles to efficient operations. CFMF's mainline operations are designed to avoid locales with these limitations. In August 1994, Federal legislation preempted intrastate operating rights which eliminated certain restrictions on intrastate pricing and operations. As a result, the Company wrote off all its unamortized intrastate operating rights in the third quarter 1994. PAGE 6 Canadian Regulation ------------------- The provinces in Canada have regulatory authority over intra-provincial operations of motor carriers and have been delegated by the federal authority to regulate inter-provincial motor carrier activity. Federal legislation to phase in deregulation of the inter-provincial motor carrier industry took effect January 1, 1988. The new legislation relaxes economic regulation of inter-provincial trucking by easing market entry regulations, and implements effective safety regulations of trucking services under Federal jurisdiction. The Company wrote-off substantially all of the unamortized cost of its Canadian operating authority in 1992. Menlo Logistics --------------- Menlo Logistics Inc. (MLI), founded in 1990, provides customized single- source logistics solutions for manufacturing, industrial and retail businesses. These services include carrier management, dedicated fleet and warehouse operations, just-in-time delivery programs, customer order processing and freight bill payment and auditing. MLI has approximately 500 employees. As a relatively new industry, competition is expected to come from new entrants into the markets it serves. MLI will address the increased competition by utilizing technologies and its established experience. Non-Carrier Operations ---------------------- Two non-carrier operations within the CF MotorFreight Group generate a majority of their sales from other companies within the CF Group. Road Systems, Inc. primarily manufactures trailers. Willamette Sales Co. serves as a distributor of heavy-duty truck, marine and construction equipment parts. CON-WAY TRANSPORTATION SERVICES ------------------------------- Con-Way Transportation Services, Inc. (CTS) is an operating company with business units that provide regional LTL freight trucking, full-service truckload freight delivery utilizing highway over-the-road and intermodal rail stack train resources for transcontinental, inter-regional and regional transportation; local and interstate container drayage and international shipping. CTS has four operating units and approximately 10,000 employees. The regional companies face more competition as national LTL companies extend into regional markets, and acquire and combine formerly independent regional carriers into inter-regional groups. New service offerings, continued expansion of regional carrier networks, extension of next-day and second-day service standards and enhanced inter-regional network capabilities are positioning the Con-Ways for growth opportunities. Refer to the CF MotorFreight section for a discussion of federal and state regulations. PAGE 7 Con-Way Regional Carriers ------------------------- CTS has three regional motor carriers each of which operate dedicated regional trucking networks principally serving core geographic territories with next-day and second-day service. The regional carriers serve manufacturing, industrial, commercial and retail business-to-business customers with a fleet in excess of 16,700 trucks, tractors and trailers. Con-Way Western Express, Inc. (CWX) was founded in May 1983 and today operates in 11 western states and serves Canada and Mexico. In 1994, CWX expanded operations to include Utah and Colorado. At December 31, 1994, CWX operated 74 service centers. In January 1995, CWX expanded operations into Oregon, Washington, Idaho and Vancouver, British Columbia, opening 22 new service centers in the Pacific Northwest. Con-Way Central Express, Inc. (CCX) was founded in June 1983 and today serves 22 states of the central and northeast U.S., and Ontario, Canada. CCX expanded into the New England states in 1994 and at December 31 operated 187 service centers. In February 1995, CCX expanded into New Jersey and began providing service for metropolitan New York City. Con-Way Southern Express, Inc., and Con-Way Southwest Express, Inc., were founded in April 1987 and November 1989, respectively. In December 1994, the two carriers were combined into a single operating unit under the Con-Way Southern Express, Inc., (CSE) name serving a 12-state southern market from Texas to the Carolinas and Florida, and encompassing Puerto Rico and Mexico. CSE operated 92 service centers at December 31, 1994. A service expansion program initiated by CTS in 1994 allows the regional carriers to provide next-day and second-day freight delivery between their principal geographic regions, utilizing existing infrastructure. The program generates additional business by allowing each carrier to compete for new traffic and provide coverage of regional markets lanes not individually serviced as part of the carrier's core territory. Con-Way Truckload Service ------------------------- Con-Way Truckload Services Inc., (CWT), formerly known as Con-Way Intermodal, is a full-service, multi-modal truckload company. It provides door-to-door transcontinental movement of truckload shipments by rail container stack train and rail trailer, utilizing nationwide operating alliances with major railroads. It also provides expedited inter-regional and regional over-the- road truckload service with a fleet of company-owned trucks and trailers. Additionally, the company provides rail freight forwarding with domestic intermodal marketing services, assembly and distribution services, local and interstate container drayage and international shipping. PAGE 8 EMERY WORLDWIDE --------------- Emery Worldwide (EWW), the Company's air freight unit, was formed when the Company purchased Emery Air Freight Corporation in April 1989 and merged it with its air freight operation, CF AirFreight, Inc. The combined companies expanded EWW's ability to deliver air freight within North America and to 89 countries worldwide. EWW provides global air cargo services through an integrated freight system designed for the movement of parcels and packages of all sizes and weights. In North America, EWW provides these services through a system of sales offices and terminals, and overseas through foreign subsidiaries, branches and agents. EWW provides door-to-door service within North America by using its own airlift system, supplemented with commercial airlines. International services are performed by operating primarily as an air freight forwarder, using commercial airlines, and with controlled lift, only when necessary. Emery also operates approximately 1,300 trucks, vans and tractors. As of December 31, 1994, EWW utilized a fleet of 69 aircraft, 42 of which are leased on a long-term basis, 9 are owned and 18 are contracted on a short- term basis to supplement nightly volumes and to provide feeder services. The nightly lift capacity of the aircraft fleet, excluding charters, is approximately 4.0 million pounds. Emery Worldwide's hub-and-spoke system is centralized at the Dayton International Airport where a leased air cargo facility (Hub) and related support facilities are located. The Hub handles all types of shipments, ranging from small packages to heavyweight cargo, with a total effective sort capacity of approximately 1.2 million pounds per hour. The operation of the Hub in conjunction with EWW's airlift system enables it to maintain a high level of service reliability. Through a separate subsidiary of the Company, Emery Worldwide Airlines, Inc. (EWA), the Company provides nightly cargo airline services under a contract with the U.S. Postal Service (USPS) to carry Express and Priority Mail, using 23 aircraft, 6 of which are leased on a long-term basis and 17 are owned. The original contract for this operation was awarded to EWA in 1989 and had been renewed and extended through early January 1994. A ten year USPS contract was awarded to the Company during 1993 with service beginning in January 1994. The Company has recognized approximately $112 million, $138 million and $141 million of revenue in 1994, 1993 and 1992, respectively, from contracts to carry Express and Priority Mail for the U.S. Postal Service. PAGE 9 Customers --------- EWW services, among others, the automotive, aviation, machinery, metals, electronic and electrical equipment, chemical, apparel, film and technology industries. Service industries and governmental entities also utilize EWW's services. Both U.S. and International operations of EWW have wide customer bases. Competition ----------- The heavy air-freight market within North American is highly competitive and price sensitive. EWW has the largest market share in the heavy air-freight segment. EWW competes with other integrated air freight carriers as well as freight forwarders. The North Atlantic market is especially price sensitive due to the abundance of airlift capacity. However, less competition is expected from passenger airlines as many continue to downsize their widebody aircraft. Competition in the international markets is also service and price sensitive. In these markets, which are more fragmented than the domestic market, EWW competes with both United States and international airlines and air freight forwarders. Customers are seeking companies such as EWW with combined integrated carrier and freight forwarding capabilities for flexible, cost effective service. EWW believes this infrastructure and the convenience of its extensive network of worldwide terminal, agent and service locations are its principal methods of competing in the market in which it operates. Regulation ---------- Regulation of Air Transportation -------------------------------- The air transportation industry is subject to federal regulation by the Federal Aviation Act of 1958, as amended (Aviation Act) and regulations issued by the Department of Transportation (DOT) pursuant to the Aviation Act. EWW, as an air freight forwarder, and EWA, as an airline, are subject to different regulations. Air freight forwarders are exempted from most DOT economic regulations and they are not subject to Federal Aviation Administration (FAA) safety regulations so long as they do not have operational control of aircraft. Airlines are subject to economic regulation by DOT and maintenance, operating and other safety-related regulation by FAA. Thus, EWA and other airlines conducting operations for EWW are subject to DOT and FAA regulation while EWW, itself, is not covered by most DOT and FAA regulations. PAGE 10 Regulation of Ground Transportation ----------------------------------- When EWW provides ground transportation of cargo having a prior or subsequent air movement, the ground transportation is exempt from regulation by the Interstate Commerce Commission (ICC). However, EWW holds ICC and intrastate motor carrier authorities which can be utilized in providing non-exempt ground transportation. Registration of ICC authorities is required in each state where a motor carrier conducts non-exempt operations, and some states also have required EWW to register as an exempt interstate operator. Environmental Matters --------------------- During recent years, operations at several airports have been subject to restrictions or curfews on arrivals or departures during certain night-time hours designed to reduce or eliminate noise for surrounding residential areas. None of these restrictions have materially affected EWW's operations. If such restrictions were to be imposed with respect to the airports at which EWW's activities are centered and no alternative airports were available to serve the affected areas, EWW's operations could be more adversely affected. As provided in Section 611 of the Aviation Act, the FAA with the assistance of the Environmental Protection Agency (EPA), is authorized to establish aircraft noise standards. Under the National Emission Standards Act of 1967, as amended by the Clean Air Act Amendments of 1970, the administrator of the EPA is authorized to issue regulations setting forth standards for aircraft emissions. EWW believes that its present fleet of owned, leased or chartered aircraft is operating in compliance with the applicable noise and emission laws. The Aviation Noise and Capacity Act of 1990 was passed in November of 1990 to establish a national aviation noise policy. The FAA has promulgated regulations under this Act regarding the phase-in requirements for compliance. This legislation and the related regulations will require all of EWW's and EWA's owned and leased aircraft to either undergo modifications or otherwise comply with Stage 3 noise restrictions by year-end 1999. Fuel and Supplies Cost ---------------------- EWW purchases substantially all of its jet fuel from major oil companies, refiners and trading companies on annual contracts with prepaid and/or volume discounts. These contract purchases are supplemented by spot purchases. The weighted average price of domestic jet fuel declined in 1994 and 1993, respectively. The 1994 domestic cost per gallon was approximately $.59 compared with 1993 and 1992 weighted average prices of approximately $.64 and $.67 per gallon, respectively. EWW believes that it has the flexibility to continue its operations without material interruption unless there are significant curtailments of its jet fuel supplies. Neither EWW nor the operators of the aircraft it charters have experienced or anticipate any fuel supply problems. There is PAGE 11 a four-million gallon fuel storage facility at the Hub. Employees --------- As of December 31, 1994, EWW had approximately 8,000 full and permanent part-time employees as compared to 7,500 in 1993 and 6,700 in 1992. Approximately 14% of these employees are covered by union contracts. GENERAL - ------- The research and development activities of the Company are not significant. During 1994, 1993 and 1992 there was no single customer of the Company that accounted for more than 10% of consolidated revenues. The total number of employees is presented in the "Ten Year Financial Summary" on pages 40 and 41 of the 1994 Annual Report to Shareholders and is incorporated herein by reference. The Company has been designated a Potentially Responsible Party (PRP) by the EPA with respect to the disposal of hazardous substances at various sites. The Company expects its share of the clean-up cost to be immaterial. The Company expects the costs of complying with existing and future federal, state and local environmental regulations to continue to increase. On the other hand, they do not anticipate that such cost increases will have any materially adverse effects on capital expenditures, earnings or competitive position. (d) Financial Information About Foreign and Domestic Operations and Export Sales ---------------------------------------- Information as to revenues, operating income (loss) and identifiable assets for each of the Company's business segments and for its foreign operations for 1994, 1993 and 1992 is contained in Note 11 on page 37 and 38 of the 1994 Annual Report to Shareholders and is incorporated herein by reference. ITEM 2. PROPERTIES The following summarizes the terminals and freight service centers operated by the Company at December 31, 1994: Owned Leased Total ----- ------ ----- CF MotorFreight 230 207 437 Con-Way Transportation Services 57 296 353 Emery Worldwide 9 174 183 PAGE 12 The following table sets forth the location and square footage of the Company's principal freight handling facilities: Location Square Footage -------- -------------- CFMF - motor carrier LTL consolidation center terminals Mira Loma, CA 280,672 Chicago, IL 231,159 * Columbus, OH 118,774 Memphis, TN 118,745 Nashville, TN 118,622 Orlando, FL 101,557 * Minneapolis, MN 94,890 St. Louis, MO 88,640 * Pocono, PA 86,285 Chicopee, MA 85,164 Akron, OH 82,494 Sacramento, CA 81,286 Atlanta, GA 77,920 Houston, TX 77,346 Dallas, TX 75,358 * Fremont, IN 73,760 * Peru, IL 73,760 Buffalo, NY 73,380 Cheyenne, WY 71,298 Milwaukee, WI 70,661 Salt Lake City, UT 68,480 Charlotte, NC 66,896 Seattle, WA 59,720 * York, PA 56,384 Kansas City, MO 55,288 * Indianapolis, IN 54,716 Portland, OR 47,824 Phoenix, AZ 20,237 CTS - freight assembly centers Chicago, IL 113,116 Des Plains, IL 100,440 Oakland, CA 85,600 Dallas, TX 82,000 Atlanta, GA 56,160 Cincinnati, OH 55,618 Columbus, OH 48,527 Detroit, MI 46,240 Santa Fe Springs, CA 45,936 Aurora, IL 44,235 Ft. Wayne, IN 35,400 Pontiac, MI 34,450 St. Louis, MO 29,625 Milwaukee, WI 22,940 PAGE 13 Location Square Footage -------- -------------- Emery - facilities *Dayton, OH 620,000 Los Angeles, CA 78,264 Chicago, IL 59,976 Boston, MA 42,236 Indianapolis, IN 38,500 * Facility partially or wholly financed through the issuance of industrial revenue bonds. Principal amount of debt is secured by the property. ITEM 3. LEGAL PROCEEDINGS The legal proceedings of the Company are summarized in Note 10 on page 37 of the 1994 Annual Report to Shareholders and are incorporated herein by reference. Discussions of certain environmental matters are presented in Item 1 and Item 7. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. PART II ------- ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS The Company's common stock is listed for trading on the New York and Pacific Stock Exchanges. The Company's Common Stock Price is included in Note 12 on page 39 of the 1994 Annual Report to Shareholders and is incorporated herein by reference. Cash dividends on common shares had been paid in every year from 1962 to 1990. In June 1990, however, the Company's Board of Directors suspended the quarterly dividend to minimize the Company's cash requirements. In December 1994, the Board of Directors reinstated a $.10 per share quarterly cash dividend on common stock. Under the terms of the restructured TASP Notes, as set forth on page 29 of the 1994 Annual Report to Shareholders, the Company is restricted from paying dividends in excess of $10 million plus 50% of the cumulative net income applicable to common shareholders since the commencement of the agreement. As of December 31, 1994, there were 16,015 holders of record of the common PAGE 14 stock ($.625 par value) of the Company. The number of shareholders is also presented in the "Ten Year Financial Summary" on pages 40 and 41 of the 1994 Annual Report to Shareholders and is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA The Selected Financial Data is presented in the "Ten Year Financial Summary" on pages 40 and 41 of the 1994 Annual Report to Shareholders and is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's Discussion and Analysis of Financial Condition and Results of Operations is presented in the "Financial Review and Management Discussion" on pages 18 through 20, inclusive, of the 1994 Annual Report to Shareholders and is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Consolidated Financial Statements and Auditors' Report are presented on pages 21 through 41, inclusive, of the 1994 Annual Report to Shareholders and are incorporated herein by reference. The unaudited quarterly financial data is included in Note 12 on page 39 of the 1994 Annual Report to Shareholders and is incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III -------- ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY The identification of the Company's Directors is presented on pages 3 through 9, inclusive, of the Proxy Statement dated March 17, 1995 and those pages are incorporated herein by reference. The Executive Officers of the Company, their ages at December 31, 1994 and their applicable business experience are as follows: Donald E. Moffitt, 62, President and Chief Executive Officer. Mr. Moffitt joined Consolidated Freightways Corporation of Delaware, the Company's nationwide, full-service subsidiary, as an accountant in 1955 and advanced to Vice President - Finance in 1973. In 1975, he transferred to the Company as Vice President - Finance and Treasurer and in 1981, was elected Executive Vice President - Finance and Administration. In 1983, he assumed the additional duties of President, CF International and Air, Inc., where he directed the Company's international and air freight businesses. Mr. Moffitt was elected Vice Chairman of the Board of the Company in 1986. He retired as an employee and as Vice Chairman of the Board of Directors in 1988 and returned to the Company as Executive Vice President - Finance and Chief Financial Officer in 1990. Mr. Moffitt was named President and Chief Executive Officer of the Company and was elected to the Board of Directors in PAGE 15 1991. Mr. Moffitt serves on the Executive Committee of the Board of Directors of the Highway Users Federation and is a member of the Board of Directors of the Bay Area Council, the Automotive Safety Foundation and the American Red Cross. He is a member of the California Business Roundtable and a member of the Business Advisory Council of the Northwestern University Transportation Center. He also serves on the Advisory Council of the Peninsula Conflict Resolution Center. Mr. Moffitt is a member of the Advisory Nominating and the Executive Committees of the Company. W. Roger Curry, 56, President and Chief Executive Officer of Consolidated Freightways Corporation of Delaware and Senior Vice President of the Company. Mr. Curry joined CFCD in 1969 as a Systems Analyst and became Coordinator, On-Line Systems of the Company in 1970. In 1972, he was named Director of Terminal Properties for CFCD. He became President of CF AirFreight in 1975 and Chief Executive Officer in 1984. Mr. Curry relinquished both offices with CF AirFreight in 1986 when he was elected Senior Vice President-Marketing of the Company. In 1991, he was elected President of Emery Air Freight Corporation, relinquishing the position in 1994 to become President of CFCD. David I. Beatson, 47, President and Chief Executive Officer of Emery Air Freight Corporation and Senior Vice President of the Company. Mr. Beatson joined CF AirFreight Corporation in 1977, advancing through several increasingly responsible positions to Vice President of National Accounts. After leaving the Company for a time, he returned to EWW in 1986 as Vice President of Sales and Marketing. He became President and Chief Executive Officer of Emery Air Freight Corporation in 1994. Gregory L. Quesnel, 46, Executive Vice President and Chief Financial Officer. Mr. Quesnel joined Consolidated Freightways Corporation of Delaware in 1975 as Director of Financial Accounting. Through several increasingly responsible financial positions, he advanced to become the top financial officer of CFCD. In 1989 he was elected Vice President-Accounting for the Company and in 1990 was named Vice President and Treasurer. Mr. Quesnel became Senior Vice President-Finance and Chief Financial Officer of the Company in 1991 and Executive Vice President and Chief Financial Officer in 1993. Robert T. Robertson, 53, President and Chief Executive Officer of Con-Way Transportation Services, Inc. and Senior Vice President of the Company. Mr. Robertson joined CFCD in 1970 as a sales representative and advanced to Manager of Eastern Area Sales by 1973. He transferred to Texas in 1976 where he became involved in CFCD's operations and was promoted to Division Manager in 1978. In 1983, he was named Vice President and General Manager of Con-Way Transportation Services, Inc. In 1986, Mr. Robertson was elected President of CTS. Eberhard G.H. Schmoller, 51, Senior Vice President and General Counsel of the Company. Mr. Schmoller joined CFCD in 1974 as a staff attorney and in 1976 was promoted to CFCD assistant general counsel. In 1983, he was appointed Vice President and General Counsel of CF AirFreight and assumed the same position with EWW after the acquisition in 1989. Mr. Schmoller was named Senior Vice President and General Counsel of the Company in 1993. PAGE 16 ITEM 11. EXECUTIVE COMPENSATION The required information for Item 11 is presented on pages 13 through 15, inclusive, of the Proxy Statement dated March 17, 1995, and those pages are incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The required information for Item 12 is included on pages 10 and 11 of the Proxy Statement dated March 17, 1995 and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Not applicable. PAGE 17 PART IV ------- ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Financial Statements and Exhibits Filed --------------------------------------- 1. Financial Statements See Index to Financial Information. 2. Financial Statement Schedules See Index to Financial Information. 3. Exhibits See Index to Exhibits. (b) Reports on Form 8-K ------------------- There were no reports on Form 8-K filed for the three months ended December 31, 1994. PAGE 18 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Form 10-K Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized. CONSOLIDATED FREIGHTWAYS, INC. (Registrant) March 27, 1995 /s/Donald E. Moffitt -------------------------------------- Donald E. Moffitt President and Chief Executive Officer March 27, 1995 /s/Gregory L. Quesnel -------------------------------------- Gregory L. Quesnel Executive Vice President and Chief Financial Officer March 27, 1995 /s/Gary D. Taliaferro -------------------------------------- Gary D. Taliaferro Vice President and Controller PAGE 19 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. March 27, 1995 /s/Raymond F. O'Brien ------------------------------------- Raymond F. O'Brien Chairman of the Board March 27, 1995 /s/Donald E. Moffitt ------------------------------------- Donald E. Moffitt President, Chief Executive Officer and Director March 27, 1995 /s/Earl F. Cheit ------------------------------------- Earl F. Cheit, Director March 27, 1995 /s/G. Robert Evans ------------------------------------- G. Robert Evans, Director March 27, 1995 /s/Robert Jaunich II ------------------------------------- Robert Jaunich II, Director March 27, 1995 /s/William D. Walsh ------------------------------------- William D. Walsh, Director March 27, 1995 /s/Robert P. Wayman ------------------------------------- Robert P. Wayman, Director PAGE 20 CONSOLIDATED FREIGHTWAYS, INC. FORM 10-K Year Ended December 31, 1994 - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- INDEX TO FINANCIAL INFORMATION ------------------------------ Consolidated Freightways, Inc. and Subsidiaries - ----------------------------------------------- The following Consolidated Financial Statements of Consolidated Freightways, Inc. and Subsidiaries appearing on pages 21 through 41, inclusive, of the Company's 1994 Annual Report to Shareholders are incorporated herein by reference: Report of Independent Public Accountants Consolidated Balance Sheets - December 31, 1994 and 1993 Statements of Consolidated Operations - Years Ended December 31, 1994, 1993 and 1992 Statements of Consolidated Cash Flows - Years Ended December 31, 1994, 1993 and 1992 Statements of Consolidated Shareholders' Equity - Years Ended December 31, 1994, 1993 and 1992 Notes to Consolidated Financial Statements In addition to the above, the following consolidated financial information is filed as part of this Form 10-K: Page ---- Consent of Independent Public Accountants 21 Report of Independent Public Accountants 21 Schedule II - Valuation and Qualifying Accounts 22 PAGE 21 The other schedules have been omitted because either (1) they are neither required nor applicable or (2) the required information has been included in the consolidated financial statements or notes thereto. SIGNATURE CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS ----------------------------------------- As independent public accountants, we hereby consent to the incorporation of our reports included and incorporated by reference in this Form 10-K, into the Company's previously filed Registration Statement File Nos. 2-81030, 33-29793, and 33-52599. /s/Arthur Andersen LLP ------------------------- ARTHUR ANDERSEN LLP San Francisco, California March 27, 1995 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ---------------------------------------- To the Shareholders and Board of Directors of Consolidated Freightways, Inc.: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in Consolidated Freightways, Inc.'s 1994 Annual Report to Shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated January 27, 1995. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedule on page 22 is the responsibility of the Company's management and is presented for the purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. /s/Arthur Andersen LLP -------------------------- ARTHUR ANDERSEN LLP San Francisco, California January 27, 1995 PAGE 22 SCHEDULE II CONSOLIDATED FREIGHTWAYS, INC. VALUATION AND QUALIFYING ACCOUNTS THREE YEARS ENDED DECEMBER 31, 1994 (In thousands) DESCRIPTION - ----------- ALLOWANCE FOR DOUBTFUL ACCOUNTS ADDITIONS BALANCE AT CHARGED TO CHARGED TO BALANCE AT BEGINNING COSTS AND OTHER END OF OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD ---------- ---------- ---------- ---------- ---------- 1994 $29,780 $ 6,676 $ - $ (9,518) (a) $26,938 ------- ------- -------- --------- ------- 1993 $26,198 $27,127 $ - $(23,545)(a) $29,780 ------- ------- -------- --------- ------- 1992 $25,742 $29,707 $ - $(29,251)(a) $26,198 ------- ------- -------- --------- ------- a) Accounts written off net of recoveries. PAGE 23 INDEX TO EXHIBITS ITEM 14(a)(3) Exhibit No. - ----------- (3) Articles of incorporation and by-laws: 3.1 Consolidated Freightways, Inc. Certificates of Incorporation, as amended. (Exhibit 3(a)(2) to the Company's Quarterly Report Form 10-Q for the quarter ended March 31, 1987*) 3.2 Consolidated Freightways, Inc. By-laws, as amended, September 26, 1994 (4) Instruments defining the rights of security holders, including debentures: 4.1 Consolidated Freightways, Inc. Stockholder Rights Plan. (Exhibit 1 on Form 8-A dated October 27, 1986*) 4.2 Certificate of Designations of the Series B Cumulative Convertible Preferred Stock. (Exhibit 4.1 as filed on Form SE dated May 25, 1989*) 4.3 Indenture between the Registrant and Security Pacific National Bank, trustee, with respect to 9-1/8% Notes Due 1999 and Medium- Term Notes, Series A. (Exhibit 4.1 as filed on Form SE dated March 20, 1990*) 4.4 Form of Security for 9-1/8% Notes Due 1999 issued by Consolidated Freightways, Inc. (Exhibit 4.1 as filed on Form SE dated August 25, 1989*) 4.5 Officers' Certificate dated as of August 24, 1989 establishing the form and terms of debt securities issued by Consolidated Freightways, Inc. (Exhibit 4.2 as filed on Form SE dated August 25, 1989*) 4.6 Form of Security for Medium-Term Notes, Series A to be issued by Consolidated Freightways, Inc. (Exhibit 4.1 as filed on Form SE dated September 18, 1989*) 4.7 Officers' Certificate dated September 18, 1989, establishing the form and terms of debt securities to be issued by Consolidated Freightways, Inc. (Exhibit 4.2 as filed on Form SE dated September 19, 1989*) Instruments defining the rights of security holders of long-term debt of Consolidated Freightways, Inc., and its subsidiaries for which financial statements are required to be filed with this Form 10-K, of which the total amount of securities authorized under each such instrument is less than 10% of the total assets of Consolidated Freightways, Inc. and its subsidiaries on a consolidated basis, have not been filed as exhibits to this Form 10-K. The Company agrees to furnish a copy of each applicable instrument to the Securities and Exchange Commission upon request. * Previously filed with the Securities and Exchange Commission and incorporated herein by reference. PAGE 24 Exhibit No. - ----------- (10) Material contracts: 10.1 Consolidated Freightways, Inc. Long-Term Incentive Plan of 1978, as amended through Amendment No. 4. (Exhibit 10(e) to the Company's Form 10-K for the year ended December 31, 1983*#) 10.2 Amendments 5, 6 and 7 to the Consolidated Freightways, Inc. Long-Term Incentive Plan of 1978, as amended through Amendment No. 4. (Exhibit 10.1 as filed on Form SE dated March 25, 1991*#) 10.3 Consolidated Freightways, Inc. Long-Term Incentive Plan of 1988. (Exhibit 10(g) to the Company's Form 10-K for the year ended December 31, 1987*#) 10.4 Amendment 3 to the Consolidated Freightways, Inc. Long-Term Incentive Plan of 1988. (Exhibit 10.2 as filed on Form SE dated March 25, 1991*#) 10.5 Consolidated Freightways, Inc. Stock Option Plan of 1978, as amended through Amendment No. 1. (Exhibit 10(e) to the Company's Form 10-K for the year ended December 31, 1981*#) 10.6 Consolidated Freightways, Inc. Stock Option Plan of 1988 as amended. (Exhibit 10(i) to the Company's Form 10-K for the year ended December 31, 1987 as amended in Form S-8 dated December 16, 1992*#) 10.7 Forms of Stock Option Agreement (with and without Cash Surrender Rights) under the Consolidated Freightways, Inc. Stock Option Plan of 1988. (Exhibit 10(j) to the Company's Form 10-K for the year ended December 31, 1987*#) 10.8 Form of Consolidated Freightways, Inc. Deferred Compensation Agreement. (Exhibit 10(i) to the Company's Form 10-K for the year ended December 31, 1981*#) 10.9 Consolidated Freightways, Inc. Retirement Plan (formerly Emery Air Freight Corporation Pension Plan), as amended effective through January 1, 1985, and amendments dated as of October 30, 1987. (Exhibit 4.22 to the Emery Air Freight Corporation Quarterly Report on Form 10-Q dated November 16, 1987**) 10.10 Emery Air Freight Plan for Retirees, effective October 31, 1987. (Exhibit 4.23 to the Emery Air Freight Corporation Quarterly Report on Form 10-Q dated November 16, 1987**) 10.11 Consolidated Freightways, Inc. Common Stock Fund (formerly Emery Air Freight Corporation Employee Stock Ownership Plan, as effective October 1, 1987 ("ESOP"). (Exhibit 4.33 to the Emery Air Freight Corporation Annual Report on Form 10-K dated March 28, 1988**) * Previously filed with the Securities and Exchange Commission and incorporated herein by reference. ** Incorporated by reference to indicated reports filed under the Securities Act of 1934, as amended, by Emery Air Freight Corporation File No. 1-3893. # Designates a contract or compensation plan for Management or Directors. PAGE 25 Exhibit No. - ----------- 10.12 Employee Stock Ownership Trust Agreement, dated as of October 8, 1987, as amended, between Emery Air Freight Corporation and Arthur W. DeMelle, Daniel J. McCauley and Daniel W. Shea, as Trustees under the ESOP Trust. (Exhibit 4.34 to the Emery Air Freight Corporation Annual Report on Form 10-K dated March 28, 1988**) 10.13 Amended and Restated Subscription and Stock Purchase Agreement dated as of December 31, 1987 between Emery Air Freight Corporation and Boston Safe Deposit and Trust Company in its capacity as successor trustee under the Emery Air Freight Corporation Employee Stock Ownership Plan Trust ("Boston Safe"). (Exhibit B to the Emery Air Freight Corporation Current Report on Form 8-K dated January 11, 1988**) 10.14 Supplemental Subscription and Stock Purchase Agreement dated as of January 29, 1988 between Emery Air Freight Corporation and Boston Safe. (Exhibit B to the Emery Air Freight Corporation Current Report on Form 8-K dated February 12, 1988**) 10.15 Trust Indenture, dated as of November 1, 1988, between City of Dayton, Ohio and Security Pacific National Trust Company (New York), as Trustee and Bankers Trust Company, Trustee. (Exhibit 4.1 to Emery Air Freight Corporation Current Report on Form 8-K dated December 2, 1988**) 10.16 Bond Purchase Agreement dated November 7, 1988, among the City of Dayton, Ohio, the Emery Air Freight Corporation and Drexel Burnham Lambert Incorporated. (Exhibit 28.7 to the Emery Air Freight Corporation Current Report on Form 8-K dated December 2, 1988**) 10.17 Lease agreement dated November 1, 1988 between the City of Dayton, Ohio and Emery Air Freight Corporation. (Exhibit 10.1 to the Emery Air Freight Corporation Annual Report on Form 10-K for the year ended December 31, 1988**) 10.18 Credit Agreement dated January 14, 1993, by and among Emery Receivables Corporation as the borrower, Emery Air Freight Corporation, Consolidated Freightways, Inc., individually and as Servicer and various financial institutions. (Exhibit 10.19 to the Company's Form 10-K for the year ended December 31, 1992*). 10.19 Purchase and Sale Agreement, dated January 14, 1993, among Emery Air Freight Corporation and Emery Distribution Systems, Inc., as Originators, Emery Receivables Corporation, and Consolidated Freightways, Inc., as Servicer. (Exhibit 10.20 to the Company's Form 10-K for the year ended December 31, 1992*). 10.20 Consolidated Freightways, Inc. Directors' Election Form for deferral payment of director's fees. # 10.21 Consolidated Freightways, Inc. 1993 Executive Deferral Plan. (Exhibit 10.22 to the Company's Form 10-K for the year ended December 31, 1992*#). * Previously filed with the Securities and Exchange Commission and incorporated herein by reference. ** Incorporated by reference to indicated reports filed under the Securities Act of 1934, as amended, by Emery Air Freight Corporation File No. 1-3893. # Designates a contract or compensation plan for Management or Directors. PAGE 26 Exhibit No. - ----------- 10.22 Consolidated Freightways, Inc. Executive Incentive Plan for 1995. # 10.23 CF MotorFreight Incentive Plan for 1995. # 10.24 Con-Way Transportation Services, Inc. Incentive Plan for 1995. # 10.25 Emery Worldwide Incentive Plan for 1995. # 10.26 Leland James Service Corporation-CFI Executive Incentive Plan for 1995. # 10.27 $300 million Amended and Restated Credit Agreement dated January 10, 1995 among Consolidated Freightways, Inc. and various financial institutions. 10.28 Official Statement of the Issuer's Special Facilities Revenue Refunding Bonds, 1993 Series E and F dated September 29, 1993 among the City of Dayton, Ohio and Emery Air Freight Corporation. (Exhibit 10.1 to the Company's Form 10-Q for the quarterly period ended September 30, 1993*). 10.29 Trust Indenture, dated September 1, 1993 between the City of Dayton, Ohio and Banker's Trust Company as Trustee. (Exhibit 10.2 to the Company's Form 10-Q for the quarterly period ended September 30, 1993*). 10.30 Supplemental Lease Agreement dated September 1, 1993 between the City of Dayton, Ohio, as Lessor, and Emery Air Freight Corporation, as Lessee. (Exhibit 10.3 to the Company's Form 10-Q for the quarterly period ended September 30, 1993*). 10.31 Supplemental Retirement Plan dated January 1, 1990. (Exhibit 10.31 to the Company's Form 10-K for the year ended December 31, 1993*#) 10.32 Directors' 24-Hour Accidental Death and Dismemberment Plan. (Exhibit 10.32 to the Company's Form 10-K for the year ended December 31, 1993*#) 10.33 Executive Split-Dollar Life Insurance Plan dated January 1, 1994. (Exhibit 10.33 to the Company's Form 10-K for the year ended December 31, 1993*#) 10.34 Board of Directors' Compensation Plan dated January 1, 1994. (Exhibit 10.34 to the Company's Form 10-K for the year ended December 31, 1993*#) 10.35 Excess Benefit Plan dated January 1, 1987. (Exhibit 10.35 to the Company's Form 10-K for the year ended December 31, 1993*#) 10.36 Directors' Business Travel Insurance Plan. (Exhibit 10.36 to the Company's Form 10-K for the year ended December 31, 1993*#) 10.37 Deferred Compensation Plan for Executives dated October 1, 1993. (Exhibit 10.37 to the Company's Form 10-K for the year ended December 31, 1993*#) 10.38 Amended and Restated 1993 Nonqualified Employee Benefit Plans Trust Agreement dated January 1, 1995. # 10.39 Consolidated Freightways, Inc. Equity Incentive Plan for Non- Employee Directors. (Attachment to the Company's 1994 Proxy Statement dated March 18, 1994.*#) * Previously filed with the Securities and Exchange Commission and incorporated herein by reference. # Designates a contract or compensation plan for Management or Directors. PAGE 27 Exhibit No. - ---------- 10.40 Amended and Restated Retirement Plan for Directors of Consolidated Freightways, Inc. dated January 1, 1994. # (13) Annual report to security holders: Consolidated Freightways, Inc. 1994 Annual Report to Shareholders (Only those portions referenced herein are incorporated in this Form 10-K. Other portions such as "To Our Shareholders and Employees" are not required and, therefore, are not "filed" as part of this Form 10-K.) (22) Significant Subsidiaries of the Company. (27) Financial Data Schedule (28) Additional documents: 28.1 Consolidated Freightways, Inc. 1995 Notice of Annual Meeting and Proxy Statement dated March 17, 1995. (Only those portions referenced herein are incorporated in this Form 10-K. Other portions are not required and, therefore, are not "filed" as a part of this Form 10-K.*) 28.2 Note Agreement dated as of July 17, 1989, between the ESOP, Consolidated Freightways, Inc. and the Note Purchasers named therein. (Exhibit 28.1 as filed on Form SE dated July 21, 1989*) 28.3 Guarantee and Agreement dated as of July 17, 1989, delivered by Consolidated Freightways, Inc. (Exhibit 28.2 as filed on Form SE dated July 21, 1989*). 28.4 Form of Restructured Note Agreement between Consolidated Freightways, Inc., Thrift and Stock Ownership Trust as Issuer and various financial institutions as Purchasers named therein, dated as of November 3, 1992. (Exhibit 28.4 to the Company's Form 10-K for the year ended December 31, 1992*). 28.5 Form of Restructured Guarantee and Agreement between Consolidated Freightways, Inc., as Issuer and various financial institutions as Purchasers named therein, dated as of November 3, 1992. (Exhibit 28.5 to the Company's Form 10-K for the year ended December 31, 1992*). The remaining exhibits have been omitted because either (1) they are neither required nor applicable or (2) the required information has been included in the consolidated financial statements or notes thereto. * Previously filed with the Securities and Exchange Commission and incorporated herein by reference. # Designates a compensation plan for Management or Directors. EX-3.2 2 CONSOLIDATED FREIGHTWAYS, INC. BY-LAWS As Amended September 26, 1994 ARTICLE I OFFICES SECTION 1. Registered Office. The registered office of the Corporation in the State of Delaware shall be in the City of Wilmington, County of New Castle. SECTION 2. Other Offices. The Corporation shall also have and maintain a principal office or place of business at such place as may be fixed by the Board of Directors, and may also have other offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or as the business of the Corporation may require. ARTICLE II STOCKHOLDERS' MEETINGS SECTION 1. Place of Meetings. Meetings of the stockholders of the Corporation shall be held at such place, either within or without the State of Delaware, as may be designated from time to time by the Board of Directors or, if not so designated, then at the principal office of the Corporation. SECTION 2. Annual Meetings. The annual meetings of the stockholders of the Corporation for the purpose of election of directors and for such other business as may lawfully come before the meetings shall be held on a date and at a time designated from time to time by the Board of Directors, or, if not so designated, then at 10:00 a.m. on the last Monday in April in each year, if not a legal holiday, or, if a legal holiday at the same hour and place on the next succeeding day not a holiday. At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must have been (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before the meeting by a stockholder. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary, Consolidated Freightways, Inc. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than 30 days nor more than 60 days prior to the meeting; provided, however, that in the event that less than 40 days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder, to be timely, must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure was made. A stockholder's notice to the Secretary shall set forth as to each matter that the stockholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and record address of the stockholder proposing such business, (c) the class and number of shares of the Corporation that are beneficially owned by the stockholder, and (d) any material interest of the stockholder in such business. Notwithstanding anything in the By-Laws to the contrary, no business shall be conducted at the annual meeting except in accordance with the procedures set forth in this Section 2. The Chairman of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 2, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. SECTION 3. Special Meetings. Special meetings of the stockholders of the Corporation may be called, for any purpose or purposes, by the Chief Executive Officer or the Board of Directors at any time. Upon written request of any stockholder or stockholders holding in the aggregate a majority of the voting power of all stockholders, the Secretary shall call a special meeting of stockholders to be held at a place in San Francisco, California specified in the request for call, at such time as the Secretary may fix, such meeting to be held not less than ten nor more than 60 days after the receipt of the request, and if the Secretary shall neglect or refuse to call the meeting, the stockholder or stockholders making the request may do so. SECTION 4. Notice of Meetings. Except as otherwise provided by law or the Certificate of Incorporation, written notice of each meeting of stockholders shall be given not less than ten nor more than 50 days before the date of the meeting to each stockholder entitled to vote thereat, directed to his address as it appears upon the books of the Corporation; said notice to specify the place, date and hour and purpose or purposes of the meeting. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken unless the adjournment is for more than thirty days, or unless after the adjournment a new record date is fixed for the adjourned meeting, in which event a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Notice of the time, place and purpose of any meeting of stockholders may be waived in writing, either before or after such meeting, and will be waived by any stockholder by his attendance thereat in person or by proxy. Any stockholder so waiving notice of such meeting shall be bound by the proceedings of any such meeting in all respects as if due notice thereof had been given. SECTION 5. Quorum. At all meetings of stockholders, except where otherwise provided by statute or by the Certificate of Incorporation, or by the By-Laws, the presence, in person or by proxy duly authorized, of the holders of a majority of the outstanding shares of stock entitled to vote shall constitute a quorum for the transaction of business. Shares, the voting of which at said meeting has been enjoined, or which for any reason cannot be lawfully voted at such meeting shall not be counted to determine a quorum at said meeting. In the absence of a quorum any meeting of stockholders may be adjourned, from time to time, by vote of the holders of a majority of the shares represented thereat, but no other business shall be transacted at such meeting. At such adjourned meeting at which a quorum is present or represented any business may be transacted which might have been transacted at the original meeting. The stockholders present at a duly called or convened meeting, at which a quorum is present, may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. Except as otherwise provided by law, the Certificate of Incorporation or these By-Laws, all action taken by the holders of a majority of the voting power represented at any meeting at which a quorum is present shall be valid and binding upon the Corporation. SECTION 6. Voting Rights. Except as otherwise provided by law, only persons in whose names shares entitled to vote stand on the stock records of the Corporation on the record date for determining the stockholders entitled to vote at said meeting shall be entitled to vote at such meeting. Shares standing in the names of two or more persons shall be voted or represented in accordance with the determination of the majority of such persons, or, if only one of such persons is present in person or represented by proxy, such person shall have the right to vote such shares and such shares shall be deemed to be represented for the purpose of determining a quorum. Every person entitled to vote or execute consents shall have the right to do so either in person or by an agent or agents authorized by a written proxy executed by such person or his duly authorized agent, which proxy shall be filed with the Secretary of the Corporation at or before the meeting at which it is to be used. Said proxy so appointed need not be a stockholder. No proxy shall be voted on after three years from its date unless the proxy provides for a longer period. SECTION 7. List of Stockholders. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order, showing the address of and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held and which place shall be specified in the notice of the meeting, or, if not specified, at the place where said meeting is to be held, and the list shall be produced and kept at the time and place of meeting during the whole time thereof, and may be inspected by any stockholder who is present. SECTION 8. Action Without Meeting. Whenever the vote of stockholders at a meeting thereof is required or permitted to be taken in connection with any corporate action by any provisions of the statutes or of the Certificate of Incorporation, the meeting and vote of stockholders may be dispensed with: (1) if all of the stockholders who would have been entitled to vote upon the action if such meeting were held shall consent in writing to such corporate action being taken; or (2) if the Certificate of Incorporation authorizes the action to be taken with the written consent of the holders of less than all of the stock who would have been entitled to vote upon the action if a meeting were held, then on the written consent of the stockholders having not less than such percentage of the number of votes as may be authorized in the Certificate of Incorporation; provided that in no case shall the written consent be by the holders of stock having less than the minimum percentage of the vote required by statute for the proposed corporate action, and provided that prompt notice must be given to all stockholders of the taking of corporate action without a meeting and by less than unanimous written consent. SECTION 9. Rules of Conduct. The Board of Directors of the Company shall be entitled to make such rules or regulations for the conduct of meetings of stockholders as it shall deem necessary, appropriate or convenient. Subject to such rules and regulations of the Board of Directors, if any, the chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are necessary, appropriate or convenient for the proper conduct of the meeting, including, without limitation, establishing an agenda or order of business for the meeting, rules and procedures for maintaining order at the meeting and the safety of those present, limitations on participation in such meeting to stockholders of record of the Corporation and their duly authorized and constituted proxies, and such other persons as the chairman shall permit, restrictions on entry to the meeting after the time fixed for the commencement thereof, limitations on the time allotted to questions or comments by participants and regulation of the opening and closing of the polls for balloting on matters which are to be voted on by ballot. Unless, and to the extent, determined by the Board of Directors or the chairman of the meeting, meetings of shareholders shall not be required to be held in accordance with rules of parliamentary procedure. ARTICLE III DIRECTORS SECTION 1. Powers. The powers of the Corporation shall be exercised, its business conducted and its property controlled by the Board of Directors. SECTION 2. Number, Qualifications and Classification. (a) A majority of the directors holding office may by resolution increase or decrease the number of directors, provided, however, that the number thereof shall never be less than twelve nor greater than fifteen. A director need not be a stockholder. The directors shall be divided into three classes, designated Class I, Class II and Class III, as nearly equal in number as the then total number of directors permits. At the 1985 annual meeting of stockholders, Class I directors shall be elected for a one-year term, Class II directors for a two-year term and Class III directors for a three-year term. At each succeeding annual meeting of stockholders beginning in 1986, successors to the class of directors whose term expires at that annual meeting shall be elected for a three-year term. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, and any additional directors of any class elected to fill a vacancy resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class, but in no case will a decrease in the number of directors shorten the term of any incumbent director. A director shall hold office until the annual meeting for the year in which his term expires and until his successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement, disqualification or removal from office. Any vacancy on the Board of Directors, including any vacancy that results from an increase in the number of directors, may be filled by a majority of the Board of Directors then in office, although less than a quorum, or by a sole remaining director. Any director elected to fill a vacancy shall have the same remaining term as that of his predecessor. (b) Notwithstanding the foregoing, whenever the holders of any one or more classes or series of Preferred Stock issued by the Corporation shall have the right, voting separately by class or series, to elect directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of the Certificate of Incorporation applicable thereto, and such directors so elected shall not be divided into classes pursuant to these By-Laws unless expressly provided by such terms. (c) Any amendment, change or repeal of this Section 2 of Article III, or any other amendment to these By- Laws that will have the effect of permitting circumvention of or modifying this Section 2 of Article III, shall require the favorable vote, at a stockholders' meeting, of the holders of at least 80\% of the then- outstanding shares of stock of the Corporation entitled to vote. SECTION 3. Special Elections. If, for any cause, the Board of Directors shall not have been elected at an annual meeting, it may be elected as soon thereafter as is convenient at a special meeting of the stockholders called for that purpose in the manner provided in these By-Laws. SECTION 4. Vacancies. A vacancy in the Board of Directors shall be deemed to exist in the case of the death, resignation or removal of any director, or if the number of directors constituting the whole Board be increased, or if the stockholders, at any meeting of stockholders at which directors are to be elected, fail to elect the number of directors then constituting the whole Board. SECTION 5. Resignations. Any director may resign at any time by delivering his written resignation to the Secretary, such resignation to specify whether it will be effective at a particular time, upon receipt by the Secretary or at the pleasure of the Board of Directors. If no such specification is made, it shall be deemed effective at the pleasure of the Board of Directors. SECTION 6. Meetings. (a) The annual meeting of the Board of Directors shall be held not later than the tenth day following the annual stockholders' meeting at such time and place as the Board may determine. No notice of the annual meeting of the Board of Directors shall be necessary if such meeting is held immediately after the annual stockholders' meeting and at the place where such stockholders' meeting is held. If the annual meeting of the Board of Directors is held on a different date, or at a different time or place, notice of the date, time and place of such annual meeting of the Board of Directors shall be furnished to each director in accordance with the procedures of Article III, Section 6(c) of these By-Laws. The annual meeting of the Board of Directors shall be held for the purpose of electing officers and transacting such other business as may lawfully come before it. (b) Regular meetings of the Board of Directors shall be held at such place within or without the State of Delaware, and at such times as the Board may from time to time determine, and if so determined no notice thereof need be given. (c) Special meetings may be called at any time and place within or without the State of Delaware upon the call of the Chief Executive Officer or Secretary or any two directors. Notice of the time, place and purposes of each special meeting shall be sent by mail at least seventy-two hours in advance of the time of the meeting, or by telegram at least forty-eight hours in advance of the time of the meeting, to the address of each director. Notice of any special meeting may be waived in writing at any time before or after the meeting and will be waived by any director by attendance thereat. SECTION 7. Quorum and Voting. (a) A majority of the whole Board of Directors shall constitute a quorum for all purposes, provided, however, at any meeting whether a quorum be present or otherwise, a majority of the directors present may adjourn from time to time and place to place, within or without the State of Delaware, without notice other than by announcement at the meeting. (b) At each meeting of the Board at which a quorum is present all questions and business shall be determined by a vote of a majority of the directors present, unless a different vote be required by law or by the Certificate of Incorporation. SECTION 8. Action Without Meeting. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board or of such committee, as the case may be, consent thereto in writing, and such writing or writings are filed with the minutes of proceedings of the Board or committee. SECTION 9. Fees and Compensation. Directors shall not receive any stated salary for their services as directors, but, by resolution of the Board, compensation in a reasonable amount may be fixed by the Board, including, without limitation, compensation in the form of an annual retainer, a fee for each Board or Board Committee meeting attended, reimbursement for expenses of attendance at any such meeting, or any combination of any of the foregoing. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity as an officer, agent, employee, or otherwise, and receiving compensation therefor. SECTION 10. Maximum Age of Directors. Directors who have attained the age of 72 years shall be ineligible to stand for election or re-election as a director. Except as may otherwise be determined by the Board of Directors, a director who has attained the age of 72 years whose term as a director continues beyond the annual meeting of shareholders next following attainment of 72 years shall retire and resign as a director at the first directors' meeting following such annual meeting of shareholders. Unless otherwise determined by the Board of Directors in accordance with the preceding sentence, for this purpose such resignation will be automatic and need not meet the requirements for resignation set forth in Section 5 of this Article III. SECTION 11. Nominations of Persons for Election to the Board of Directors. Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of stockholders by or at the direction of the Board of Directors, by any nominating committee or person appointed by the Board of Directors or by any stockholder of the Corporation who is entitled to vote for the election of directors at the meeting and who complies with the notice procedures set forth in this Section 11. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary, Consolidated Freightways, Inc. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not less than 30 days nor more than 60 days prior to the meeting; provided, however, that in the event that less than 40 days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder, to be timely, must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. Such stockholder's notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or re- election as a director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of the Corporation that are beneficially owned by the person and (iv) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors pursuant to Regulation 14a under the Securities Exchange Act of 1934; and (b) as to the stockholder giving the notice, (i) the name and record address of the stockholder and (ii) the class and number of shares of the Corporation that are beneficially owned by the stockholder. A signed written consent of each proposed nominee to serve as a director of the Corporation shall be appended to the stockholder's notice. The Corporation may require any proposed nominee to furnish any other information that may reasonably be required by the Corporation to determine the qualifications of such proposed nominee to serve as a director of the Corporation. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth herein. These provisions shall not apply to nomination of any persons entitled to be separately elected by holders of Preferred Stock. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. ARTICLE IV OFFICERS AND COMMITTEES SECTION 1. Officers Designated. The executive officers of the Corporation shall be chosen by the Board of Directors and shall be the Chairman of the Board, the President, one or more Vice Presidents, the Secretary, one or more Assistant Secretaries, the Treasurer, one or more Assistant Treasurers, and such other executive officers as the Board of Directors from time to time may designate. The Board of Directors shall designate either the Chairman of the Board or the President as the Chief Executive Officer of the Corporation. The officer so designated shall have charge of the actual conduct and operation of the business of the Corporation, subject to the control and direction of the Board of Directors. The Chief Executive Officer shall, with the consent of the Board of Directors, assign such additional titles to Vice Presidents as he shall deem appropriate and designate the succession of officers to act in his stead in his absence or disability. He may appoint additional Vice Presidents who shall not, however, be executive officers. He shall assign all duties not otherwise specified by these By-Laws to all officers and employees of the Corporation. SECTION 2. Election, Qualification, Tenure of Office, and Duties of Executive Officers and Other Officers. (a) At the annual meeting of the Board of Directors following their election by the stockholders, the directors shall elect all executive officers of the Corporation. Any one person may hold any number of offices of the Corporation at any one time unless specifically prohibited therefrom by law. The Chairman of the Board shall be a director but no other officer need be a director. (b) Each executive officer shall hold office from the date of his election either until the date of his voluntary resignation, or death, or until the next annual meeting of the Board of Directors and until a successor shall have been duly elected and qualified, whichever shall first occur; provided that any such officer may be removed by the Board of Directors whenever in its judgment the best interest of the Corporation will be served thereby, and the Board may elect another in the place and stead of the person so removed. (c) Chairman of the Board: The Chairman of the Board shall preside at all meetings of the stockholders, of the Board of Directors, and of the Executive Committee. He shall have the responsibility of keeping the directors informed on all policy matters, and shall have such other powers and perform such other duties as may be prescribed by the Board. (d) President: The President shall, in the absence of the Chairman of the Board preside at all meetings of the stockholders, the Board of Directors and the Executive Committee. He shall exercise all of the powers and discharge all of the other duties of the Chairman of the Board in the absence of the Chairman of the Board. He shall perform such other duties as may be prescribed by the Chairman of the Board. (e) Vice Presidents: The Vice Presidents shall have such duties and have such other powers as shall be prescribed by the Chief Executive Officer. Such Vice President as may be designated by the Board of Directors or the Chairman of the Board shall preside at all meetings of the stockholders. (f) Secretary: The Secretary shall record all the proceedings of the meetings of the Corporation and of the directors in a book or books kept for that purpose. He shall attend to the giving and serving of all notices on behalf of the Corporation. He shall have the custody of the corporate seal and affix the same to such instruments as may be required. He shall have such other powers and perform such other duties as may be prescribed by the Chief Executive Officer. (g) Assistant Secretaries: Assistant Secretaries shall assist the Secretary in the performance of his duties and any one of the Assistant Secretaries may perform all of the duties of the Secretary if at any time he shall be unable to act. Assistant Secretaries shall have such other powers and perform such other duties as may be prescribed by the Chief Executive Officer. (h) Treasurer: The Treasurer shall have charge of the custody, control and disposition of all funds of the Corporation and shall account for same. He shall have such other powers and perform such other duties as may be prescribed by the Chief Executive Officer. (i) Assistant Treasurers: Assistant Treasurers shall assist the Treasurer in the performance of his duties and any one of the Assistant Treasurers may perform all of the duties of the Treasurer if at any time he shall be unable to act. Assistant Treasurers shall have such other powers and perform such other duties as may be prescribed by the Chief Executive Officer. SECTION 3. Committees. (a) Executive Committee. The Board of Directors shall, by resolution passed by a majority of the whole Board, appoint an Executive Committee of not less than three members, all of whom shall be directors. The Executive Committee, to the extent permitted by law, shall have and may exercise when the Board of Directors is not in session all powers of the Board in the management of the business and affairs of the Corporation and may authorize the seal of the Corporation to be affixed to all papers which may require it. It shall be the duty of the Secretary of the Corporation to record the minutes of all actions of the Executive Committee. (b) Other Committees. The Board of Directors may, by resolution passed by a majority of the whole Board, from time to time appoint such other committees as may be permitted by law. The Chief Executive Officer may appoint such other committees as he finds necessary to the conduct of the Corporation's business. Such other committees appointed by the Board of Directors or the Chief Executive Officer shall have such powers and perform such duties as may be prescribed by the body or person appointing such committee. (c) The members of all committees of the Board of Directors shall serve a term co-existent with that of the Board of Directors which shall have appointed such committee. The Board, subject to the provisions of sub-section (a) or (b) of this Section 3 may at any time increase or decrease the number of members of a committee or terminate the existence of a committee; provided, that no committee shall consist of less than three members. The membership of a committee member shall terminate on the date of his death or voluntary resignation, but the Board may at any time for any reason remove any individual committee member and the Board may fill any committee vacancy created by death, resignation, removal or increase in the number of members of the committee. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of any member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. ARTICLE V CAPITAL STOCK SECTION 1. Form and Execution of Certificates. Certificates for the shares of stock of the Corporation shall be in such form as are consistent with the Certificate of Incorporation and applicable law. Every holder of stock in the Corporation shall be entitled to have a certificate signed by, or in the name of the Corporation by, the Chairman of the Board, President or any Vice President and by the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary, certifying the number of shares owned by him in the Corporation. Where such certificate is countersigned by a transfer agent other than the Corporation or its employee, or by a registrar other than the Corporation or its employee, any other signature on the certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent, or registrar at the date of issue. SECTION 2. Lost Certificates. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost or destroyed. SECTION 3. Transfers. Transfers of record of shares of the capital stock of the Corporation shall be made upon its books by the holders thereof, in person or by attorney duly authorized, and upon the surrender of a certificate or certificates for a like number of shares, properly endorsed or accompanied by a properly endorsed stock power. SECTION 4. Fixing Record Dates. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. If no record date is fixed: (1) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; and (2) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 5. Registered Stockholders. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. ARTICLE VI OTHER SECURITIES OF THE CORPORATION All bonds, debentures and other corporate securities of the Corporation, other than stock certificates, may be signed by the Chairman of the Board, the President or any Vice President, or such other person as may be authorized by the Board of Directors, and the corporate seal impressed thereon or a facsimile of such seal imprinted thereon and attested by the signature of the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer, or such other person as may be authorized by the Board of Directors; provided, however, that where any such bond, debenture or other corporate security shall be authenticated by the manual signature of a trustee under an indenture pursuant to which such bond, debenture or other corporate securities shall be issued, the signatures of the persons signing and attesting the corporate seal on such bond, debenture or other corporate security may be the imprinted facsimile of the signatures of such persons. Interest coupons appertaining to any such bond, debenture or other corporate security, authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an Assistant Treasurer of the Corporation, or such other person as may be authorized by the Board of Directors, or bear imprinted thereon the facsimile signature of such person. In case any person who shall have signed or attested any bond, debenture or other corporate security, or whose facsimile signature shall appear thereon or on any such interest coupon, shall have ceased to be an officer before the bond, debenture or other corporate security so signed or attested shall have been delivered, such bond, debenture or other corporate security nevertheless may be adopted by the Corporation and issued and delivered as though the person who signed the same or whose facsimile signature shall have been used thereon had not ceased to be such officer of the Corporation. ARTICLE VII SECURITIES OWNED BY THE CORPORATION Power to Vote. Unless otherwise ordered by the Board of Directors, the Chief Executive Officer, or any officer designated in writing by the Chief Executive Officer, shall have full power and authority in the name and on behalf of the Corporation, to vote and to act either in person or by proxy at any meeting of the holders of stock or securities in any corporation upon and in respect of any securities therein which the Corporation may hold, and shall possess and may exercise in the name of the Corporation any and all rights and powers incident to the ownership of such stock or securities which, as the owner thereof, the Corporation shall possess and might exercise including the right to give written consents in respect to action taken or to be taken. The Board of Directors may from time to time confer like powers upon any other person or persons. ARTICLE VIII CORPORATE SEAL The corporate seal shall consist of a die bearing the inscription, ``Consolidated Freightways, Inc.-- Corporate Seal--Delaware.'' ARTICLE IX AMENDMENTS These By-Laws may be repealed, altered or amended or new By- Laws adopted by written consent of stockholders in the manner authorized by Section 8 of Article II or at any meeting of the stockholders, either annual or special, by the affirmative vote of a majority of the stock entitled to vote at such meeting. The Board of Directors shall also have the authority to repeal, alter or amend these By-Laws or adopt new By-Laws by unanimous written consent or by the affirmative vote of a majority of the whole Board at any annual, regular, or special meeting subject to the power of the stockholders to change or repeal such By- Laws. ARTICLE X MISCELLANEOUS SECTION 1. Definitions. As used in these By-Laws and wherever the context shall require, the word ``person'' shall include associations, partnerships and corporations as well as individuals; words in the masculine gender shall include the feminine and associations, partnerships and corporations; words in the singular shall include the plural and words in the plural may mean only the singular, and words ``additional compensation'' shall mean and include all bonus, profit sharing, retirement, deferred compensation, and all other additional compensation plans or arrangements affecting persons individually or as a group. SECTION 2. Notices. Whenever, under any provisions of these By-Laws, notice is required to be given to any stockholder, the same shall be given in writing, timely and duly deposited in the United States Mail, postage prepaid, and addressed to his last known post office address as shown by the stock record of the Corporation or its transfer agent. Any notice required to be given to any director may be given by the method hereinabove stated, by personal delivery, or by telegram, except that such notice, other than one which is delivered personally, shall be sent to such address as such director shall have filed in writing with the Secretary of the Corporation, or, in the absence of such filing, to the last known post office address of such director. If no address of a stockholder or director be known, such notice may be sent to the principal office of the Corporation. An affidavit of mailing, executed by a duly authorized and competent employee of the Corporation or its transfer agent appointed with respect to the class of stock affected, specifying the name and address or the names and addresses of the stockholder or stockholders, director or directors, to whom any such notice or notices was or were given, and the time and method of giving the same, shall be conclusive evidence of the statements therein contained. All notices given by mail, as above provided, shall be deemed to have been given as at the time of mailing and all notices given by telegram shall be deemed to have been given as at the sending time recorded by the telegraph company transmitting the same. It shall not be necessary that the same method of giving be employed in respect of all directors, but one permissible method may be employed in respect of any one or more, and any other permissible method or methods may be employed in respect of any other or others. The period or limitation of time within which any stockholder may exercise any option or right, or enjoy any privilege or benefit, or be required to act, or within which any directors may exercise any power or right, or enjoy any privilege, pursuant to any notice sent him in the manner above provided, shall not be affected or extended in any manner by the failure of such stockholder or such director to receive such notice. Whenever any notice is required to be given under the provisions of the statutes or of the Certificate of Incorporation, or of these By-Laws, a waiver thereof in writing signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. Whenever notice is required to be given, under any provision of law or of the Certificate of Incorporation or By-Laws of the Corporation, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by the Corporation is such as to require the filing of a certificate under any provision of the Delaware General Corporation Law, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful. SECTION 3. Indemnification of Officers, Directors, Employees and Agents. (a) Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is involved in any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative (hereinafter a ``Proceeding''), by reason of the fact that he, or a person of whom he is the legal representative, is or was a director, officer, employee, or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee, or agent of another corporation or of a partnership, joint venture, trust, or other enterprise, including service with respect to employee benefit plans, whether the basis of the Proceeding is alleged action in an official capacity as a director, officer, employee, or agent or in any other capacity while serving as a director, officer, employee, or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than were permitted prior to amendment) against all expenses, liability, and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties, and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith; provided, however, that except as to actions to enforce indemnification rights pursuant to paragraph (c) of this Section, the Corporation shall indemnify any such person seeking indemnification in connection with a Proceeding (or part thereof) initiated by such person only if the Proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this Article shall be a contract right for the benefit of the Corporation's directors, officers, employees, and agents. (b) Authority to Advance Expenses. Expenses incurred (including attorneys' fees) by an officer or director (acting in his capacity as such) in defending a Proceeding shall be paid by the Corporation in advance of the final disposition of such Proceeding, provided, however, that if required by the Delaware General Corporation Law, as amended, such expenses shall be advanced only upon delivery to the Corporation of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this Article or otherwise. Such expenses incurred by other employees or agents of the Corporation (or by the directors or officers not acting in their capacity as such, including service with respect to employee benefit plans) may be advanced upon such terms and conditions as the Board of Directors deems appropriate. (c) Right of Claimant to Bring Suit. If a claim under paragraph (a) or (b) of this Section is not paid in full by the Corporation within sixty days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense (including attorneys' fees) of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending a Proceeding in advance of its final disposition where the required undertaking has been tendered to the Corporation) that the claimant has not met the standards of conduct that make it permissible under the Delaware General Corporation Law for the Corporation to indemnify the claimant for the amount claimed. The burden of proving such a defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper under the circumstances because he has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant had not met such applicable standard of conduct, shall be a defense to the action or create a presumption that claimant has not met the applicable standard of conduct. (d) Provisions Nonexclusive. The rights conferred on any person by this Section shall not be exclusive of any other rights that such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, By-Law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. (e) Authority to Insure. The Corporation may purchase and maintain insurance to protect itself and any person who is or was a director, officer, employee, or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise against any liability, expense, or loss asserted against or incurred by such person, whether or not the Corporation would have the power to indemnify him against such liability, expense, or loss under applicable law or the provisions of this Article. (f) Survival of Rights. The rights provided by this Section shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of such a person. (g) Effect of Amendment. Any amendment, repeal, or modification of this Section shall not (a) adversely affect any right or protection of any director, officer, employee, or agent existing at the time of such amendment, repeal, or modification, or (b) apply to the indemnification of any such person for liability, expense, or loss stemming from actions or omissions occurring prior to such amendment, repeal, or modification. CERTIFICATE The undersigned,Secretary of CONSOLIDATED FREIGHTWAYS, INC., does hereby certify that the foregoing is a true and correct copy of the By-Laws of CONSOLIDATED FREIGHTWAYS, INC., as amended to date hereof. In witness whereof the undersigned has hereunto set her hand and affixed the seal of said corporation this 26th day of September, 1994 . /s/Marlya R. Boonstoppel Vice President and Secretary of Consolidated Freightways, Inc. CONSOLIDATED FREIGHTWAYS, INC. INCORPORATED IN DELAWARE AUGUST 13, 1958 UNDER THE CORPORATE NAME OF CONSOLIDATED FREIGHTWAYS COMPANY BY-LAWS As Amended September 26, 1994 EX-10.20 3 PAGE 1 EXHIBIT 10.20 ------------- CONSOLIDATED FREIGHTWAYS, INC. ------------------------------ 1995 Director's Election Form ----------------------------- Indicate amount of deferral under (A), timing of deferral under (B), or select (C) if no deferral is elected. In the event I earn any Consolidated Freightways, Inc. director's fees in 1995, I hereby elect to defer payment of such fees and any interest equivalent as follows: A. ( ) To defer annual retainer and all meeting fees and chair fees, if applicable. ( ) To defer the annual retainer portion of such fees. B. ( ) To be paid in the year following the year in which I cease to be a director of Consolidated Freightways, Inc. ( ) To be paid in equal annual installments for _____ year(s) but not to exceed five (5) years, commencing in the year following the year in which I cease to be a director of Consolidated Freightways, Inc. ( ) To be paid in the year following _____ year(s) (insert 1 or any multiple of years) after the year in which fees are deferred (but in no event later than the year following the year I cease to be a director of Consolidated Freightways, Inc.). ( ) To be paid in equal annual installments for _____ year(s) but not to exceed five (5) years, commencing in the year following _______ year(s) (insert 1 or any multiple of years) after the year in which fees are deferred (but in no event later than the year I cease to be a director of Consolidated Freightways, Inc.). I understand that payment of any amount deferred hereunder will be made by January 31st of the year in which such payment is to be made. I further understand that any amount deferred will be credited with interest equivalents at the end of each calendar quarter following the date of deferral and continuing until such deferred amount is paid to me. Interest equivalents shall be calculated at the published Bank of America NT & SA prime rate as of the date credited and shall be paid on prior interest equivalents credited on amounts deferred. I also understand that no trust is created hereby and that in the event of my death, any amounts unpaid shall be paid to my designated beneficiary in a lump sum. I designate as my beneficiary ________________________________________ C. ( ) I do not elect to defer payments of any fees earned in 1995. ________________________ ________________________ Date of this Election Signature of Director EX-10.22 4 Exhibit 10.22 CONSOLIDATED FREIGHTWAYS, INC. EXECUTIVE INCENTIVE PLAN FOR 1995 THE PLAN In order to motivate certain of its employees more effectively and efficiently, Consolidated Freightways, Inc. (CF, Inc.) establishes an Incentive Plan (Plan) under which payments will be made to eligible executive personnel out of calendar year 1995 Incentive Profits. DESIGNATION OF PARTICIPANTS Participants in this Plan shall be all full-time executive personnel of CF, Inc. A master list of all Plan participants will be maintained in the office of the Chief Executive Officer of CF, Inc. ELIGIBILITY FOR PAYMENT Participants will commence participation at the beginning of the first full calendar quarter following becoming eligible. Calendar quarters begin January 1, April 1, July 1, and October 1 or the first working day thereafter. An employee who commences participation in the 1995 Plan during the 1995 Plan year, and who participates less than four full quarters, will receive a pro rata payment based on the number of full calendar quarters of Plan participation. Subject to the following exceptions, no person shall receive any payment under this Plan unless on the date that the payment is actually made that person is then currently (i) employed by Consolidated Freightways, Inc. or any of its subsidiaries and (ii) a Plan participant. EXCEPTION 1. A Plan participant who is employed by CF, Inc. or any of its subsidiaries through December 31, 1995 but leaves that employment or otherwise becomes ineligible after December 31, 1995 but before the final payment is made relating to 1995, unless terminated for cause, shall be entitled to receive payments under this Plan resulting from 1995 Incentive Profits. EXCEPTION 2. An appropriate pro rata payment will be made (1) to a Plan participant who retires prior to December 31, 1995 pursuant to the Consolidated Freightways, Inc. Retirement Plan or to the provisions of the Social Security Act and who, at the time of retirement, was an eligible participant in this Plan, (2) to the heirs, legatees, administrators or executors of a Plan participant who dies prior to December 31, 1995 and who, at the time of death, was an eligible participant in this Plan, (3) to an eligible Plan participant who is placed on an approved Medical, Sabbatical, or Military Leave of Absence prior to December 31, 1995, or (4) to an eligible Plan participant who is transferred to another subsidiary of CF, Inc. and who remains an employee through December 31, 1995. METHOD OF PAYMENT Each Plan participant will be assigned an incentive participation factor as a percent of Annual Salary. The Incentive Participation Factor will be allocated 70% to the assigned profit goal and 30% to the assigned Return on Capital Employed Goal (ROCE). Incentive compensation for the assigned goals will be earned on a pro rata basis for accomplishments between the Minimum level and the Incentive Factor Goal. Once incentive earnings exceed the Incentive Factor Goal, incentive compensation will be earned ratably at 70% of the previous level. No incentive will be earned by a participant until CF, Inc. has achieved its Minimum Profit Goal. PERSONAL DATA SHEET A "Personal Data Sheet" for calculation of incentive earnings will be prepared for each Plan participant which designates (1) the unit to which the participant is assigned, (2) his assigned incentive participation factor, (3) the minimum level of achievement required for each assigned goal, (4) the incentive factor level of achievement for each assigned goal, and (5) the incentive earnings at the incentive factor level for each assigned goal. DATE OF PAYMENT The Chief Executive Officer of CF, Inc. may authorize a partial payment of the estimated annual earned incentive, in December, 1995. The final payment to eligible participants, less any previous partial payment, will be made on or before March 15, 1996. INCENTIVE PROFIT Incentive Profit is defined as the earnings of CF, Inc. before deducting any amounts expensed under any CF, Inc. and qualified LJSC incentive plans and before deducting income taxes. ANNUAL COMPENSATION Annual Compensation for incentive purposes for each Plan participant is his annualized salary before any incentive or other special compensation as of the first pay period following the date the participant becomes eligible to participate in this Plan. The term "special compensation" used herein does not include deferred salary arrangements wherein the participant could have chosen to receive the deferred salary in the Plan year. MAXIMUM PAYMENT Payments under this Plan are limited to double each participant's Participation Factor. LAWS GOVERNING PAYMENTS No payment shall be made under this Plan in an amount which is prohibited by law. AMENDMENT, SUSPENSION, AND ADMINISTRATION OF PLAN The Board of Directors of CF, Inc. may at any time amend, suspend, or terminate the operation of this Plan, by thirty-day written notice to the Plan participants, and will have full discretion as to the administration and interpretation of this Plan. No participant in this Plan shall at any time have any right to receive any payment under this Plan until such time, if any, as any payment is actually made. DURATION OF PLAN This Plan is for the calendar year 1995 only. EX-10.23 5 Exhibit 10.23 CF MOTORFREIGHT INCENTIVE PLAN FOR 1995 THE PLAN In order to motivate certain employees of CF MotorFreight (CFMF) more effectively and efficiently, Consolidated Freightways Corporation of Delaware (CFCD) establishes an Incentive Plan (Plan) under which payments will be made to eligible supervisory, managerial and regular full-time nonsalaried, noncontractual personnel out of calendar year 1995 Incentive Profits. DESIGNATION OF PARTICIPANTS Participants in the Plan shall be all full-time supervisory, managerial and regular nonsalaried, noncontractual personnel of CFMF. A master list of Plan participants will be maintained in the office of the President of CFCD. ELIGIBILITY FOR PARTICIPATION Participants will commence participation at the beginning of the first full calendar quarter following becoming eligible. Calendar quarters begin January 1, April 1, July 1, and October 1 or the first working day thereafter. An employee who commences participation in the 1995 Plan during the 1995 Plan year, and who participates less than four full quarters, will receive a pro rata payment based on the number of full calendar quarters of Plan participation. Subject to the following exceptions, no person shall receive any payment under this Plan unless on the date that the payment is actually made that person is then currently (i) employed by CFCD or any of its subsidiaries and (ii) a Plan participant. EXCEPTION 1. A Plan participant who is employed by CFCD or any of its subsidiaries through December 31, 1995 but leaves that employment or otherwise becomes ineligible after December 31, 1995, unless terminated for cause, shall be entitled to receive payments under this Plan resulting from 1995 Incentive Profits. EXCEPTION 2. An appropriate pro rata payment will be made (1) to a Plan participant who retires prior to December 31, 1995 pursuant to the Consolidated Freightways, Inc. Retirement Plan or to the provisions of either the Social Security Act or the Old Age Security Acts (of Canada), as applicable, and who, at the time of retirement, was an eligible participant in this Plan, (2) to the heirs, legatees, administrators or executors of a Plan participant who dies prior to December 31, 1995 and who, at the time of death, was an eligible participant in this Plan, (3) to an eligible Plan participant who is placed on an approved Medical, Sabbatical, or Military Leave of Absence prior to December 31, 1995, or (4) to an eligible Plan participant who is transferred to another subsidiary of Consolidated Freightways, Inc. and who remains an employee through December 31, 1995. METHOD OF PAYMENT Each participant will be assigned an incentive Profit Sharing Percentage (PSP) as a percent of profit earnings within range - Entry to Factor. Participants will have their PSP based on CFMF Incentive Profit. Incentive compensation for the assigned profit goals will be earned on a pro rata basis for accomplishments between the Minimum Level and the Incentive Factor Goal. Once incentive earnings exceed the Incentive Factor Goal, a participant's PSP will be increased by 47.88% and incentive will be earned pro rata to the Maximum Profit Goal. No incentive will be earned by a participant until CFMF has achieved its Minimum Profit Goal. PERSONAL DATA SHEET A "Personal Data Sheet" for calculation of incentive earnings will be prepared for each Plan participant which designates (1) the unit to which the participant is assigned, (2) his profit-sharing percentage, (3) the minimum level of achievement required for the profit goal, (4) the incentive factor level of achievement for the profit goal, and (5) the incentive earnings at the incentive factor level for the profit goal. DATE OF PAYMENT The President of CFCD may authorize a partial payment of the estimated annual earned incentive, in December 1995. The final payment to eligible participants, less any previous partial payment, will be made on or before March 15, 1996. INCENTIVE PROFIT Incentive Profit is defined as the operating earnings of CF MotorFreight before deducting any amounts expensed under this or any similar incentive or bonus plan, before deducting interest expense and other non-operating expenses, before adding interest income, and before deducting income taxes. ANNUAL COMPENSATION Annual Compensation for incentive purposes for each Plan participant is his annualized salary or hourly base pay before any incentive, overtime, shift premium, or other special compensation as of the first pay period following the date the participant becomes eligible to participate in this Plan. MAXIMUM PAYMENT Payments under this Plan are limited to each participant's profit sharing percentage applied to earnings between minimum profit goal and the maximum profit goal. LAWS GOVERNING PAYMENTS No payment shall be made under this Plan in an amount which is prohi- bited by law. AMENDMENT, SUSPENSION AND ADMINISTRATION OF PLAN The Board of Directors of CFCD may at any time amend, suspend, or terminate the operation of this Plan, by thirty-day written notice to the Plan participants, and will have full discretion as to the administration and interpretation of this Plan. No participant in this Plan shall at any time have any right to receive any payment under this Plan until such time, if any, as any payment is actually made. DURATION OF PLAN This Plan is for the calendar year 1995 only. EX-10.24 6 Exhibit 10.24 CON-WAY TRANSPORTATION SERVICES, INC. INCENTIVE PLAN FOR 1995 THE PLAN In order to motivate certain of its employees more effectively and efficiently, Con-Way Transportation Services, Inc. (CTS) establishes an Incentive Plan (Plan) under which payments will be made to eligible supervisory, managerial, and regular full-time nonsalaried personnel out of calendar year 1995 Incentive Profits. DESIGNATION OF PARTICIPANTS Participants in the Plan shall be all full-time supervisory, managerial and regular nonsalaried personnel of CTS Administration. A master list of all Plan participants will be maintained in the office of the President of CTS. ELIGIBILITY FOR PARTICIPATION Participants will commence participation at the beginning of the first full calendar quarter following becoming eligible. Calendar quarters begin January 1, April 1, July 1, and October 1 or the first working day thereafter. An employee who commences participation in the 1995 Plan during the 1995 Plan year, and who participates less than four full quarters, will receive a pro rata payment based on the number of full calendar quarters of Plan participation. Subject to the following exceptions, no person shall receive any payment under this Plan unless on the date that the payment is actually made that person is then currently (i) employed by CTS or any of its subsidiaries and (ii) a Plan participant. EXCEPTION 1. A Plan participant who is employed by CTS or any of its subsidiaries through December 31, 1995 but leaves that employment or otherwise becomes ineligible after December 31, 1995 but before the final payment is made relating to 1995, unless terminated for cause, shall be entitled to receive payments under this Plan resulting from 1995 Incentive Profits. EXCEPTION 2. An appropriate pro rata payment will be made (1) to a Plan participant who retires prior to December 31, 1995 pursuant to the Consolidated Freightways, Inc. Retirement Plan or to the provisions of the Social Security Act and who, at the time of retirement, was an eligible participant in this Plan, (2) to the heirs, legatees, administrators or executors of a Plan participant who dies prior to December 31, 1995 and who, at the time of death, was an eligible participant in this Plan, (3) to an eligible Plan participant who is placed on an approved Medical, Sabbatical, or Military Leave of Absence prior to December 31, 1995, or (4) to an eligible Plan participant who is transferred to another subsidiary of Consolidated Freightways, Inc. and who remains an employee through December 31, 1995. METHOD OF PAYMENT Each Plan participant will be assigned an incentive participation factor as a percent of Annual Compensation in accordance with the enclosed Personal Data Sheet. Incentive for assigned goals will be earned on a pro rata basis for accomplishment between the Minimum level and the Incentive Factor Goal. Incentive earnings over the Incentive Factor Goal will continue to earn at the same pro rata relationship that exists between minimum level and factor goal. No incentive will be earned by a participant until CTS has achieved its Minimum Profit Goal. PERSONAL DATA SHEET A "Personal Data Sheet" for calculation of incentive earnings will be prepared for each Plan participant which designates (1) the unit to which the participant is assigned, (2) his assigned incentive par ticipation factor, (3) the minimum level of achievement required for the profit goal, (4) the incentive factor level of achievement for the profit goal, and (5) the incentive earnings at the incentive factor level for the profit goal. DATE OF PAYMENT The President of CTS may authorize a partial payment of the estimated annual earned incentive, in December 1995. The final payment to eligible participants, less any previous partial payment, will be made on or before March 15, 1996. INCENTIVE PROFIT Incentive profit is defined as the consolidated earnings of all of the companies comprising CTS, before deducting any amounts expensed under this or any similar incentive or bonus plan and before deducting income taxes and excluding interest income and expense. ANNUAL COMPENSATION Annual Compensation for incentive purposes for each Plan participant is his annualized salary or hourly base pay before any incentive, overtime, or other special compensation as of the first pay period following the date the participant becomes eligible to participate in this Plan. MAXIMUM PAYMENT Payments under this Plan are limited to double each participant's Participation Factor. LAWS GOVERNING PAYMENTS No payment shall be made under this Plan in an amount which is prohibited by law. AMENDMENT, SUSPENSION, AND ADMINISTRATION OF PLAN The Board of Directors of CTS may at any time amend, suspend, or terminate the operation of this Plan, by thirty-day written notice to the Plan participants, and will have full discretion as to the administration and interpretation of this Plan. No participant in this Plan shall at any time have any right to receive any payment under this Plan until such time, if any, as the payment is actually made. DURATION OF PLAN This Plan is for the calendar year 1995 only. EX-10.25 7 Exhibit 10.25 EMERY WORLDWIDE INCENTIVE PLAN FOR 1995 THE PLAN In order to motivate certain employees more effectively and efficiently, Emery Worldwide (EWW) establishes an Incentive Plan (Plan) under which payments will be made to designated participants out of calendar year 1995 Incentive Profits. DESIGNATION OF PARTICIPANTS Participants in the Plan shall be all supervisory, managerial, and regular full-time and part-time non-contractual (time-sheet) personnel of EWW. A master list of Plan participants will be maintained in the office of the President of EWW. ELIGIBILITY FOR PARTICIPATION Participants will commence participation at the beginning of the first full calendar quarter following becoming eligible. Calendar quarters begin January 1, April 1, July 1 and October 1 or the first working day thereafter. An employee who commences participation in the 1995 Plan during the 1995 Plan year, and who participates less than four full quarters, will receive a pro rata payment based on the number of full calendar quarters of Plan participation. Subject to the following exceptions, no person shall receive any payment under this Plan unless on the date that the payment is actually made that person is then currently (i) employed by EWW or any of its subsidiaries and (ii) a Plan participant. EXCEPTION 1. A Plan participant who is employed by EWW through December 31, 1995 but leaves that employment or otherwise becomes ineligible after December 31, 1995 but before the final payment is made relating to 1995, unless terminated for cause, is entitled to receive payments under this Plan resulting from 1995 Incentive Profits. EXCEPTION 2. An appropriate pro rata payment will be made (1) to a Plan participant who retires prior to December 31, 1995 pursuant to the Consolidated Freightways, Inc. Retirement Plan, The Purolator Courier Corporation Hourly Employee Pension Plan or to the provisions of the Social Security Act and who, at the time of retirement, was an eligible participant in this Plan, (ii) to the heirs, legatees, administrators or executors of a Plan participant who dies prior to December 31, 1995 and who, at the time of death, was an eligible participant in this Plan, (iii) to an eligible Plan participant who is placed on approved Medical, Sabbatical, or Military Leave of Absence prior to December 31, 1995, or (iv) to an eligible Plan participant who is transferred to another subsidiary of Consolidated Freightways, Inc. and who remains an employee through December 31, 1995. METHOD OF PAYMENT Each Plan participant will be assigned an incentive participation factor as a percent of annual compensation. The President of Emery will assign each Plan participant to an operating unit (terminal, division, total company, etc.) to earn incentive. The participation factor may be further indexed to specific performance goals such as revenue, profit, service, etc. Incentive compensation will be paid from an ICP pool earned ratably between the Minimum and Incentive Factor Profit Goals and will continue to be earned ratably over the Incentive Factor Goal. Incentive Factor Plan Goals and minimum levels of accomplishment will be established for all performance goals. No incentive will be earned by a participant until their terminal or appropriate unit meets the entry level for the various Performance Goals established. Actual incentive payout is subject to the ICP pool. Incentive Compensation will be adjusted proportionately to the amount in the ICP pool, thus actual system incentive payout can never surpass the percent of accomplishment for system profit. There is a maximum percent of accomplishment for any performance goal of 200%. PERSONAL DATA SHEET A "Personal Data Sheet" for calculation of incentive earnings will be prepared for each Plan participant which designates (1) the unit to which the participant is assigned, (2) his assigned incentive par- ticipation factor and the allocation of that factor to specific Performance Goals, (3) the minimum level of achievement required for each assigned goal, (4) the incentive factor level of achievement for each assigned goal, and (5) the incentive earnings at the incentive factor level for each assigned goal. DATE OF PAYMENT The President of EWW may authorize a partial payment of the estimated annual earned incentive, in December 1995. The final payment to eligible participants, less any previous partial payment, will be made on or before March 15, 1996. INCENTIVE PROFIT Incentive Profit is defined as the earnings of Emery Worldwide, Emery Custom Brokers, and Emery Worldwide Airlines before deducting any amounts expensed under this or any similar incentive or bonus plan and before deducting income taxes and excluding interest income and expense. ANNUAL COMPENSATION Annual Compensation for incentive purposes for each Plan participant is his annual earnings for 1995 before any incentive or bonus payments earned during the period of Plan participation eligibility. MAXIMUM PAYMENT Payments under this plan are limited to double each participant's Participation Factor. LAWS GOVERNING PAYMENTS No payment shall be made under this Plan in an amount which is prohibited by law. AMENDMENT, SUSPENSION, AND ADMINISTRATION OF PLAN The Board of Directors of EWW may at any time amend, suspend, or terminate the operation of this Plan, by thirty-day written notice to the Plan participants, and will have full discretion as to the administration and interpretation of this Plan. No participant in this Plan shall at any time have any right to receive any payment under this Plan until such time, if any, as any payment is actually made. DURATION OF PLAN This Plan is for the calendar year 1995 only. EX-10.26 8 Exhibit 10.26 LELAND JAMES SERVICE CORPORATION - CFI EXECUTIVE INCENTIVE PLAN FOR 1995 THE PLAN In order to motivate certain employees of Leland James Service Corporation (LJSC) more effectively and efficiently, Consolidated Freightways, Inc. (CF, Inc.) establishes an Incentive Plan (Plan) under which payments will be made to eligible executive personnel of LJSC out of calendar year 1995 Incentive Profits. DESIGNATION OF PARTICIPANTS Participants in this Plan shall be all full-time executive personnel of LJSC. A master list of all Plan participants will be maintained in the office of the President of LJSC. ELIGIBILITY FOR PAYMENT Participants will commence participation at the beginning of the first full calendar quarter following becoming eligible. Calendar quarters begin January 1, April 1, July 1, and October 1 or the first working day thereafter. An employee who commences participation in the 1995 Plan during the 1995 Plan year, and who participates less than four full quarters, will receive a pro rata payment based on the number of full calendar quarters of Plan participation. Subject to the following exceptions, no person shall receive any payment under this Plan unless on the date that the payment is actually made that person is then currently (i) employed by LJSC and (ii) a Plan participant. EXCEPTION 1. A Plan participant who is employed by LJSC through December 31, 1995 but leaves that employment or otherwise becomes ineligible after December 31, 1995 but before the final payment is made relating to 1995, unless terminated for cause, shall be entitled to receive payments under this Plan resulting from 1995 Incentive Profits. EXCEPTION 2. An appropriate pro rata payment will be made (1) to a Plan participant who retires prior to December 31, 1995 pursuant to the Consolidated Freightways, Inc. Retirement Plan or to the provisions of the Social Security Act and who, at the time of retirement, was an eligible participant in this Plan, (2) to the heirs, legatees, administrators or executors of a Plan participant who dies prior to December 31, 1995 and who, at the time of death, was an eligible participant in this Plan, (3) to an eligible Plan participant who is placed on an approved Medical, Sabbatical, or Military Leave of Absence prior to December 31, 1995, or (4) to an eligible Plan participant who is transferred to another subsidiary of CF, Inc. and who remains an employee through December 31, 1995. METHOD OF PAYMENT Each Plan participant will be assigned an incentive participation factor as a percent of Annual Salary. The Incentive Participation Factor will be allocated 70% to the assigned profit goal and 30% to the assigned Return on Capital Employed Goal (ROCE). Incentive compensation for the assigned goals will be earned on a pro rata basis for accomplishments between the Minimum level and the Incentive Factor Goal. Once incentive earnings exceed the Incentive Factor Goal, incentive compensation will be earned ratably at 70% of the previous level. No incentive will be earned by a participant until CF, Inc. has achieved its Minimum Profit Goal. PERSONAL DATA SHEET A "Personal Data Sheet" for calculation of incentive earnings will be prepared for each Plan participant which designates (1) the unit to which the participant is assigned, (2) his assigned incentive participation factor, (3) the minimum level of achievement required for each assigned goal, (4) the incentive factor level of achievement for each assigned goal, and (5) the incentive earnings at the incentive factor level for each assigned goal. DATE OF PAYMENT The President of LJSC may authorize a partial payment of the estimated annual earned incentive, in December, 1995. The final payment to eligible participants, less any previous partial payment, will be made on or before March 15, 1996. INCENTIVE PROFIT Incentive Profit is defined as the earnings of CF, Inc. before deducting any amounts expensed under any CF, Inc. and qualified LJSC incentive plans and before deducting income taxes. ANNUAL COMPENSATION Annual Compensation for incentive purposes for each Plan participant is his annualized salary before any incentive or other special compensation as of the first pay period following the date the participant becomes eligible to participate in this Plan. The term "special compensation" used herein does not include deferred salary arrangements wherein the participant could have chosen to receive the deferred salary in the Plan year. MAXIMUM PAYMENT Payments under this Plan are limited to double each participant's Participation Factor. LAWS GOVERNING PAYMENTS No payment shall be made under this Plan in an amount which is prohibited by law. AMENDMENT, SUSPENSION, AND ADMINISTRATION OF PLAN The Board of Directors of CF, Inc. may at any time amend, suspend, or terminate the operation of this Plan, by thirty-day written notice to the Plan participants, and will have full discretion as to the administration and interpretation of this Plan. No participant in this Plan shall at any time have any right to receive any payment under this Plan until such time, if any, as any payment is actually made. DURATION OF PLAN This Plan is for the calendar year 1995 only. EX-10.27 9 EXHIBIT 10.27 $300,000,000 AMENDED AND RESTATED CREDIT AGREEMENT dated as of January 10, 1995 among Consolidated Freightways, Inc. The Banks Listed Herein ABN-AMRO Bank, N.V., Bank of America National Trust and Savings Association, The First National Bank of Chicago and Morgan Guaranty Trust Company of New York, as LC Issuing Banks ABN-AMRO Bank, N.V., Bank of America National Trust and Savings Association and The First National Bank of Chicago, as Co-Agents and Morgan Guaranty Trust Company of New York, as Agent TABLE OF CONTENTS Page ARTICLE I DEFINITIONS SECTION 1.01. Definitions. 1 SECTION 1.02. Accounting Terms and Determinations. 16 SECTION 1.03. Types of Borrowings 17 ARTICLE II THE CREDITS SECTION 2.01. Commitments to Lend. 17 SECTION 2.02. Notice of Committed Borrowing. 18 SECTION 2.03. Money Market Borrowings. 19 SECTION 2.04. Notice to Banks; Funding of Loans 23 SECTION 2.05. Notes. 24 SECTION 2.06. Maturity of Loans. 25 SECTION 2.07. Interest Rates. 25 SECTION 2.08. Fees. 29 SECTION 2.09. Optional Termination or Reduction of Commitments. 29 SECTION 2.10. Mandatory Termination of Commitments. 30 SECTION 2.11. Optional Prepayments. 30 SECTION 2.12. General Provisions as to Payments. 30 SECTION 2.13. Funding Losses. 31 SECTION 2.14. Computation of Interest and Fees. 31 SECTION 2.15. Letters of Credit. 32 SECTION 2.16. Maximum Interest Rate. 39 ARTICLE III CONDITIONS SECTION 3.01. Conditions to Effectiveness. 39 SECTION 3.02. Consequence of Effectiveness. 40 SECTION 3.03. Credit Extensions. 41 ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Corporate Existence and Power. 42 SECTION 4.02. Corporate and Governmental Authorization; No Contravention 42 SECTION 4.03. Binding Effect 42 SECTION 4.04. Financial Information. 42 SECTION 4.05. Litigation. 43 SECTION 4.06. Compliance with ERISA. 43 SECTION 4.07. Environmental Matters. 44 SECTION 4.08. Taxes. 44 SECTION 4.09. Subsidiaries. 45 SECTION 4.10. Not an Investment Company. 45 SECTION 4.11. Full Disclosure. 45 ARTICLE V COVENANTS SECTION 5.01. Information. 45 SECTION 5.02. Payment of Obligations. 48 SECTION 5.03. Maintenance of Property; Insurance. 48 SECTION 5.04. Conduct of Business and Maintenance of Existence. 49 SECTION 5.05. Compliance with Laws. 49 SECTION 5.06. Inspection of Property, Books and Records. 49 SECTION 5.07. Debt. 50 SECTION 5.08. Minimum Consolidated Tangible Net Worth. 50 SECTION 5.09. Negative Pledge 50 SECTION 5.10. Consolidations, Mergers and Sales of Assets. 52 SECTION 5.11. Use of Proceeds. 53 SECTION 5.12. Fixed Charge Coverage. 53 SECTION 5.13. Transactions with Third Party Affiliates and Emery Subsidiaries. 53 ARTICLE VI DEFAULTS SECTION 6.01. Events of Default. 54 SECTION 6.02. Notice of Default. 57 SECTION 6.03. Cash Cover. 57 ARTICLE VII THE AGENT AND THE CO-AGENTS SECTION 7.01. Appointment and Authorization. 57 SECTION 7.02. Agent and Affiliates. 57 SECTION 7.03. Action by Agent. 58 SECTION 7.04. Consultation with Experts. 58 SECTION 7.05. Liability of Agent. 58 SECTION 7.06. Indemnification. 58 SECTION 7.07. Credit Decision. 59 SECTION 7.08. Successor Agent. 59 SECTION 7.09. Agent's Fee. 59 SECTION 7.10. Co-Agents. 59 ARTICLE VIII CHANGE IN CIRCUMSTANCES SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair. 60 SECTION 8.02. Illegality. 60 SECTION 8.03. Increased Cost and Reduced Return. 61 SECTION 8.04. Taxes. 63 SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate Loans. 65 SECTION 8.06. Substitution of Banks 65 ARTICLE IX MISCELLANEOUS SECTION 9.01. Notices. 66 SECTION 9.02. No Waivers. 67 SECTION 9.03. Expenses; Indemnification. 67 SECTION 9.04. Sharing of Set-Offs. 68 SECTION 9.05. Amendments and Waivers. 69 SECTION 9.06. Successors and Assigns. 69 SECTION 9.07. Collateral. 71 SECTION 9.08. Governing Law; Submission to Jurisdiction. 71 SECTION 9.09. Counterparts; Integration. 71 SECTION 9.10. WAIVER OF JURY TRIAL. 72 SECTION 9.11. Confidentiality. 72 AMENDED AND RESTATED CREDIT AGREEMENT AGREEMENT dated as of January 10, 1995 among CONSOLIDATED FREIGHTWAYS, INC., the BANKS listed on the signature pages hereof, ABN-AMRO BANK, N.V., BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, THE FIRST NATIONAL BANK OF CHICAGO and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as LC Issuing Banks, ABN-AMRO BANK, N.V., BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION and THE FIRST NATIONAL BANK OF CHICAGO, as Co-Agents, and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent. WHEREAS, the Borrower, the banks referred to therein and Morgan Guaranty Trust Company of New York, as Agent for such banks, are parties to a Credit Agreement dated as of July 30, 1993 under which both loans and letters of credit are available to the Borrower on the terms and conditions provided therein; WHEREAS, the parties hereto desire to amend and restate said Credit Agreement as provided in this Agreement and, upon satisfaction of the conditions specified in Section 3.01, said Credit Agreement will be so amended and restated; WHEREAS, in order to induce the Banks, the LC Issuing Banks, the Co-Agents and the Agent to enter into this Agreement, certain Subsidiaries of the Borrower are willing to guaranty the obligations of the Borrower under this Agreement and the Notes issued pursuant hereto; and WHEREAS, the Banks are willing to make loans to the Borrower and the LC Issuing Banks are willing to issue letters of credit at the request of the Borrower on the terms and conditions provided herein; NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Definitions. The following terms, as used herein, have the following meanings: "Absolute Rate Auction" means a solicitation of Money Market Quotes setting forth Money Market Absolute Rates pursuant to Section 2.03. "Adjusted CD Rate" has the meaning set forth in Section 2.07(b). "Adjusted London Interbank Offered Rate" has the meaning set forth in Section 2.07(c). "Administrative Questionnaire" means, with respect to each Bank, an administrative questionnaire in the form prepared by the Agent and submitted to the Agent (with a copy to the Borrower) duly completed by such Bank. "Agent" means Morgan Guaranty Trust Company of New York in its capacity as agent for the Banks and the LC Issuing Banks under the Financing Documents, and its successors in such capacity. "Aggregate Usage" means, at any time, the sum of (i) the aggregate outstanding principal amount of the Loans at such time plus (ii) the aggregate outstanding amount of the LC Liabilities at such time. "Agreement", when used with reference to this Agreement, means this Amended and Restated Credit Agreement dated as of January 10, 1995, as it may be amended from time to time. "Applicable Lending Office" means, with respect to any Bank, (i) in the case of its Domestic Loans, its Domestic Lending Office, (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case of its Money Market Loans, its Money Market Lending Office. "Assessment Rate" has the meaning set forth in Section 2.07(b). "Assignee" has the meaning set forth in Section 9.06(c). "Bank" means each bank listed on the signature pages hereof, each Assignee which becomes a Bank pursuant to Section 9.06(c), and their respective successors. "Base Rate" means, for any day, a rate per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal Funds Rate for such day. "Base Rate Loan" means a Committed Loan to be made by a Bank as a Base Rate Loan in accordance with the applicable Notice of Committed Borrowing or pursuant to Article VIII. "Base Rate Margin" means a rate per annum determined in accordance with the Pricing Schedule. "Benefit Arrangement" means at any time an employee benefit plan within the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and which is maintained or otherwise contributed to by any member of the ERISA Group. "Borrower" means Consolidated Freightways, Inc., a Delaware corporation, and its successors. "Borrowing" has the meaning set forth in Section 1.03. "CD Base Rate" has the meaning set forth in Section 2.07(b). "CD Loan" means a Committed Loan to be made by a Bank as a CD Loan in accordance with the applicable Notice of Committed Borrowing. "CD Margin" means a rate per annum determined in accordance with the Pricing Schedule. "CD Reference Banks" means Bank of America National Trust and Savings Association, The First National Bank of Chicago and Morgan Guaranty Trust Company of New York. "Co-Agents" means ABN-AMRO Bank, N.V., Bank of America National Trust and Savings Association and The First National Bank of Chicago, in their capacities as co-agents hereunder. "Commitment" means, with respect to each Bank, the amount set forth opposite the name of such Bank on the signature pages hereof, as such amount may be reduced from time to time pursuant to Section 2.09. "Committed Loan" means a loan made by a Bank pursuant to Section 2.01. "Consolidated Debt" means at any date the Debt of the Borrower and its Consolidated Subsidiaries, determined on a consolidated basis as of such date. "Consolidated EBITDAR" means, for any period, the sum of (i) the consolidated income before income taxes of the Borrower and its Consolidated Subsidiaries for such period plus (ii) to the extent deducted in determining such consolidated income before income taxes, the sum of (A) Consolidated Interest Expense, (B) depreciation and amortization and (C) Consolidated Rental Expense. "Consolidated Fixed Charges" means, for any period, the sum of Consolidated Interest Expense and Consolidated Rental Expense for such period. "Consolidated Interest Expense" means, for any period, the interest expense of the Borrower and its Consolidated Subsidiaries, determined on a consolidated basis for such period. "Consolidated Rental Expense" means, for any period, the rental expense for operating leases of the Borrower and its Consolidated Subsidiaries determined on a consolidated basis for such period. "Consolidated Subsidiary" means at any date any Subsidiary or other entity the accounts of which would be consolidated with those of the Borrower in its consolidated financial statements if such statements were prepared as of such date. "Consolidated Tangible Net Worth" means at any date the consolidated shareholders' equity of the Borrower and its Consolidated Subsidiaries less their consolidated Intangible Assets, all determined as of such date. For purposes of this definition, "Intangible Assets" means the amount (to the extent reflected in determining such consolidated shareholders' equity) of (i) all write-ups (other than write-ups resulting from foreign currency translations and write-ups of assets of a going concern business made within twelve months after the acquisition of such business) subsequent to September 30, 1994 in the book value of any asset owned by the Borrower or a Consolidated Subsidiary, (ii) all equity investments in Persons which are not Subsidiaries (except investments in publicly traded marketable equity securities) and (iii) all unamortized debt discount and expense, goodwill, patents, trademarks, service marks, trade names, copyrights, organization or developmental expenses and other intangible assets (it being understood that unamortized deferred charges and deferred income tax assets are not deemed to be intangible assets for purposes hereof). "Credit Extension" means the making of a Loan or the issuance or extension of a Letter of Credit. "Debt" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all obligations of such Person as lessee which are capitalized in accordance with generally accepted accounting principles, (v) all obligations of such Person to reimburse banks for drawings under letters of credit or payments with respect to bankers' acceptances, which obligations remain unpaid for more than three Domestic Business Days after they become due, or, if later, after such Person is notified of the due date thereof, (vi) all obligations of the types referred to in clauses (i) to (v), inclusive, of this definition which are secured by a Lien on any asset of such Person, whether or not such obligations are otherwise obligations of such Person, and (vii) all obligations of others of the types referred to in clauses (i) to (v), inclusive, of this definition which are Guaranteed by such Person. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized by law to close; provided that, when used in Section 2.15 with reference to any LC Issuing Bank, the term "Domestic Business Day" shall not include any day on which commercial banks are authorized to close in the jurisdiction where the LC Office of such LC Issuing Bank is located. "Domestic Lending Office" means, as to each Bank, its office located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Domestic Lending Office) or such other office as such Bank may hereafter designate as its Domestic Lending Office by notice to the Borrower and the Agent; provided that any Bank may so designate separate Domestic Lending Offices for its Base Rate Loans, on the one hand, and its CD Loans, on the other hand, in which case all references herein to the Domestic Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require. "Domestic Loans" means CD Loans or Base Rate Loans or both. "Domestic Reserve Percentage" has the meaning set forth in Section 2.07(b). "Effective Date" means the date this Agreement becomes effective in accordance with Section 3.01. "Emery Group" means Emery Air Freight Corporation, a Delaware corporation, Emery Worldwide Airlines, Inc., a Nevada corporation, and each Subsidiary directly or indirectly owned by either of such corporations. "Emery Subsidiary" means any Subsidiary which is included in the Emery Group. "Environmental Laws" means any and all federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, permits, concessions, grants, franchises, licenses, agreements and other governmental restrictions relating to the environment, the effect of the environment on human health or to emissions, discharges or releases of pollutants, contaminants, Hazardous Substances or wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, Hazardous Substances or wastes or the clean-up or other remediation thereof. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute. "ERISA Group" means the Borrower, any Subsidiary and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower or any Subsidiary, are treated as a single employer under Section 414 of the Internal Revenue Code. "Euro-Dollar Business Day" means any Domestic Business Day on which commercial banks are open for international business (including dealings in dollar deposits) in London. "Euro-Dollar Lending Office" means, as to each Bank, its office, branch or affiliate located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Euro-Dollar Lending Office) or such other office, branch or affiliate of such Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice to the Borrower and the Agent. "Euro-Dollar Loan" means a Committed Loan to be made by a Bank as a Euro-Dollar Loan in accordance with the applicable Notice of Committed Borrowing. "Euro-Dollar Margin" means a rate per annum determined in accordance with the Pricing Schedule. "Euro-Dollar Reference Banks" means the principal London offices of ABN-AMRO Bank, N.V., The First National Bank of Chicago and Morgan Guaranty Trust Company of New York. "Euro-Dollar Reserve Percentage" has the meaning set forth in Section 2.07(c). "Event of Default" has the meaning set forth in Section 6.01. "Existing Agreement" means the Credit Agreement dated as of July 30, 1993 among the Borrower, the banks referred to therein, and Morgan Guaranty Trust Company of New York, as Agent, as in effect from time to time prior to the Effective Date. "Existing Bank" means a "Bank" (as such term is defined in the Existing Agreement) that is a party to the Existing Agreement immediately prior to the Effective Date. "Existing Letters of Credit" means the letters of credit issued on or before the Effective Date and listed in Exhibit K hereto. "Federal Funds Rate" means, for any day, the rate per annum (rounded upward, if necessary, to the nearest 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Domestic Business Day next succeeding such day, provided that (i) if such day is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day as so published on the next succeeding Domestic Business Day, and (ii) if no such rate is so published on such next succeeding Domestic Business Day, the Federal Funds Rate for such day shall be the average rate quoted to Morgan Guaranty Trust Company of New York on such day on such transactions as determined by the Agent. "Financing Documents" means this Agreement, the Subsidiary Guaranty Agreement and the Notes. "Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or Money Market Loans (excluding Money Market LIBOR Loans bearing interest at the Base Rate pursuant to Section 8.01(a)) or any combination of the foregoing. "Guarantee" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Debt of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Hazardous Substances" means any toxic, radioactive, caustic or otherwise hazardous substance, including petroleum, its derivatives, by-products and other hydrocarbons, or any substance having any constituent elements displaying any of the foregoing characteristics. "Indemnitee" has the meaning set forth in Section 9.03(b). "Insignificant Subsidiaries" means Subsidiaries which, if aggregated and considered as a single Subsidiary, would not have total assets, shareholders' equity or revenues in excess of 10% of the consolidated total assets, consolidated shareholders' equity or consolidated revenues, respectively, of the Borrower and its Consolidated Subsidiaries, all calculated at the date of the most recent financial statements delivered to the Banks pursuant to Section 5.01 or, in the case of revenues, for the twelve calendar months then ended. "Interest Period" means: (1) with respect to each Euro-Dollar Borrowing, the period commencing on the date of such Borrowing and ending one, two, three or six months thereafter, as the Borrower may elect in the applicable Notice of Borrowing; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Euro-Dollar Business Day of a calendar month; and (c) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date; (2) with respect to each CD Borrowing, the period commencing on the date of such Borrowing and ending 30, 60, 90 or 180 days thereafter, as the Borrower may elect in the applicable Notice of Borrowing; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day; and (b) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date; (3) with respect to each Base Rate Borrowing, the period commencing on the date of such Borrowing and ending 30 days thereafter; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day; and (b) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date; (4) with respect to each Money Market LIBOR Borrowing, the period commencing on the date of such Borrowing and ending one week, two weeks, three weeks or any whole number of months thereafter, as the Borrower may elect in accordance with Section 2.03; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Euro-Dollar Business Day of a calendar month; and (c) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date; and (5) with respect to each Money Market Absolute Rate Borrowing, the period commencing on the date of such Borrowing and ending such number of days thereafter (but not less than seven days) as the Borrower may elect in accordance with Section 2.03; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day; and (b) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended, or any successor statute. "Investment" means any investment in any Person, whether by means of share purchase, capital contribution, loan or otherwise. "LC Issuing Bank" means ABN-AMRO Bank, N.V., Bank of America National Trust and Savings Association, The First National Bank of Chicago and Morgan Guaranty Trust Company of New York, in their capacities as issuers of Letters of Credit. "LC Liabilities" means, at any time, the sum, without duplication, of (i) the aggregate amount available for drawing under all Letters of Credit outstanding at such time plus (ii) the aggregate unpaid amount at such time of all Reimbursement Obligations in respect of previous drawings made under Letters of Credit. "LC Office" means, with respect to each LC Issuing Bank, the office at which it books the Letters of Credit issued by it hereunder. "LC Payment Date" has the meaning set forth in Section 2.15(f). "LC Reimbursement Date" means, with respect to any Letter of Credit, an LC Payment Date applicable to such Letter of Credit, or, if later, the Domestic Business Day next succeeding the Domestic Business Day on which the Agent shall have notified the Borrower of such LC Payment Date and of the amount payable by the LC Issuing Bank under such Letter of Credit on such LC Payment Date. "Letter of Credit" means (i) any Existing Letter of Credit and (ii) any financial stand-by letter of credit (including without limitation a Workers' Compensation Letter of Credit) issued hereunder after the Effective Date. "LIBOR Auction" means a solicitation of Money Market Quotes setting forth Money Market Margins based on the London Interbank Offered Rate pursuant to Section 2.03. "Lien" means (i) with respect to any asset (including without limitation any account receivable), any mortgage, lien, pledge, charge, security interest or encumbrance of any kind, or any other type of preferential arrangement that has the practical effect of creating a security interest, in respect of such asset and (ii) with respect to any account receivable, any sale of such account receivable. For the purposes of this Agreement, the Borrower or any Subsidiary shall be deemed (x) to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset and (y) not to own subject to a Lien any asset which it leases under a lease that is classified as an operating lease under generally accepted accounting principles. "Loan" means a Domestic Loan, a Euro-Dollar Loan or a Money Market Loan and "Loans" means Domestic Loans, Euro-Dollar Loans or Money Market Loans or any combination of the foregoing. "London Interbank Offered Rate" has the meaning set forth in Section 2.07(c). "Material Commitments" means commitments to extend credit which, if extended, would constitute Debt of the Borrower and/or one or more of its Subsidiaries in an aggregate amount exceeding $25,000,000. For purposes of this definition, any commitment for less than $1,000,000 shall be excluded, but commitments arising from one or more related or unrelated transactions shall be aggregated if each such commitment is for $1,000,000 or more. "Material Debt" means Debt (other than the Notes) of the Borrower and/or one or more of its Subsidiaries in an aggregate outstanding principal amount exceeding $25,000,000. For purposes of this definition, if the Debt arising from any single transaction has an outstanding principal amount less than $1,000,000, it shall be excluded, but Debts arising from one or more related or unrelated transactions shall be aggregated if the Debt arising from each such transaction has an outstanding principal amount of $1,000,000 or more. "Material Plan" means at any time a Plan or Plans having aggregate Unfunded Liabilities in excess of $25,000,000. "Money Market Absolute Rate" has the meaning set forth in Section 2.03(d). "Money Market Absolute Rate Loan" means a loan to be made by a Bank pursuant to an Absolute Rate Auction. "Money Market Lending Office" means, as to each Bank, its Domestic Lending Office or such other office, branch or affiliate of such Bank as it may hereafter designate as its Money Market Lending Office by notice to the Borrower and the Agent; provided that any Bank may from time to time by notice to the Borrower and the Agent designate separate Money Market Lending Offices for its Money Market LIBOR Loans, on the one hand, and its Money Market Absolute Rate Loans, on the other hand, in which case all references herein to the Money Market Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require. "Money Market LIBOR Loan" means a loan to be made by a Bank pursuant to a LIBOR Auction (including such a loan bearing interest at the Base Rate pursuant to Section 8.01(a)). "Money Market Loan" means a Money Market LIBOR Loan or a Money Market Absolute Rate Loan. "Money Market Margin" has the meaning set forth in Section 2.03(d). "Money Market Quote" means an offer by a Bank to make a Money Market Loan in accordance with Section 2.03. "Multiemployer Plan" means at any time an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions, including for these purposes any Person which ceased to be a member of the ERISA Group during such five year period. "Non-Emery Subsidiary" means any Subsidiary that is not an Emery Subsidiary. "Notes" means promissory notes of the Borrower, substantially in the form of Exhibit A hereto, evidencing the obligation of the Borrower to repay the Loans, and "Note" means any one of such promissory notes issued hereunder. "Notice of Borrowing" means a Notice of Committed Borrowing (as defined in Section 2.02) or a Notice of Money Market Borrowing (as defined in Section 2.03(f)). "Obligor" means each of the Borrower and the Subsidiary Guarantors, and "Obligors" means all of the foregoing. "Outstanding Credit Exposure" means, as to any Bank at any time, the sum of (i) the aggregate principal amount of its Loans outstanding at such time plus (ii) its Outstanding LC Exposure at such time. "Outstanding LC Exposure" means, as to any Bank at any time, an amount equal to its Percentage of the LC Liabilities at such time. "Parent" means, with respect to any Bank, any Person controlling such Bank. "Participant" has the meaning set forth in Section 9.06(b). "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Percentage" means, with respect to each Bank, the percentage that such Bank's Commitment constitutes of the aggregate amount of the Commitments. "Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Plan" means at any time an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code and either (i) is maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group or (ii) has at any time within the preceding five years been maintained, or contributed to, by any Person which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group. "Pricing Schedule" means the Pricing Schedule attached hereto. "Prime Rate" means the rate of interest publicly announced by Morgan Guaranty Trust Company of New York in New York City from time to time as its Prime Rate. "Reference Banks" means the CD Reference Banks or the Euro-Dollar Reference Banks, as the context may require, and "Reference Bank" means any one of such Reference Banks. "Refunding Borrowing" means a Committed Borrowing which, after application of the proceeds thereof, results in no net increase in the outstanding principal amount of Committed Loans made by any Bank. "Reimbursement Obligations" means, at any time, the aggregate of all obligations of the Borrower then outstanding under Section 2.15 to reimburse an LC Issuing Bank for amounts paid by such LC Issuing Bank in respect of any drawing under any Letter of Credit. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Required Banks" means at any time Banks having at least 60% of the aggregate amount of the Commitments or, if the Commitments shall have been terminated, having at least 60% of the aggregate amount of the Outstanding Credit Exposures. "Subsidiary" means any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by the Borrower. "Subsidiary Guarantors" means Consolidated Freightways Corporation of Delaware, a Delaware corporation, Con-Way Transportation Services, Inc., a Delaware corporation, and each other Subsidiary which becomes a party to the Subsidiary Guaranty Agreement pursuant to Article III thereof, and their respective successors. "Subsidiary Guaranty Agreement" means a Subsidiary Guaranty Agreement among the Borrower, the Subsidiary Guarantors and the Agent, as executed and delivered pursuant to Section 3.01(c) and as the same may be amended from time to time in accordance with the terms thereof. "TASP Notes" means (i) $55,000,000 aggregate principal amount of the 8.50% Series A Guaranteed ESOP Notes due January 1, 2006 and $62,000,000 aggregate principal amount of the 8.62% Series B Guaranteed ESOP Notes due January 1, 2009, each issued pursuant to separate Note Agreements, each dated as of July 17, 1989, among Consolidated Freightways, Inc. Thrift and Stock Ownership Trust ("TASP"), the Borrower and certain institutional investors and (ii) $33,000,000 aggregate principal amount of the 9.00% Restructured Notes due January 1, 2006, issued under separate Restructured Note Agreements, each dated as of November 3, 1992, among TASP, the Borrower and certain institutional investors. "Taxes" has the meaning set forth in Section 8.04(a). "Termination Date" means January 10, 1999, or any later date to which the Termination Date shall have been postponed pursuant to Section 2.01(b), or, if any such day is not a Euro-Dollar Business Day, the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the Termination Date shall be the next preceding Euro-Dollar Business Day. "Third Party Affiliate" means (i) any Person that directly, or indirectly through one or more intermediaries, controls the Borrower (a "Controlling Person") or (ii) any Person (other than the Borrower or a Subsidiary) which is controlled by or is under common control with a Controlling Person. As used herein, the term "control" means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "Unfunded Liabilities" means, with respect to any Plan at any time, the amount (if any) by which (i) the value of all benefit liabilities under such Plan, determined on a plan termination basis using the assumptions prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market value of all Plan assets allocable to such liabilities under Title IV of ERISA (excluding any accrued but unpaid contributions), all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA. "United States" means the United States of America, including the States and the District of Columbia, but excluding its territories and possessions. "Wholly-Owned Subsidiary" means any Subsidiary all of the shares of capital stock or other ownership interests of which (except directors' qualifying shares) are at the time directly or indirectly owned by the Borrower. "Workers' Compensation Letter of Credit" means any letter of credit which is used to secure obligations of the Borrower or its Subsidiaries under workers' compensation or similar laws. SECTION 1.02. Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles as in effect from time to time, applied on a basis consistent (except for changes concurred in by the Borrower's independent public accountants) with the most recent audited consolidated financial statements of the Borrower and its Consolidated Subsidiaries delivered to the Banks; provided that, if the Borrower notifies the Agent that the Borrower wishes to amend any covenant in Article V to eliminate the effect of any change in generally accepted accounting principles on the operation of such covenant (or if the Agent notifies the Borrower that the Required Banks wish to amend Article V for such purpose), then the Borrower's compliance with such covenant shall be determined on the basis of generally accepted accounting principles in effect immediately before the relevant change in generally accepted accounting principles became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Borrower and the Required Banks. SECTION 1.03. Types of Borrowings. The term "Borrowing" denotes the aggregation of Loans of one or more Banks to be made to the Borrower pursuant to Article II on a single date and for a single Interest Period. Borrowings are classified for purposes of this Agreement either by reference to the pricing of Loans comprising such Borrowing (e.g., a "Euro-Dollar Borrowing" is a Borrowing comprised of Euro-Dollar Loans) or by reference to the provisions of Article II under which participation therein is determined (i.e., a "Committed Borrowing" is a Borrowing under Section 2.01 in which all Banks participate in proportion to their Commitments, while a "Money Market Borrowing" is a Borrowing under Section 2.03 in which the Bank participants are determined on the basis of their bids in accordance therewith). ARTICLE II THE CREDITS SECTION 2.01. Commitments to Lend. (a) Each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make loans to the Borrower pursuant to this Section from time to time prior to the Termination Date; provided that, immediately after each such Loan is made, the sum of (i) the aggregate outstanding principal amount of all Committed Loans made by such Bank plus (ii) its Outstanding LC Exposure shall not exceed its Commitment. Each Borrowing pursuant to this Section shall be in an aggregate principal amount of $10,000,000 or any larger integral multiple of $1,000,000 (except that any such Borrowing may be in the aggregate amount available in accordance with Section 3.03(b)) and shall be made from the several Banks ratably in accordance with their respective Percentages. Within the foregoing limits, the Borrower may borrow, repay, or to the extent permitted by Section 2.11, prepay Loans and reborrow at any time prior to the Termination Date. (b) The Termination Date may be postponed, in the manner and subject to the conditions set forth in this subsection (b), on January 10, 1996 (the "Extension Date"), for a period of one year (i.e., to January 10, 2000). If the Borrower wishes to request a postponement of the Termination Date on the Extension Date, it shall give written notice to that effect to the Agent not less than 45 nor more than 90 days prior to the Extension Date, whereupon the Agent shall notify each of the Banks, LC Issuing Banks and Co-Agents of such notice. Each of the Banks, LC Issuing Banks and Co-Agents will use its best efforts to respond to such request, whether affirmatively or negatively, within 30 days. If all of the Banks, LC Issuing Banks and Co-Agents respond affirmatively, then, subject to receipt by the Agent prior to the Extension Date of instruments substantially in the form of Exhibit H hereto signed by each of the Banks, LC Issuing Banks and Co-Agents, respectively, and by the Borrower and the Agent, the Termination Date shall be postponed, effective on the Extension Date, for a period of one year. Unless all of the Banks, LC Issuing Banks and Co- Agents respond affirmatively within 30 days, the Borrower's request to postpone the Termination Date shall be deemed to have been denied. SECTION 2.02. Notice of Committed Borrowing. The Borrower shall give the Agent notice (a "Notice of Committed Borrowing") not later than (x) 12:00 Noon (New York City time) on the date of each Base Rate Borrowing, (y) 1:00 P.M. (New York City time) on the second Domestic Business Day before each CD Borrowing and (z) 1:00 P.M. (New York City time) on the third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying: (a) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing, (b) the aggregate amount of such Borrowing, (c) whether the Loans comprising such Borrowing are to be CD Loans, Base Rate Loans or Euro-Dollar Loans, and (d) in the case of a Fixed Rate Borrowing, the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period; provided that the Borrower may not deliver a Notice of Committed Borrowing if after giving effect to the requested Borrowing there would be more than ten Committed Fixed Rate Borrowings outstanding. SECTION 2.03. Money Market Borrowings. (a) The Money Market Option. In addition to Committed Borrowings pursuant to Section 2.01, the Borrower may, as set forth in this Section, request the Banks to make offers to make Money Market Loans to the Borrower on any day prior to the Termination Date. The Banks may, but shall have no obligation to, make such offers and the Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this Section. (b) Money Market Quote Request. When the Borrower wishes to request offers to make Money Market Loans under this Section, it shall transmit to the Agent by telex or facsimile transmission a Money Market Quote Request substantially in the form of Exhibit B hereto so as to be received no later than (x) 1:00 P.M. (New York City time) on the fifth Euro-Dollar Business Day prior to the date of Borrowing proposed therein, in the case of a LIBOR Auction or (y) 11:30 A.M. (New York City time) on the Domestic Business Day next preceding the date of Borrowing proposed therein, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective) specifying: (i) the proposed date of Borrowing, which shall be a Euro-Dollar Business Day in the case of a LIBOR Auction or a Domestic Business Day in the case of an Absolute Rate Auction, (ii) the aggregate amount of such Borrowing, which shall be $10,000,000 or a larger integral multiple of $1,000,000, (iii) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period, and (iv) whether the Money Market Quotes requested are to set forth a Money Market Margin or a Money Market Absolute Rate. The Borrower may request offers to make Money Market Loans for more than one Interest Period in a single Money Market Quote Request. No Money Market Quote Request shall be given within five Euro-Dollar Business Days (or such other number of days as the Borrower and the Agent may agree) of any other Money Market Quote Request. (c) Invitation for Money Market Quotes. Promptly upon receipt of a Money Market Quote Request, the Agent shall send to the Banks by telex or facsimile transmission an Invitation for Money Market Quotes substantially in the form of Exhibit C hereto, which shall constitute an invitation by the Borrower to each Bank to submit Money Market Quotes offering to make the Money Market Loans to which such Money Market Quote Request relates in accordance with this Section. (d) Submission and Contents of Money Market Quotes. (i) Each Bank may submit a Money Market Quote containing an offer or offers to make Money Market Loans in response to any Invitation for Money Market Quotes. Each Money Market Quote must comply with the requirements of this subsection (d) and must be submitted to the Agent by telex or facsimile transmission at its offices specified in or pursuant to Section 9.01 not later than (x) 2:00 P.M. (New York City time) on the fourth Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) 10:15 A.M. (New York City time) on the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective); provided that Money Market Quotes submitted by the Agent (or any affiliate of the Agent) in the capacity of a Bank may be submitted, and may only be submitted, if the Agent or such affiliate notifies the Borrower of the terms of the offer or offers contained therein not later than (x) one hour prior to the deadline for the other Banks, in the case of a LIBOR Auction or (y) 15 minutes prior to the deadline for the other Banks, in the case of an Absolute Rate Auction. Subject to Articles III and VI, any Money Market Quote so made shall be irrevocable except with the written consent of the Agent given on the instructions of the Borrower. (ii) Each Money Market Quote shall be in substantially the form of Exhibit D hereto and shall in any case specify: (A) the proposed date of Borrowing, (B) the principal amount of the Money Market Loan for which each such offer is being made, which principal amount (w) may be greater than or less than the Commitment of the quoting Bank, (x) must be $5,000,000 or a larger integral multiple of $1,000,000, (y) may not exceed the principal amount of Money Market Loans for which offers were requested and (z) may be subject to an aggregate limitation as to the principal amount of Money Market Loans for which offers being made by such quoting Bank may be accepted, (C) in the case of a LIBOR Auction, the margin above or below the applicable London Interbank Offered Rate (the "Money Market Margin") offered for each such Money Market Loan, expressed as a percentage (specified to the nearest 1/10,000 of 1%) to be added to or subtracted from such base rate, (D) in the case of an Absolute Rate Auction, the rate of interest per annum (specified to the nearest 1/10,000 of 1%) (the "Money Market Absolute Rate") offered for each such Money Market Loan, and (E) the identity of the quoting Bank. A Money Market Quote may set forth up to five separate offers by the quoting Bank with respect to each Interest Period specified in the related Invitation for Money Market Quotes. (iii) Any Money Market Quote shall be disregarded if it: (A) is not substantially in conformity with Exhibit D hereto or does not specify all of the information required by subsection (d)(ii); (B) contains qualifying, conditional or similar language; (C) proposes terms other than or in addition to those set forth in the applicable Invitation for Money Market Quotes; or (D) arrives after the time set forth in subsection (d)(i). (e) Notice to Borrower. The Agent shall promptly notify the Borrower of the terms (x) of any Money Market Quote submitted by a Bank that is in accordance with subsection (d) and (y) of any Money Market Quote that amends, modifies or is otherwise inconsistent with a previous Money Market Quote submitted by such Bank with respect to the same Money Market Quote Request. Any such subsequent Money Market Quote shall be disregarded by the Agent unless such subsequent Money Market Quote is submitted solely to correct a manifest error in such former Money Market Quote. The Agent's notice to the Borrower shall specify (A) the aggregate principal amount of Money Market Loans for which offers have been received for each Interest Period specified in the related Money Market Quote Request, (B) the respective principal amounts and Money Market Margins or Money Market Absolute Rates, as the case may be, so offered and (C) if applicable, limitations on the aggregate principal amount of Money Market Loans for which offers in any single Money Market Quote may be accepted. (f) Acceptance and Notice by Borrower. Not later than 11:30 A.M. (New York City time) on (x) the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Borrower and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective), the Borrower shall notify the Agent of its acceptance or non-acceptance of the offers so notified to it pursuant to subsection (e). In the case of acceptance, such notice (a "Notice of Money Market Borrowing") shall specify the aggregate principal amount of offers for each Interest Period that are accepted. The Borrower may accept any Money Market Quote in whole or in part; provided that: (i) the aggregate principal amount of each Money Market Borrowing may not exceed the applicable amount set forth in the related Money Market Quote Request, (ii) the principal amount of each Money Market Borrowing must be $10,000,000 or a larger integral multiple of $1,000,000, (iii) acceptance of offers may only be made on the basis of ascending Money Market Margins or Money Market Absolute Rates, as the case may be, and (iv) the Borrower may not accept any offer that is described in subsection (d)(iii) or that otherwise fails to comply with the requirements of this Agreement. (g) Allocation by Agent. If offers are made by two or more Banks with the same Money Market Margins or Money Market Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Money Market Loans in respect of which such offers are accepted shall be allocated by the Agent among such Banks as nearly as possible (in multiples of $1,000,000, as the Agent may deem appropriate) in proportion to the aggregate principal amounts of such offers. Determinations by the Agent of the amounts of Money Market Loans shall be conclusive in the absence of manifest error. SECTION 2.04. Notice to Banks; Funding of Loans. (a) Upon receipt of a Notice of Borrowing, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's share (if any) of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Borrower. (b) Not later than (x) 12:00 Noon (New York City time) on the date of each Borrowing other than a Base Rate Borrowing and (y) 1:00 P.M. (New York City time) on the date of each Base Rate Borrowing, each Bank participating therein shall (except as provided in subsection (c) of this Section) make available its share of such Borrowing, in Federal or other funds immediately available in New York City, to the Agent at its address referred to in Section 9.01. Unless the Agent determines that any applicable condition specified in Article III has not been satisfied, the Agent will, promptly upon receipt thereof, make the funds so received from the Banks available to the Borrower at the Agent's aforesaid address. (c) If any Bank makes a new Loan hereunder on a day on which the Borrower is to repay all or any part of an outstanding Loan from such Bank, such Bank shall apply the proceeds of its new Loan to make such repayment and only an amount equal to the difference (if any) between the amount being borrowed and the amount being repaid shall be made available by such Bank to the Agent as provided in subsection (b), or remitted by the Borrower to the Agent as provided in Section 2.12, as the case may be. (d) Unless the Agent shall have received notice from a Bank prior to the date of any Borrowing that such Bank will not make available to the Agent such Bank's share of such Borrowing, the Agent may assume that such Bank has made such share available to the Agent on the date of such Borrowing in accordance with subsections (b) and (c) of this Section 2.04 and the Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Bank shall not have so made such share available to the Agent, such Bank and the Borrower severally agree to repay to the Agent, within one Domestic Business Day after demand, such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Agent, at (i) in the case of the Borrower, a rate per annum equal to the higher of the Federal Funds Rate and the interest rate applicable thereto pursuant to Section 2.07 and (ii) in the case of such Bank, the Federal Funds Rate. If such Bank shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Bank's Loan included in such Borrowing for purposes of this Agreement. SECTION 2.05. Notes. (a) The Loans of each Bank shall be evidenced by a single Note payable to the order of such Bank for the account of its Applicable Lending Office in an amount equal to the aggregate unpaid principal amount of such Bank's Loans. (b) Each Bank may, by notice to the Borrower and the Agent, request that its Loans of a particular type be evidenced by a separate Note in an amount equal to the aggregate unpaid principal amount of such Loans. Each such Note shall be in substantially the form of Exhibit A hereto with appropriate modifications to reflect the fact that it evidences solely Loans of the relevant type. Each reference in this Agreement to the "Note" of such Bank shall be deemed to refer to and include any or all of such Notes, as the context may require. (c) Upon receipt of each Bank's Note pursuant to Section 3.01(b), the Agent shall forward such Note to such Bank. Each Bank shall record the date, amount, type and maturity of each Loan made by it and the date and amount of each payment of principal made by the Borrower with respect thereto, and may, if such Bank so elects in connection with any transfer or enforcement of its Note, endorse on the schedule forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding; provided that the failure of any Bank to make any such recordation or endorsement, or any error in the making thereof, shall not affect the obligations of the Borrower hereunder or under the Notes. Each Bank is hereby irrevocably authorized by the Borrower so to endorse its Note and to attach to and make a part of its Note a continuation of any such schedule as and when required. SECTION 2.06. Maturity of Loans. Each Loan included in any Borrowing shall mature, and the principal amount thereof shall be due and payable, on the last day of the Interest Period applicable to such Borrowing. SECTION 2.07. Interest Rates. (a) Each Base Rate Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the sum of the Base Rate for such day plus, if applicable, the Base Rate Margin for such day. Such interest shall be payable for each Interest Period on the last day thereof. Any overdue principal of or interest on any Base Rate Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the rate otherwise applicable to Base Rate Loans for such day. (b) Each CD Loan shall bear interest on the outstanding principal amount thereof, for each day during the Interest Period applicable thereto, at a rate per annum equal to the sum of the CD Margin for such day plus the Adjusted CD Rate applicable to such Interest Period; provided that if any CD Loan or any portion thereof shall, as a result of clause (2)(b) of the definition of Interest Period, have an Interest Period of less than 30 days, such portion shall bear interest during such Interest Period at the rate applicable to Base Rate Loans during such period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than 90 days, 90 days after the first day thereof. Any overdue principal of or interest on any CD Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the rate applicable to Base Rate Loans for such day. The "Adjusted CD Rate" applicable to any Interest Period means a rate per annum determined pursuant to the following formula: [ CDBR ]* ACDR = [ ---------- ] + AR [ 1.00 - DRP ] ACDR = Adjusted CD Rate CDBR = CD Base Rate DRP = Domestic Reserve Percentage AR = Assessment Rate __________ * The amount in brackets being rounded upward, if necessary, to the next higher 1/100 of 1% The "CD Base Rate" applicable to any Interest Period is the rate of interest determined by the Agent to be the average (rounded upward, if necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum bid at 10:00 A.M. (New York City time) (or as soon thereafter as practicable) on the first day of such Interest Period by two or more New York certificate of deposit dealers of recognized standing for the purchase at face value from each CD Reference Bank of its certificates of deposit in an amount comparable to the principal amount of the CD Loan of such CD Reference Bank to which such Interest Period applies and having a maturity comparable to such Interest Period. "Domestic Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including without limitation any basic, supplemental or emergency reserves) for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of new non-personal time deposits in dollars in New York City having a maturity comparable to the related Interest Period and in an amount of $100,000 or more. The Adjusted CD Rate shall be adjusted automatically on and as of the effective date of any change in the Domestic Reserve Percentage. "Assessment Rate" means for any day the annual assessment rate in effect on such day which is payable by a member of the Bank Insurance Fund classified as adequately capitalized and within supervisory subgroup "A" (or a comparable successor assessment risk classification) within the meaning of 12 C.F.R. S 327.3(e) (or any successor provision) to the Federal Deposit Insurance Corporation (or any successor) for such Corporation's (or such successor's) insuring time deposits at offices of such institution in the United States. The Adjusted CD Rate shall be adjusted automatically on and as of the effective date of any change in the Assessment Rate. (c) Each Euro-Dollar Loan shall bear interest on the outstanding principal amount thereof, for each day during the Interest Period applicable thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for such day plus the Adjusted London Interbank Offered Rate applicable to such Interest Period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, three months after the first day thereof. The "Adjusted London Interbank Offered Rate" applicable to any Interest Period means a rate per annum equal to the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (i) the applicable London Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar Reserve Percentage. The "London Interbank Offered Rate" applicable to any Interest Period means the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which deposits in dollars are offered to each of the Euro-Dollar Reference Banks in the London interbank market at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the first day of such Interest Period in an amount approximately equal to the principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to which such Interest Period is to apply and for a period of time comparable to such Interest Period. "Euro-Dollar Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of "Eurocurrency liabilities" (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents). The Adjusted London Interbank Offered Rate shall be adjusted automatically on and as of the effective date of any change in the Euro-Dollar Reserve Percentage. (d) Any overdue principal of or interest on any Euro-Dollar Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 2% plus the higher of (i) the sum of the Euro-Dollar Margin plus the Adjusted London Interbank Offered Rate applicable to such Loan and (ii) the Euro-Dollar Margin plus the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (x) the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which one day (or, if such amount due remains unpaid more than three Euro-Dollar Business Days, then for such other period of time not longer than three months as the Agent may select) deposits in dollars in an amount approximately equal to such overdue payment due to each of the Euro-Dollar Reference Banks are offered to such Euro-Dollar Reference Bank in the London interbank market for the applicable period determined as provided above by (y) 1.00 minus the Euro-Dollar Reserve Percentage (or, if the circumstances described in clause (a) or (b) of Section 8.01 shall exist, at a rate per annum equal to the sum of 2% plus the rate applicable to Base Rate Loans for such day). (e) Subject to Section 8.01(a), each Money Market LIBOR Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the London Interbank Offered Rate for such Interest Period (determined in accordance with Section 2.07(c) as if the related Money Market LIBOR Borrowing were a Committed Euro-Dollar Borrowing) plus (or minus) the Money Market Margin quoted by the Bank making such Loan in accordance with Section 2.03. Each Money Market Absolute Rate Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the Money Market Absolute Rate quoted by the Bank making such Loan in accordance with Section 2.03. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. Any overdue principal of or interest on any Money Market Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the Base Rate for such day. (f) The Agent shall determine each interest rate applicable to the Loans hereunder. The Agent shall give prompt notice to the Borrower and the participating Banks of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error. (g) Each Reference Bank agrees to use its best efforts to furnish quotations to the Agent as contemplated by this Section. If any Reference Bank does not furnish a timely quotation, the Agent shall determine the relevant interest rate on the basis of the quotation or quotations furnished by the remaining Reference Bank or Banks or, if none of such quotations is available on a timely basis, the provisions of Section 8.01 shall apply. SECTION 2.08. Fees. (a) Commitment Fee. The Borrower shall pay to the Agent, for the account of the Banks ratably in accordance with their respective Percentages, a commitment fee for each day at the Commitment Fee Rate for such day (determined in accordance with the Pricing Schedule) on the amount by which the aggregate amount of the Commitments exceeds the Aggregate Usage on such day. Such commitment fee shall accrue from and including January 10, 1995 to but excluding the Termination Date (or earlier date of termination of the Commitments in their entirety). (b) Facility Fee. The Borrower shall pay to the Agent, for the account of the Banks ratably in accordance with their respective Percentages, a facility fee for each day at the Facility Fee Rate for such day (determined in accordance with the Pricing Schedule). Such facility fee shall accrue for each day (i) from and including January 10, 1995 to but excluding the Termination Date (or earlier date of termination of the Commitments in their entirety), on the aggregate amount of the Commitments (whether used or unused) on such day and (ii) if any Committed Loans or LC Liabilities remain outstanding after the Commitments terminate in their entirety, then for each day from and including the date on which the Commitments terminate in their entirety to but excluding the first day thereafter on which no Committed Loans or LC Liabilities remain outstanding, on the aggregate outstanding amount of the Committed Loans and the LC Liabilities on such day. (c) Payments. Accrued fees under subsections (a) and (b) shall be payable quarterly on the last day of each fiscal quarter of the Borrower and on the date on which the Commitments terminate in their entirety (and, if later, the first day thereafter on which no Committed Loans or LC Liabilities remain outstanding). SECTION 2.09. Optional Termination or Reduction of Commitments. The Borrower may, upon at least three Domestic Business Days' notice to the Agent, (i) terminate the Commitments at any time, if no Loans or LC Liabilities are outstanding at such time, or (ii) ratably reduce from time to time by an aggregate amount of $5,000,000 or any larger integral multiple of $1,000,000, the aggregate amount of the Commitments in excess of the Aggregate Usage. SECTION 2.10. Mandatory Termination of Commitments. The Commitments shall terminate on the Termination Date, and any Loans then outstanding (together with accrued interest thereon) shall be due and payable on such date. SECTION 2.11. Optional Prepayments. (a) The Borrower may, upon at least one Domestic Business Day's notice to the Agent, prepay any Base Rate Borrowing (or any Money Market Borrowing bearing interest at the Base Rate pursuant to Section 8.01(a)) in whole at any time, or from time to time in part in amounts aggregating $5,000,000 or any larger integral multiple of $1,000,000, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment. Each such optional prepayment shall be applied to prepay ratably the Loans of the several Banks included in such Borrowing. (b) Except as provided in Section 8.02 and Section 8.05(b), the Borrower may not prepay all or any portion of the principal amount of any Fixed Rate Loan prior to the maturity thereof. (c) Upon receipt of a notice of prepayment pursuant to this Section, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's ratable share (if any) of such prepayment and such notice shall not thereafter be revocable by the Borrower. SECTION 2.12. General Provisions as to Payments. (a) The Borrower shall make each payment of principal of, and interest on, the Loans and of fees hereunder, not later than 1:00 P.M. (New York City time) on the date when due, in Federal or other funds immediately available in New York City, to the Agent at its address referred to in Section 9.01. The Agent will promptly distribute to each Bank its ratable share of each such payment received by the Agent for the account of the Banks. Whenever any payment of principal of, or interest on, the Domestic Loans or of fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. Whenever any payment of principal of, or interest on, the Money Market Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day. If the date for any payment of principal is extended in accordance with this Section 2.12, by operation of law or otherwise, interest thereon shall be payable for such extended time. (b) Unless the Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Banks hereunder that the Borrower will not make such payment in full, the Agent may assume that the Borrower has made such payment in full to the Agent on such date and the Agent may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent that the Borrower shall not have so made such payment, each Bank shall repay to the Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Agent, at the Federal Funds Rate. SECTION 2.13. Funding Losses. If the Borrower makes any payment of principal with respect to any Fixed Rate Loan (pursuant to Article VI or VIII or otherwise) on any day other than the last day of the Interest Period applicable thereto, or the last day of an applicable period fixed pursuant to Section 2.07(d), or if the Borrower fails to borrow any Fixed Rate Loans after notice has been given to any Bank in accordance with Section 2.04(a), the Borrower shall pay to each Bank within 15 days after demand an amount calculated as provided in Exhibit J hereto to compensate such Bank for any loss incurred by it (or by an existing or scheduled Participant in the related Loan) in obtaining, liquidating or employing deposits from third parties, provided that such Bank shall have delivered to the Borrower a certificate setting forth such amount and the calculation thereof in reasonable detail. SECTION 2.14. Computation of Interest and Fees. Interest based on the Prime Rate hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and all letter of credit fees, commitment fees and facility fees shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). SECTION 2.15. Letters of Credit. (a) On the Effective Date, each LC Issuing Bank that has issued an Existing Letter of Credit on or before the Effective Date shall be deemed, without further action by any party hereto, to have sold to each Bank, and each Bank shall be deemed, without further action by any party hereto, to have purchased from such LC Issuing Bank, a participation in such Existing Letter of Credit and the related LC Liabilities in proportion to its Percentage. Concurrently with such sale, the participations in the Existing Letters of Credit sold to the Existing Banks under the Existing Agreement shall be automatically cancelled without further action by any of the parties thereto. (b) Subject to the terms and conditions set forth in this Agreement (including without limitation the condition set forth in Section 3.03(b)), (i) ABN-AMRO Bank, N.V., as LC Issuing Bank, agrees to issue Letters of Credit hereunder from time to time after the Effective Date and before the Termination Date upon the request of the Borrower, provided that immediately after each such Letter of Credit is issued, the aggregate outstanding amount of LC Liabilities in respect of all Letters of Credit issued by ABN-AMRO Bank, N.V., as LC Issuing Bank, shall not exceed $100,000,000; (ii) Bank of America National Trust and Savings Association, as LC Issuing Bank, agrees to issue Letters of Credit hereunder from time to time after the Effective Date and before the Termination Date upon the request of the Borrower, provided that immediately after each such Letter of Credit is issued, the aggregate outstanding amount of LC Liabilities in respect of all Letters of Credit issued by Bank of America National Trust and Savings Association, as LC Issuing Bank, shall not exceed $100,000,000; (iii) The First National Bank of Chicago, as LC Issuing Bank, agrees to issue Letters of Credit hereunder from time to time after the Effective Date and before the Termination Date upon the request of the Borrower, provided that (x) immediately after each such Letter of Credit is issued, the aggregate outstanding amount of LC Liabilities in respect of all Letters of Credit issued by The First National Bank of Chicago, as LC Issuing Bank, shall not exceed $100,000,000 and (y) The First National Bank of Chicago, as LC Issuing Bank, shall not issue any Letter of Credit in respect of any obligation under the Borrower's public debt or the TASP Notes; and (iv) Morgan Guaranty Trust Company of New York, as LC Issuing Bank, agrees to issue Letters of Credit hereunder from time to time after the Effective Date and before the Termination Date upon the request of the Borrower, provided that immediately after each such Letter of Credit is issued, the aggregate outstanding amount of LC Liabilities in respect of all Letters of Credit issued by Morgan Guaranty Trust Company of New York, as LC Issuing Bank, shall not exceed $125,000,000. Upon the issuance by an LC Issuing Bank of a Letter of Credit in accordance with this subsection (b), such LC Issuing Bank shall be deemed, without further action by any party hereto, to have sold to each Bank, and each Bank shall be deemed, without further action by any party hereto, to have purchased from such LC Issuing Bank, a participation in such Letter of Credit and the related LC Liabilities in proportion to its Percentage. (c) No Letter of Credit issued on or after the Effective Date shall have an original expiry date later than one year after the issuance thereof. No Letter of Credit shall be extended on or after the Effective Date unless (i) such extension is for a period not exceeding one year and (ii) the LC Issuing Bank agrees to so extend such Letter of Credit (or, in the case of an "evergreen" Letter of Credit, its ability to give a notice to prevent such extension expires) no earlier than three months before the then existing expiry date. No Letter of Credit shall have an original or extended expiry date later than the fifth Domestic Business Day prior to the Termination Date. (d) The Borrower shall give the relevant LC Issuing Bank at least three Domestic Business Days' prior notice of (x) the issuance of each Letter of Credit to be issued by it after the Effective Date and (y) each extension of a Letter of Credit issued by it, specifying in each case (i) the date of such issuance or extension, (ii) the expiry date or extended expiry date of such Letter of Credit (which shall comply with subsection (c) above), (iii) the proposed terms of such Letter of Credit and (iv) the nature of the transactions proposed to be supported thereby. The issuance of any Letter of Credit after the Effective Date shall be subject to the conditions precedent set forth in Article III (the LC Issuing Bank having no duty to ascertain whether such conditions precedent are satisfied, other than to confirm with the Agent on the date of issuance that such issuance will not cause the Aggregate Usage to exceed the aggregate amount of the Commitments) and subject to the additional conditions precedent that such Letter of Credit shall be satisfactory to such LC Issuing Bank and that the Borrower shall have executed and delivered such other instruments and agreements relating to such Letter of Credit as such LC Issuing Bank shall have reasonably requested. The extension of any Letter of Credit shall be subject to the conditions precedent set forth in Article III (the LC Issuing Bank having no duty to ascertain whether such conditions precedent are satisfied). Upon issuing or extending any Letter of Credit, the LC Issuing Bank shall promptly notify the Agent of such issuance or extension, and the Agent shall promptly notify each Bank thereof and of the amount of such Bank's participation in such Letter of Credit. (e) The Borrower shall pay to the Agent, for the account of the Banks ratably in accordance with their respective Percentages, a letter of credit fee at (i) the LC Fee Rate on the aggregate amount available for drawings under each Letter of Credit (other than Workers' Compensation Letters of Credit) outstanding from time to time and (ii) the LC Fee Rate minus .125% per annum on the aggregate amount available for drawings under each Workers' Compensation Letter of Credit outstanding from time to time. Each such fee shall be payable in arrears on the last day of each fiscal quarter of the Borrower for so long as such Letter of Credit is outstanding and on the expiry date thereof. The Borrower shall pay to each LC Issuing Bank additional fronting fees and expenses in the amounts and at the times agreed between the Borrower and such LC Issuing Bank. The LC Issuing Banks shall furnish to the Agent upon request such information as the Agent shall require in order to calculate the amount of any fee payable under this subsection (e). "LC Fee Rate" means, for any day, a rate per annum equal to the Euro-Dollar Margin for such day. (f) Upon receipt from the beneficiary of any Letter of Credit of any demand for payment under such Letter of Credit, the relevant LC Issuing Bank shall notify the Agent and the Agent shall promptly notify the Borrower and each other Bank as to the amount to be paid by the Issuing Bank as a result of such demand and the proposed payment date (the "LC Payment Date"). The responsibility of such LC Issuing Bank to the Borrower and each Bank shall be only to determine that the documents (including each demand for payment) delivered under each Letter of Credit issued by it in connection with such presentment shall be in conformity in all material respects with such Letter of Credit. Each LC Issuing Bank shall endeavor to exercise the same care in the issuance and administration of the Letters of Credit issued by it as it does with respect to letters of credit in which no participations are granted, it being understood that in the absence of any gross negligence or willful misconduct by such LC Issuing Bank, each Bank shall be unconditionally and irrevocably liable without regard to the occurrence of any Event of Default or any condition precedent whatsoever, to reimburse such LC Issuing Bank on demand for (i) such Bank's Percentage of the amount of each payment made by such LC Issuing Bank under each Letter of Credit issued by it to the extent such amount is not reimbursed by the Borrower pursuant to subsection (g) below plus (ii) interest on the foregoing amount to be reimbursed by such Bank, for each day from the date of such LC Issuing Bank's demand for such reimbursement (or, if such demand is made after 11:00 A.M. (New York City time) on such date, from the next succeeding Domestic Business Day) to the date on which such Bank pays the amount to be reimbursed by it, at a rate of interest per annum equal to the Federal Funds Rate for such day. (g) The Borrower shall be irrevocably and unconditionally obligated to reimburse each LC Issuing Bank on or by the applicable LC Reimbursement Date for any amounts paid by such LC Issuing Bank upon any drawing under any Letter of Credit issued by it, without presentment, demand, protest or other formalities of any kind; provided that neither the Borrower nor any Bank shall hereby be precluded from asserting any claim for direct (but not consequential) damages suffered by the Borrower or such Bank to the extent, but only to the extent, caused by (i) the willful misconduct or gross negligence of such LC Issuing Bank in determining whether a request presented under any Letter of Credit issued by it complied with the terms of such Letter of Credit or (ii) such LC Issuing Bank's failure to pay under any Letter of Credit issued by it after the presentation to it of a request strictly complying with the terms and conditions of such Letter of Credit. All such amounts paid by such LC Issuing Bank and remaining unpaid by the Borrower shall bear interest, payable on demand, for each day until paid at a rate per annum equal to (x) the rate applicable to Base Rate Loans for such day if such day falls on or before the applicable LC Reimbursement Date and (y) the sum of 2% plus the rate applicable to Base Rate Loans for such day if such day falls after such LC Reimbursement Date. Each LC Issuing Bank will pay to each Bank ratably in accordance with its Percentage all amounts received from the Borrower for application in payment, in whole or in part, of the Reimbursement Obligations in respect of any Letter of Credit issued by such LC Issuing Bank, but only to the extent such Bank has made payment to such LC Issuing Bank in respect of such Letter of Credit pursuant to subsection (f). (h) If, after the date hereof, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank or LC Issuing Bank with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall impose, modify or deem applicable any tax, reserve, special deposit or similar requirement against or with respect to or measured by reference to Letters of Credit issued or to be issued hereunder or participations therein, and the result shall be to increase the cost to any Bank or LC Issuing Bank of issuing or maintaining any Letter of Credit or any participation therein, or reduce any amount receivable by any Bank or LC Issuing Bank hereunder in respect of any Letter of Credit (which increase in cost, or reduction in amount receivable, shall be the result of such Bank's or LC Issuing Bank's reasonable allocation of the aggregate of such increases or reductions resulting from such event), then, upon demand by such Bank or LC Issuing Bank, the Borrower agrees to pay to such Bank or LC Issuing Bank, from time to time as specified by such Bank or LC Issuing Bank, such additional amounts as shall be sufficient to compensate such Bank or LC Issuing Bank for such increased costs or reductions in amount incurred by such Bank or LC Issuing Bank. A certificate of such Bank or LC Issuing Bank submitted by such Bank or LC Issuing Bank to the Borrower shall be conclusive as to the amount thereof in the absence of manifest error. (i) The Borrower's obligations under this Section 2.15 shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Borrower may have or have had against any LC Issuing Bank, any Bank or any beneficiary of a Letter of Credit. The Borrower further agrees with the LC Issuing Banks and the Banks that the LC Issuing Banks and the Banks shall not be responsible for, and the Borrower's Reimbursement Obligations in respect of any Letter of Credit shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even if such documents should in fact prove to be in any or all respects invalid, fraudulent or forged, or any dispute between or among the Borrower, any of its Subsidiaries, the beneficiary of any Letter of Credit or any financing institution or other party to whom any Letter of Credit may be transferred or any claims or defenses whatsoever of the Borrower or any of its Subsidiaries against the beneficiary of any Letter of Credit or any such transferee. No LC Issuing Bank shall be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit issued, extended or renewed by it. The Borrower agrees that any action taken or omitted by an LC Issuing Bank or any Bank under or in connection with each Letter of Credit and the related drafts and documents, if done in good faith and without gross negligence, shall be binding upon the Borrower and shall not put such LC Issuing Bank or any Bank under any liability to the Borrower. (j) To the extent not inconsistent with subsection (i) above, each LC Issuing Bank shall be entitled to rely, and shall be fully protected in relying upon, any Letter of Credit, draft, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel, independent accountants and other experts selected by such LC Issuing Bank. Each LC Issuing Bank shall be fully justified in failing or refusing to take any action under this Agreement unless it shall first have received such advice or concurrence of the Required Banks as it reasonably deems appropriate or it shall first be indemnified to its reasonable satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Notwithstanding any other provision of this Section 2.15, each LC Issuing Bank shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement in accordance with a request of the Required Banks, and such request and any action taken or failure to act pursuant thereto shall be binding upon the Banks and all future holders of participations in any Letters of Credit. (k) The Borrower hereby agrees to indemnify and hold harmless each Bank, each LC Issuing Bank and the Agent, and their respective directors, officers, agents and employees from and against any and all claims and damages, losses, liabilities, costs or expenses which such Bank, such LC Issuing Bank or the Agent may incur (or which may be claimed against such Bank, such LC Issuing Bank or the Agent by any Person whatsoever) by reason of or in connection with the execution and delivery or transfer of or payment or failure to pay under any Letter of Credit or any actual or proposed use of any Letter of Credit, including, without limitation, any claims, damages, losses, liabilities, costs or expenses which an LC Issuing Bank may incur by reason of or in connection with the failure of any other Bank to fulfill or comply with its obligations to such LC Issuing Bank hereunder (but nothing herein contained shall affect any rights the Borrower may have against any defaulting Bank); provided that the Borrower shall not be required to indemnify any Bank, any LC Issuing Bank or the Agent for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, caused by (i) the willful misconduct or gross negligence of an LC Issuing Bank in determining whether a request presented under any Letter of Credit issued by it complied with the terms of such Letter of Credit or (ii) an LC Issuing Bank's failure to pay under any Letter of Credit issued by it after the presentation to it of a request strictly complying with the terms and conditions of such Letter of Credit; and provided further that the foregoing indemnity shall not apply with respect to any costs or expenses arising out of any claim by any Person other than the beneficiary or account party under the relevant Letter of Credit unless such costs and expenses shall have been reasonably incurred. Nothing in this subsection (k) is intended to limit the obligations of the Borrower under any other provision of this Agreement. (l) Each Bank shall, ratably in accordance with its Percentage, indemnify each LC Issuing Bank, its affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Borrower) against any cost, expense (including reasonable counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees' gross negligence or willful misconduct or such LC Issuing Bank's failure to pay under any Letter of Credit issued by it after the presentation to it of a request strictly complying with the terms and conditions of the Letter of Credit) that such indemnitees may suffer or incur in connection with this Section 2.15 or any action taken or omitted by such indemnitees hereunder. (m) In its capacity as a Bank, each LC Issuing Bank shall have the same rights and obligations as any other Bank. The obligations of the LC Issuing Banks under the Financing Documents are several and not joint. SECTION 2.16. Maximum Interest Rate. (a) Nothing contained in this Agreement or the Notes shall require the Borrower to pay interest for the account of any Bank at a rate exceeding the maximum rate permitted by applicable law. (b) If the amount of interest payable for the account of any Bank on any interest payment date in respect of the immediately preceding interest computation period, computed pursuant to Section 2.07, would exceed the maximum amount permitted by applicable law to be charged by such Bank, the amount of interest payable for its account on such interest payment date shall be automatically reduced to such maximum permissible amount. (c) If the amount of interest payable for the account of any Bank in respect of any interest computation period is reduced pursuant to subsection (b) of this Section and the amount of interest payable for its account in respect of any subsequent interest computation period, computed pursuant to Section 2.07, would be less than the maximum amount permitted by applicable law to be charged by such Bank, then the amount of interest payable for its account in respect of such subsequent interest computation period shall be automatically increased to such maximum permissible amount; provided that at no time shall the aggregate amount by which interest paid for the account of any Bank has been increased pursuant to this subsection (c) exceed the aggregate amount by which interest paid for its account has theretofore been reduced pursuant to subsection (b) of this Section. ARTICLE III CONDITIONS SECTION 3.01. Conditions to Effectiveness. This Agreement shall become effective on the date on which all of the following conditions to effectiveness shall be satisfied (but shall not become effective unless such date is before February 15, 1995): (a) the Agent shall have received counterparts hereof signed by each of the parties hereto (or, in the case of any party as to which an executed counterpart shall not have been received, the Agent shall have received in form satisfactory to it telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party); (b) the Agent shall have received a duly executed Note for the account of each Bank dated on or before the Effective Date complying with the provisions of Section 2.05; (c) the Agent shall have received counterparts of the Subsidiary Guaranty Agreement, duly executed by each of the Obligors listed on the signature pages thereof; (d) the Borrower shall have paid (or made arrangements satisfactory to the Agent for paying) on the Effective Date all fees accrued under the Existing Agreement to but excluding the Effective Date and all other amounts (if any) then due and payable by the Borrower thereunder; (e) on the Effective Date no loans shall be outstanding under the Existing Agreement; (f) the Agent shall have received an opinion of Eberhard G.H. Schmoller, Esq., general counsel for the Borrower, substantially in the form of Exhibit E hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; (g) the Agent shall have received an opinion of Davis Polk & Wardwell, special counsel for the Agent, substantially in the form of Exhibit F hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; and (h) the Agent shall have received all documents the Agent may reasonably request relating to the existence of the Obligors, the corporate authority for and the validity of the Financing Documents and any other matters relevant hereto, all in form and substance satisfactory to the Agent. The Agent shall promptly notify the Borrower, the Banks and the LC Issuing Banks of the Effective Date, and such notice shall be conclusive and binding on all parties hereto. SECTION 3.02. Consequence of Effectiveness. (a) On the Effective Date, the Existing Agreement will be automatically amended and restated to read as this Agreement reads, without further action by any of the parties thereto. (b) On and after the Effective Date, the rights and obligations of the parties hereto shall be governed by the provisions hereof, and the rights and obligations of the parties to the Existing Agreement with respect to the period prior to the Effective Date shall continue to be governed by the provisions thereof as in effect prior to the Effective Date, except that all fees accrued under the Existing Agreement to but excluding the Effective Date shall be paid on the Effective Date. SECTION 3.03. Credit Extensions. The obligation of any Bank to make a Loan on the occasion of any Borrowing and the obligation of an LC Issuing Bank to issue or extend a Letter of Credit on the occasion of a request therefor by the Borrower are each subject to the satisfaction of the following conditions: (a) receipt (i) by the Agent of a Notice of Borrowing as required by Section 2.02 or 2.03, as the case may be, in the case of a Borrowing or (ii) by such LC Issuing Bank of a notice as required by Section 2.15, in the case of a Letter of Credit; (b) the fact that, after giving effect to such Credit Extension, the Aggregate Usage will not exceed the aggregate amount of the Commitments; (c) the fact that, immediately before and after such Credit Extension, no Default shall have occurred and be continuing; and (d) the fact that the representations and warranties of the Borrower contained in this Agreement (except, in the case of a Refunding Borrowing, the representations and warranties set forth in Sections 4.04(c) and 4.05 as to any matter which has theretofore been disclosed in writing by the Borrower to the Banks) shall be true on and as of the date of such Credit Extension. Each Credit Extension hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such Credit Extension as to the facts specified in clauses (b), (c) and (d) of this Section. ARTICLE IV REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants that: SECTION 4.01. Corporate Existence and Power. The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. SECTION 4.02. Corporate and Governmental Authorization; No Contravention. The execution, delivery and performance by each Obligor of the Financing Documents to which it is a party are within its corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of such Obligor or of any agreement, judgment, injunction, order, decree or other instrument binding upon such Obligor or any Subsidiaries or result in the creation or imposition of any Lien on any asset of such Obligor or any Subsidiaries. SECTION 4.03. Binding Effect. This Agreement constitutes a valid and binding agreement of the Borrower and the Notes, when executed and delivered in accordance with this Agreement, will constitute valid and binding obligations of the Borrower. The Subsidiary Guaranty Agreement, when executed and delivered by each Obligor, will constitute a valid and binding agreement of such Obligor. SECTION 4.04. Financial Information. (a) The consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of December 31, 1993 and the related statements of consolidated operations, consolidated cash flows and consolidated shareholders' equity for the fiscal year then ended, reported on by Arthur Andersen & Co. and set forth in the Borrower's 1993 Annual Report to Shareholders, a copy of which has been delivered to each of the Banks, fairly present, in conformity with generally accepted accounting principles, the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such fiscal year. (b) The unaudited condensed consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of September 30, 1994 and the related unaudited condensed statements of consolidated operations and consolidated cash flows for the nine months then ended, set forth in the Borrower's quarterly report for the fiscal quarter ended September 30, 1994 as filed with the Securities and Exchange Commission on Form 10-Q, a copy of which has been delivered to each of the Banks, fairly present, on a basis consistent with the financial statements referred to in subsection (a) of this Section, the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such nine-month period (subject to normal year-end adjustments). (c) Since September 30, 1994 there has been no material adverse change in the business, financial position, results of operations or prospects of the Borrower and its Consolidated Subsidiaries, considered as a whole. SECTION 4.05. Litigation. There is no action, suit or proceeding pending against, or to the knowledge of the Borrower threatened against or affecting, the Borrower or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official (i) in which there is a reasonable possibility that a final judgment in excess of $30,000,000 will be entered or filed against the Borrower or any of its Subsidiaries, (ii) in which there is a reasonable possibility of an adverse decision which could, in a manner not involving the payment of damages, materially adversely affect the business of the Borrower and its Subsidiaries, considered as a whole, or (iii) which in any manner draws into question the validity of any Financing Document. SECTION 4.06. Compliance with ERISA. Each member of the ERISA Group has fulfilled its obligations under the minimum funding standards of ERISA and the Internal Revenue Code with respect to each Plan and is in compliance in all respects with the presently applicable provisions of ERISA and the Internal Revenue Code with respect to each Plan, except to the extent that noncompliance could not materially adversely affect the business, consolidated financial position or consolidated results of operations of the Borrower and its Consolidated Subsidiaries. No member of the ERISA Group has (i) sought a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed to make any contribution or payment to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement, which has resulted or could result in the imposition of a Lien or the posting of a bond or other security under ERISA or the Internal Revenue Code or (iii) incurred any liability under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA. SECTION 4.07. Environmental Matters. In the ordinary course of its business, the Borrower conducts periodic reviews of the effect of Environmental Laws on the business, operations and properties of the Borrower and its Subsidiaries, in the course of which it identifies and evaluates associated liabilities and costs (including, without limitation, any capital or operating expenditures required for clean-up or closure of properties presently or previously owned, any capital or operating expenditures required to achieve or maintain compliance with environmental protection standards imposed by law or as a condition of any license, permit or contract, any related constraints on operating activities, including any periodic or permanent shutdown of any facility or reduction in the level of or change in the nature of operations conducted thereat, any costs or liabilities in connection with off-site disposal of wastes or Hazardous Substances, and any actual or potential liabilities to third parties, including employees, and any related costs and expenses). On the basis of such reviews, the Borrower has reasonably concluded that such associated liabilities and costs, including the costs of compliance with Environmental Laws, are unlikely (after taking into account the Borrower's reserves for such liabilities and costs) to have a material adverse effect on the business, financial condition, results of operations or prospects of the Borrower and its Consolidated Subsidiaries, considered as a whole. SECTION 4.08. Taxes. United States Federal income tax returns of the Borrower and its Subsidiaries have been examined and closed through the fiscal year ended December 31, 1986. The Borrower and its Subsidiaries have filed all United States Federal income tax returns and all other material tax returns which are required to be filed by them and have paid all taxes due pursuant to such returns or pursuant to any assessment received by the Borrower or any Subsidiary. The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of taxes or other governmental charges are, in the opinion of the Borrower, adequate. SECTION 4.09. Subsidiaries. Each of the Borrower's corporate Subsidiaries is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. Each Subsidiary Guarantor is a Wholly-Owned Subsidiary of the Borrower. SECTION 4.10. Not an Investment Company. The Borrower is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended. SECTION 4.11. Full Disclosure. All information heretofore furnished by the Borrower to the Agent or any Bank for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all such information hereafter furnished by the Borrower to the Agent or any Bank will be, true and accurate in all material respects on the date as of which such information is stated or certified. The Borrower has disclosed to the Banks in writing any and all facts which materially and adversely affect or may affect (to the extent the Borrower can now reasonably foresee) the business, operations or financial condition of the Borrower and its Consolidated Subsidiaries, taken as a whole, or the ability of the Borrower to perform its obligations under this Agreement. ARTICLE V COVENANTS The Borrower agrees that, so long as any Bank has any Commitment or any Outstanding LC Exposure hereunder or any amount payable under any Note remains unpaid: SECTION 5.01. Information. The Borrower will deliver to each of the Banks: (a) as soon as available and in any event within 120 days after the end of each fiscal year of the Borrower, the audited consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such fiscal year and the related audited statements of consolidated operations, consolidated cash flows and consolidated shareholders' equity for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in a manner acceptable to the Securities and Exchange Commission by Arthur Andersen & Co. or other independent public accountants of nationally recognized standing; (b) as soon as available and in any event within 45 days after the end of each of the first three quarters of each fiscal year of the Borrower, commencing with the fiscal quarter ending March 31, 1995, the condensed consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such quarter, the related condensed statement of consolidated operations for such quarter and the related condensed statements of consolidated operations and consolidated cash flows for the portion of the Borrower's fiscal year ended at the end of such quarter, setting forth in the case of such statements of consolidated operations and consolidated cash flows in comparative form the figures for the corresponding periods of the Borrower's previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation and consistency by the chief financial officer or the chief accounting officer of the Borrower; (c) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of the chief financial officer or the chief accounting officer of the Borrower (i) setting forth in reasonable detail the calculations required to establish whether the Borrower was in compliance with the requirements of Sections 5.07, 5.08, 5.09 and 5.12 on the date of such financial statements and (ii) stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (d) simultaneously with the delivery of each set of financial statements referred to in clause (a) above, a statement of the firm of independent public accountants which reported on such statements (i) whether anything has come to their attention to cause them to believe that any Default existed on the date of such statements and (ii) confirming the calculations set forth in the officer's certificate delivered simultaneously therewith pursuant to clause (c) above; (e) within five Domestic Business Days after any officer of the Borrower obtains knowledge of any Default, if such Default is then continuing, a certificate of the chief financial officer or the chief accounting officer of the Borrower setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (f) promptly upon the mailing thereof to the shareholders of the Borrower generally, copies of all financial statements, reports and proxy statements so mailed; (g) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents) which the Borrower shall have filed with the Securities and Exchange Commission; (h) if and when any member of the ERISA Group (i) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is insolvent or has been terminated, which could, when aggregated with any liability incurred after January 10, 1995 by any member of the ERISA Group as a result of any other such withdrawal liability, reorganization, insolvency or termination, give rise to aggregate liabilities of the ERISA Group in excess of $5,000,000, a copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate, impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code, a copy of such application; (v) gives notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and other information filed with the PBGC; (vi) gives notice of withdrawal from any Plan pursuant to Section 4063 of ERISA, which could, when aggregated with any liability incurred after January 10, 1995 by any member of the ERISA Group as a result of any other such withdrawal, give rise to aggregate liabilities of the ERISA Group in excess of $5,000,000, a copy of such notice; or (vii) fails to make any payment or contribution to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement or makes any amendment to any Plan or Benefit Arrangement which has resulted or could result in the imposition of a Lien or the posting of a bond or other security, a certificate of the chief financial officer or the chief accounting officer of the Borrower setting forth details as to such occurrence and action, if any, which the Borrower or applicable member of the ERISA Group is required or proposes to take; and (i) from time to time such additional information regarding the financial position or business of the Borrower and its Subsidiaries as the Agent, at the request of any Bank, may reasonably request. SECTION 5.02. Payment of Obligations. The Borrower will pay and discharge, and will cause each Subsidiary to pay and discharge, at or before maturity, all their respective material obligations and liabilities, including, without limitation, tax liabilities, except where the same are contested in good faith by appropriate proceedings, and will maintain, and will cause each Subsidiary to maintain, in accordance with generally accepted accounting principles, appropriate reserves for the accrual of any of the same. SECTION 5.03. Maintenance of Property; Insurance. (a) The Borrower will keep, and will cause each Subsidiary to keep, all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted. (b) The Borrower will maintain, and will cause each Subsidiary to maintain, with financially sound and reputable insurers, insurance against liabilities to third parties, casualties affecting property used in its business and other risks of the kinds customarily insured against by corporations of established reputation engaged in the same or similar business and similarly situated, of such types and in such amounts as are customarily carried under similar circumstances by such other corporations; provided that, in lieu of any such insurance, the Borrower or any Subsidiary may maintain a system or systems of self-insurance and reinsurance which will accord with sound practices of similarly situated corporations maintaining such systems and with respect to which the Borrower or such Subsidiary will maintain adequate insurance reserves, all in accordance with generally accepted accounting principles and in accordance with sound insurance principles or practice. SECTION 5.04. Conduct of Business and Maintenance of Existence. The Borrower will continue, and will cause each Non-Emery Subsidiary to continue, to engage in business of the same general type as now conducted by the Borrower and its Non-Emery Subsidiaries, and will preserve, renew and keep in full force and effect, and will cause each Subsidiary to preserve, renew and keep in full force and effect their respective corporate existence and their respective rights, privileges and franchises necessary or desirable in the normal conduct of business; provided that nothing in this Section 5.04 shall prohibit (i) any merger or consolidation permitted by Section 5.10 or (ii) the termination of the corporate existence of any Subsidiary (other than a Subsidiary Guarantor) if the Borrower in good faith determines that such termination is in the best interest of the Borrower and is not materially disadvantageous to the Banks. SECTION 5.05. Compliance with Laws. The Borrower will comply, and will cause each Subsidiary to comply, in all material respects with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities (including, without limitation, Environmental Laws and ERISA and the rules and regulations thereunder), except where (i) the necessity of compliance therewith is contested in good faith by appropriate proceedings or (ii) failures to comply therewith could not, in the aggregate, have a material adverse effect on the business, consolidated financial position or consolidated results of operations of the Borrower and its Consolidated Subsidiaries. SECTION 5.06. Inspection of Property, Books and Records. The Borrower will keep, and will cause each Subsidiary to keep, proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities. The Borrower will permit, and will cause its Subsidiaries (except Insignificant Subsidiaries) to permit, representatives of any Bank, at such Bank's expense, to visit and inspect any of their respective properties, to examine and make abstracts from any of their respective books and records and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent accountants, in each case to the extent reasonably requested by such Bank to enable it to evaluate the credit of the Borrower and the Subsidiary Guarantors, confirm the Borrower's compliance with the provisions of the Financing Documents, exercise and enforce such Bank's rights under the Financing Documents or otherwise make decisions relating thereto, but subject to any limitations imposed by law or by confidentiality agreements binding on the Borrower or the relevant Subsidiary. Such visits, inspections, examinations and discussions shall be conducted at such reasonable times and as often as the relevant Bank or Banks may reasonably request. SECTION 5.07. Debt. (a) The ratio of Consolidated Debt to Consolidated Tangible Net Worth shall not exceed (1) 2 to 1 at any time during 1995 or (2) 1.75 to 1 at any time thereafter. (b) Total Debt of all Non-Emery Subsidiaries will at no time exceed $100,000,000; provided that, for purposes of this subsection (b), such Total Debt shall not include (i) Debt of a Non-Emery Subsidiary owing to the Borrower, (ii) Debt of a Non-Emery Subsidiary owing to another Non- Emery Subsidiary (except, in the case of Debt held by a Non- Emery Subsidiary that is not wholly owned, directly or indirectly, by the Borrower, the portion of such Debt allocable, on a pro rata basis, to the minority interest), (iii) Debt of the Borrower Guaranteed by a Subsidiary Guarantor and (iv) Debt of an ESOP Trust which is Guaranteed by a Non-Emery Subsidiary. "ESOP Trust" means a trust created under an employee stock ownership plan as defined in Section 407(d)(6) of ERISA which purchases the capital stock of the relevant Non-Emery Subsidiary for the benefit of employees of such Non-Emery Subsidiary and its subsidiaries. SECTION 5.08. Minimum Consolidated Tangible Net Worth. Consolidated Tangible Net Worth shall not be less than $217,000,000; provided that such amount shall be increased as of the last day of each fiscal year of the Borrower (commencing with 1994) by an amount equal to 50% of the consolidated net income of the Borrower and its Consolidated Subsidiaries, if such consolidated net income is positive, (i) for the fourth quarter of 1994 in the case of 1994 and (ii) for the full fiscal year in the case of each subsequent fiscal year. SECTION 5.09. Negative Pledge. Neither the Borrower nor any Non-Emery Subsidiary will create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except: (a) Liens existing on the date of this Agreement securing Debt outstanding on the date of this Agreement in an aggregate principal amount not exceeding $17,000,000; (b) any Lien existing on any asset of any corporation at the time such corporation becomes a Subsidiary and not created in contemplation of such event at the request of the Borrower or any of its Subsidiaries or for the benefit of any of their respective creditors; (c) any Lien on any asset securing Debt incurred or assumed for the purpose of financing all or any part of the cost of acquiring such asset, provided that such Lien attaches to such asset concurrently with or within 90 days after the acquisition thereof; (d) any Lien on any asset of any corporation existing at the time such corporation is merged or consolidated with or into the Borrower or a Subsidiary and not created in contemplation of such event at the request of the Borrower or any of its Subsidiaries or for the benefit of any of their respective creditors; (e) any Lien existing on any asset prior to the acquisition thereof by the Borrower or a Subsidiary and not created in contemplation of such acquisition at the request of the Borrower or any of its Subsidiaries or for the benefit of any of their respective creditors; (f) any Lien arising out of the refinancing, extension, renewal or refunding of any Debt secured by any Lien permitted by any of the foregoing clauses of this Section, provided that such Debt is not increased and is not secured by any additional assets; (g) any Lien on (i) the common stock of any Subsidiary Guarantor, but only if after giving effect to such Lien, the Borrower would own, directly or indirectly, at least 80% of the common stock of such Subsidiary Guarantor free and clear of Liens or (ii) the common stock of any Emery Subsidiary; (h) Liens arising in the ordinary course of its business which (i) do not secure Debt, (ii) do not secure any obligation in an amount exceeding $50,000,000 and (iii) do not in the aggregate materially detract from the value of its assets or materially impair the use thereof in the operation of its business; (i) any Lien on accounts receivable if, immediately after such Lien arises, the aggregate uncollected balance of all accounts receivable sold or subjected to Liens by the Borrower and its Subsidiaries (excluding accounts receivable charged off in accordance with the charge-off policies applicable to the unsold accounts receivable of the Borrower and its Subsidiaries) would not exceed 10% of the consolidated accounts receivable of the Borrower and its Subsidiaries as of the end of its then most recently ended fiscal quarter; and (j) Liens not otherwise permitted by the foregoing clauses of this Section securing Debt in an aggregate principal amount at any time outstanding not to exceed the sum of $25,000,000 plus 10% of Consolidated Tangible Net Worth as of the end of the immediately preceding fiscal quarter of the Borrower. SECTION 5.10. Consolidations, Mergers and Sales of Assets. The Borrower will not, and will not permit any Subsidiary to, consolidate or merge with, or sell, lease or otherwise transfer any of its assets to, any Person, except that nothing in this Section 5.10 shall prohibit: (a) the merger of a Non-Emery Subsidiary into the Borrower, (b) the merger or consolidation of a Non-Emery Subsidiary with or into another Person (except an Emery Subsidiary) if the corporation surviving such consolidation or merger is a Non-Emery Subsidiary, (c) the merger or consolidation of an Emery Subsidiary with or into another Emery Subsidiary, (d) the merger or consolidation of an Emery Subsidiary with or into another Person (except the Borrower or a Non-Emery Subsidiary) if the corporation surviving such merger or consolidation is an Emery Subsidiary, (e) the sale, lease or other transfer of any asset of the Borrower or the Non-Emery Subsidiaries (i) in the ordinary course of business or (ii) for fair value if after giving effect thereto, the aggregate consideration received for all of their assets sold, leased or otherwise transferred under this clause (ii) during any fiscal year of the Borrower does not exceed $100,000,000, or (f) the sale, lease or other transfer of any asset of the Emery Subsidiaries in the ordinary course of business, or otherwise if the Borrower in good faith determines that such sale, lease or other transfer is in the best interest of the Borrower or any Emery Subsidiary and is not materially disadvantageous to the Banks; provided that, in the case of (x) any such merger or consolidation or (y) any such sale, lease or other transfer of any asset not in the ordinary course of business, after giving effect thereto, no Default shall have occurred and be continuing. SECTION 5.11. Use of Proceeds. The proceeds of the Loans made under this Agreement will be used by the Borrower for general corporate purposes. None of such proceeds will be used, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of buying or carrying any "margin stock" within the meaning of Regulation U. SECTION 5.12. Fixed Charge Coverage. The ratio of Consolidated EBITDAR to Consolidated Fixed Charges will not, for any period of four consecutive fiscal quarters, be less than (1) 1.75 to 1 if the fourth such fiscal quarter ends in 1994, (2) 1.875 to 1 if the fourth such fiscal quarter ends in 1995, or (3) 2 to 1 if the fourth such fiscal quarter ends in 1996 or thereafter. SECTION 5.13. Transactions with Third Party Affiliates and Emery Subsidiaries. (a) The Borrower will not, and will not permit any Subsidiary to, directly or indirectly, pay any funds to or for the account of, make any investment (whether by acquisition of stock or indebtedness, by loan, advance, transfer of property, guarantee or other agreement to pay, purchase or service, directly or indirectly, any Debt, or otherwise) in, lease, sell, transfer or otherwise dispose of any assets, tangible or intangible, to, or participate in, or effect any transaction in connection with any joint enterprise or other joint arrangement with, any Third Party Affiliate; provided that nothing in this subsection (a) shall prohibit (i) the Borrower from declaring or paying any lawful dividend so long as, after giving effect thereto, no Default shall have occurred and be continuing, (ii) the Borrower or any Subsidiary from making sales to or purchases from any Third Party Affiliate and, in connection therewith, extending credit or making payments, or from making payments for services rendered by any Third Party Affiliate, if such sales or purchases are made or such services are rendered in the ordinary course of business and on an arm's-length basis, (iii) the Borrower or any Subsidiary from making payments of principal, interest and premium on any Debt of the Borrower or such Subsidiary held by a Third Party Affiliate if the terms of such Debt are established on an arm's-length basis or (iv) the Borrower or any Subsidiary from participating in, or effecting any transaction in connection with, any joint enterprise or other joint arrangement with any Third Party Affiliate if the Borrower or such Subsidiary participates in the ordinary course of its business and on a basis no less advantageous than the basis on which such Third Party Affiliate participates. (b) The Borrower will not, and will not permit any Non-Emery Subsidiary to, directly or indirectly, lease, sell, transfer or otherwise dispose of any asset, tangible or intangible, to any Emery Subsidiary, unless such lease, sale, transfer or other disposal (i) is made in the ordinary course of business and on an arm's-length basis or (ii) is of an asset with a value (calculated at the greater of book value or fair market value as of the date of such lease, sale, transfer or other disposal) which, when aggregated with the value so calculated of each other asset leased, sold, transferred or otherwise disposed of in one or more related transactions (if any), is $500,000 or less. ARTICLE VI DEFAULTS SECTION 6.01. Events of Default. If one or more of the following events ("Events of Default") shall have occurred and be continuing: (a) the Borrower shall fail to pay any principal of any Loan when due, or shall fail to pay within three Domestic Business Days of the due date thereof any interest, fees or other amount payable hereunder; (b) the Borrower shall fail to observe or perform any covenant contained in Sections 5.07 to 5.12, inclusive, or in Section 3.01 of the Subsidiary Guaranty Agreement; (c) the Borrower shall fail to observe or perform any covenant or agreement contained in any Financing Document (other than those covered by clause (a) or (b) above) for 30 days after written notice thereof has been given to the Borrower by the Agent at the request of any Bank; (d) any representation, warranty, certification or statement made by the Borrower in any Financing Document or in any certificate, financial statement or other document delivered pursuant to any Financing Document shall prove to have been incorrect in any material respect when made (or deemed made); (e) the Borrower or any Subsidiary shall fail to make any payment in respect of any Material Debt within three Domestic Business Days after such payment is due or, if longer, within any grace period otherwise applicable to such payment; (f) any event or condition shall occur which results in the acceleration of the maturity of Material Debt or enables the holders of Material Debt or any Person acting on their behalf to accelerate the maturity thereof, or any default by the Borrower or any Subsidiary shall occur which results in the termination of Material Commitments prior to the scheduled termination thereof or enables Persons extending Material Commitments to terminate such Material Commitments prior to the scheduled termination thereof; (g) the Borrower or any Subsidiary (except Insignificant Subsidiaries) shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; (h) an involuntary case or other proceeding shall be commenced against the Borrower or any Subsidiary (except Insignificant Subsidiaries) seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Borrower or any Subsidiary (except Insignificant Subsidiaries) under the federal bankruptcy laws as now or hereafter in effect; (i) any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $25,000,000 which it shall have become liable to pay under Title IV of ERISA; or notice of intent to terminate a Material Plan shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or to cause a trustee to be appointed to administer any Material Plan; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; or there shall occur a complete or partial withdrawal from, or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which could cause one or more members of the ERISA Group to incur a current payment obligation in excess of $25,000,000; (j) a final judgment or order for the payment of money in excess of $25,000,000 shall be entered or filed against the Borrower or any Subsidiary and such judgment or order shall continue unsatisfied, unvacated and unstayed for a period of 30 days; (k) any person or group of persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under said Act) of 30% or more of the outstanding shares of common stock of the Borrower; or, during any period of 15 consecutive calendar months, individuals who were directors of the Borrower on the first day of such period shall cease to constitute a majority of the board of directors of the Borrower; or (l) the Borrower shall cease to own, directly or indirectly, at least 80% of the common stock of each Subsidiary Guarantor free and clear of all Liens; then, and in every such event, the Agent shall (i) if requested by the Required Banks, by notice to the Borrower terminate the Commitments and they shall thereupon terminate and (ii) if requested by Banks holding Notes evidencing at least 60% in aggregate principal amount of the Loans outstanding, by notice to the Borrower declare the Notes (together with accrued interest thereon) to be, and the Notes shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Obligors; provided that in the case of any of the Events of Default specified in clause (g) or (h) above with respect to any Obligor, without any notice to the Obligors or any other act by the Agent or the Banks, the Commitments shall thereupon terminate and the Notes (together with accrued interest thereon) shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Obligors. SECTION 6.02. Notice of Default. The Agent shall give notice to the Borrower under Section 6.01(c) promptly upon being requested to do so by any Bank and shall thereupon notify all the Banks thereof. SECTION 6.03. Cash Cover. The Borrower agrees, in addition to the provisions of Section 6.01 hereof, that upon the occurrence and during the continuance of any Event of Default, it shall, if requested by the Agent upon instruction from Banks having at least 60% of the aggregate amount of the Outstanding LC Exposures, pay (and, in the case of any of the Events of Default specified in clause (g) or (h) above with respect to any Obligor, forthwith, without any demand or the taking of any other action by the Agent or any Bank, it shall pay) to the Agent an amount in immediately available funds equal to the then aggregate amount of the LC Liabilities to be held as security therefor for the benefit of the Banks and the LC Issuing Banks. ARTICLE VII THE AGENT AND THE CO-AGENTS SECTION 7.01. Appointment and Authorization. Each Bank irrevocably appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Financing Documents as are delegated to the Agent by the terms thereof, together with all such powers as are reasonably incidental thereto. SECTION 7.02. Agent and Affiliates. Morgan Guaranty Trust Company of New York shall have the same rights and powers under the Financing Documents as any other Bank and may exercise or refrain from exercising the same as though it were not the Agent, and Morgan Guaranty Trust Company of New York and its affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or affiliate of the Borrower as if it were not the Agent hereunder. SECTION 7.03. Action by Agent. The obligations of the Agent under the Financing Documents are only those expressly set forth therein. Without limiting the generality of the foregoing, the Agent shall not be required to take any action with respect to any Default (except as expressly provided in Article VI) and shall not have a fiduciary relationship with any Bank. SECTION 7.04. Consultation with Experts. The Agent may consult with legal counsel (who may be counsel for an Obligor), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. SECTION 7.05. Liability of Agent. Neither the Agent nor any of its affiliates nor any of their respective directors, officers, agents or employees shall be liable for any action taken or not taken by it in connection herewith (i) with the consent or at the request of the Required Banks or (ii) in the absence of its own gross negligence or willful misconduct. Neither the Agent nor any of its affiliates nor any of their respective directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made in connection with the Financing Documents or any borrowing hereunder; (ii) the performance or observance of any of the covenants or agreements of the Borrower; (iii) the satisfaction of any condition specified in Article III, except receipt of items required to be delivered to the Agent; or (iv) the validity, effectiveness or genuineness of the Financing Documents or any other instrument or writing furnished in connection therewith. The Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement, or other writing (which may be a bank wire, telex or similar writing) believed by it to be genuine or to be signed by the proper party or parties. SECTION 7.06. Indemnification. Each Bank shall, ratably in accordance with its Percentage, indemnify the Agent, its affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Borrower) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees' gross negligence or willful misconduct) that such indemnitees may suffer or incur in connection with this Agreement or any action taken or omitted by such indemnitees hereunder. SECTION 7.07. Credit Decision. Each Bank acknowledges that it has, independently and without reliance upon the Agent, the Co-Agents or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Agent, the Co-Agents or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under the Financing Documents. SECTION 7.08. Successor Agent. The Agent may resign at any time by giving notice thereof to the Banks and the Borrower. Upon any such resignation, the Required Banks shall have the right, after consultation with the Borrower, to appoint a successor Agent. If no successor Agent shall have been so appointed by the Required Banks, and shall have accepted such appointment, within 30 days after the retiring Agent gives notice of resignation, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent, which shall be a commercial bank organized or licensed under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $1,000,000,000. Upon the acceptance of its appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent. SECTION 7.09. Agent's Fee. The Borrower shall pay to the Agent for its own account fees in the amounts and at the times previously agreed upon between the Borrower and the Agent. SECTION 7.10. Co-Agents. The Co-Agents, in their capacities as such, shall have no rights, obligations or duties of any kind under the Financing Documents and shall not have a fiduciary relationship with any Bank. ARTICLE VIII CHANGE IN CIRCUMSTANCES SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair. If on or prior to the first day of any Interest Period for any Fixed Rate Borrowing: (a) the Agent is advised by the Reference Banks that deposits in dollars (in the applicable amounts) are not being offered to the Reference Banks in the relevant market for such Interest Period, or (b) in the case of a Committed Borrowing, Banks having 50% or more of the aggregate amount of the Commitments advise the Agent that the Adjusted CD Rate or the Adjusted London Interbank Offered Rate, as the case may be, as determined by the Agent will not adequately and fairly reflect the cost to such Banks of funding their CD Loans or Euro-Dollar Loans, as the case may be, for such Interest Period, the Agent shall forthwith give notice thereof to the Borrower and the Banks, whereupon until the Agent notifies the Borrower that the circumstances giving rise to such suspension no longer exist, the obligations of the Banks to make CD Loans or Euro-Dollar Loans, as the case may be, shall be suspended. Unless the Borrower notifies the Agent at least two Domestic Business Days before the date of any Fixed Rate Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, (i) if such Fixed Rate Borrowing is a Committed Borrowing, such Borrowing shall instead be made as a Base Rate Borrowing and (ii) if such Fixed Rate Borrowing is a Money Market LIBOR Borrowing, the Money Market LIBOR Loans comprising such Borrowing shall bear interest for each day from and including the first day to but excluding the last day of the Interest Period applicable thereto at the Base Rate for such day. SECTION 8.02. Illegality. If, on or after the date of this Agreement, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Euro-Dollar Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans and such Bank shall so notify the Agent, the Agent shall forthwith give notice thereof to the other Banks and the Borrower, whereupon until such Bank notifies the Borrower and the Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make Euro-Dollar Loans shall be suspended. Before giving any notice to the Agent pursuant to this Section, such Bank shall designate a different Euro-Dollar Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. If such Bank shall determine that it may not lawfully continue to maintain and fund any of its outstanding Euro-Dollar Loans to maturity and shall so specify in such notice, the Borrower shall immediately prepay in full the then outstanding principal amount of each such Euro-Dollar Loan, together with accrued interest thereon. Concurrently with prepaying each such Euro-Dollar Loan, the Borrower shall borrow a Base Rate Loan in an equal principal amount from such Bank (on which interest and principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Banks), and such Bank shall make such a Base Rate Loan. SECTION 8.03. Increased Cost and Reduced Return. (a) If on or after (x) the date hereof, in the case of any Committed Loan or any obligation to make Committed Loans or (y) the date of the related Money Market Quote, in the case of any Money Market Loan, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall impose, modify or deem applicable any reserve (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding (i) with respect to any CD Loan any such requirement included in an applicable Domestic Reserve Percentage and (ii) with respect to any Euro-Dollar Loan any such requirement included in an applicable Euro-Dollar Reserve Percentage), special deposit, insurance assessment (excluding, with respect to any CD Loan, any such requirement reflected in an applicable Assessment Rate) or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Bank (or its Applicable Lending Office) or shall impose on any Bank (or its Applicable Lending Office) or on the United States market for certificates of deposit or the London interbank market any other condition affecting its Fixed Rate Loans, its Note or its obligation to make Fixed Rate Loans and the result of any of the foregoing is to increase the cost to such Bank (or its Applicable Lending Office) of making or maintaining any Fixed Rate Loan, or to reduce the amount of any sum received or receivable by such Bank (or its Applicable Lending Office) under this Agreement or under its Note with respect thereto, by an amount deemed by such Bank to be material, then, within 30 days after demand by such Bank (with a copy to the Agent), the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or reduction. (b) If any Bank shall have determined that, after the date hereof, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change in any such law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on capital of such Bank (or its Parent) as a consequence of such Bank's obligations hereunder to a level below that which such Bank (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time, within 30 days after demand by such Bank (with a copy to the Agent), the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank (or its Parent) for such reduction. (c) Each Bank will use its best efforts promptly to notify the Borrower and the Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Bank may use any reasonable averaging and attribution methods. SECTION 8.04. Taxes. (a) Any and all payments by the Borrower to or for the account of any Bank or the Agent hereunder or under any Note shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Bank and the Agent, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction under the laws of which such Bank or the Agent (as the case may be) is organized or any political subdivision thereof and, in the case of each Bank, taxes imposed on its income, and franchise or similar taxes imposed on it, by the jurisdiction of such Bank's Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, duties, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Bank or the Agent, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 8.04) such Bank or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law and (iv) the Borrower shall furnish to the Agent, at its address referred to in Section 9.01, the original or a certified copy of a receipt evidencing payment thereof. (b) In addition, the Borrower agrees to pay any present or future stamp or documentary taxes and any other excise or property taxes, or charges or similar levies which arise from any payment made hereunder or under any Note or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note (hereinafter referred to as "Other Taxes"). (c) The Borrower agrees to indemnify each Bank and the Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 8.04) paid by such Bank or the Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within 30 days from the date such Bank or the Agent (as the case may be) makes demand therefor. (d) Each Bank organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Bank listed on the signature pages hereof and on or prior to the date on which it becomes a Bank in the case of each other Bank, and from time to time thereafter if requested in writing by the Borrower (but only so long as such Bank remains lawfully able to do so), shall provide the Borrower with Internal Revenue Service form 1001 or 4224, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Bank is entitled to benefits under an income tax treaty to which the United States is a party which reduces the rate of withholding tax on payments of interest or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States. If the form provided by a Bank at the time such Bank first becomes a party to this Agreement indicates a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from "Taxes" as defined in Section 8.04(a). (e) For any period with respect to which a Bank has failed to provide the Borrower with the appropriate form pursuant to Section 8.04(d) (unless such failure is due to a change in treaty, law or regulation, or any change in the interpretation or administration thereof by any governmental authority, occurring subsequent to the date on which a form originally was required to be provided), such Bank shall not be entitled to indemnification under Section 8.04(a) with respect to Taxes imposed by the United States; provided that should a Bank, which is otherwise exempt from or subject to a reduced rate of withholding tax, become subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps as such Bank shall reasonably request to assist such Bank to recover such Taxes. (f) If the Borrower is required to pay additional amounts to or for the account of any Bank pursuant to this Section 8.04, then such Bank will change the jurisdiction of its Applicable Lending Office so as to eliminate or reduce any such additional payment which may thereafter accrue if such change, in the judgment of such Bank, is not otherwise disadvantageous to such Bank. SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate Loans. (a) If (i) the obligation of any Bank to make Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03 or 8.04 with respect to its CD Loans or Euro-Dollar Loans and the Borrower shall, by at least five Euro-Dollar Business Days' prior notice to such Bank through the Agent, have elected that the provisions of this Section 8.05(a) shall apply to such Bank, then, unless and until such Bank notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer exist: (x) all Loans which would otherwise be made by such Bank as CD Loans or Euro-Dollar Loans, as the case may be, shall be made instead as Base Rate Loans (on which interest and principal shall be payable contemporaneously with the related Fixed Rate Loans of the other Banks), and (y) after each of its CD Loans or Euro-Dollar Loans, as the case may be, has been repaid, all payments of principal which would otherwise be applied to repay such Fixed Rate Loans shall be applied to repay its Base Rate Loans instead. (b) If (i) any Bank has demanded compensation under Section 8.03 with respect to its CD Loans or Euro- Dollar Loans or (ii) the Borrower has become obligated to pay any Taxes or other amounts to or for the account of any Bank pursuant to Section 8.04, and the Borrower shall, by at least five Euro-Dollar Business Days' prior notice to the Banks through the Agent, have elected that the provisions of this Section 8.05(b) shall apply to all of the Banks, then the Borrower shall, on the fifth Euro-Dollar Business Day following such notice, prepay in full the then outstanding principal amount of each outstanding Euro-Dollar Loan or CD Loan, as the case may be, of each Bank, together with accrued interest thereon. SECTION 8.06. Substitution of Banks. If (i) any Bank has demanded compensation under Section 8.03 or (ii) the Borrower has become obligated to pay any Taxes or other amounts to or for the account of any Bank pursuant to Section 8.04 (such Bank, in either case, being called a "Selling Bank"), the Borrower shall have the right, with the assistance of the Agent, to seek one or more banks or other institutions satisfactory to the Borrower, the LC Issuing Banks and the Agent (collectively, the "Purchasing Banks") willing to purchase the Selling Bank's Note and its share of any unpaid Reimbursement Obligations and assume the Commitment of the Selling Bank, all on the terms specified in this Section 8.06. The Selling Bank shall be obligated to sell its Note and its share of any unpaid Reimbursement Obligations to such Purchasing Bank or Banks (which may include one or more of the Banks) within 15 days after receiving notice from the Borrower requiring it to do so, at an aggregate price equal to the outstanding principal amount thereof, plus unpaid interest accrued thereon to but excluding the date of sale. In connection with any such sale, and as a condition thereof, the Borrower shall pay to the Selling Bank all fees accrued for its account hereunder to but excluding the date of such sale, plus, if demanded by the Selling Bank at least two Domestic Business Days prior to such sale, (i) the amount of any compensation which would be due to the Selling Bank under Section 2.13 if the Borrower had prepaid the outstanding Fixed Rate Loans of the Selling Bank on the date of such sale and (ii) any additional compensation, Taxes or other amounts accrued for its account under Section 8.03 or 8.04, as applicable, to but excluding said date (it being understood that the Selling Bank shall retain its right to be compensated after the date of such sale for any such accrued amounts remaining unpaid). Upon such sale, the Purchasing Bank or Banks shall assume the Commitment of the Selling Bank, and the Selling Bank shall be released from its obligations hereunder to a corresponding extent. If any Purchasing Bank is not already one of the Banks, the Selling Bank, as assignor, such Purchasing Bank, as assignee, the Borrower, the LC Issuing Banks and the Agent shall enter into an assignment and assumption agreement substantially in the form of Exhibit G hereto, whereupon such Purchasing Bank shall be a Bank party to this Agreement, shall be deemed to be an Assignee hereunder and shall have all the rights and obligations of a Bank with a Commitment equal to its ratable share of the Commitment of the Selling Bank. Upon the consummation of any sale pursuant to this Section 8.06, the Selling Bank, the Agent and the Borrower shall make appropriate arrangements so that, if required, each Purchasing Bank receives a new Note. ARTICLE IX MISCELLANEOUS SECTION 9.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party: (x) in the case of the Borrower, an LC Issuing Bank, a Co-Agent or the Agent, at its address or telex number or facsimile number set forth on the signature pages hereof, (y) in the case of any Bank, at its address or telex number or facsimile number set forth in its Administrative Questionnaire or (z) in the case of any party, such other address or telex number or facsimile number as such party may hereafter specify for the purpose by notice to the Agent and the Borrower. Each such notice, request or other communication shall be effective (i) if given by telex, when such telex is transmitted to the telex number specified in this Section and the appropriate answerback is received, (ii) if given by facsimile transmission, when such facsimile is transmitted to the facsimile transmission number specified in or pursuant to this Section 9.01 and telephonic confirmation of receipt thereof is received, (iii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iv) if given by any other means, when delivered at the address specified in this Section; provided that notices to the Agent or the LC Issuing Banks under Article II or Article VIII shall not be effective until received. SECTION 9.02. No Waivers. No failure or delay by the Agent, any Bank or any LC Issuing Bank in exercising any right, power or privilege under any Financing Document shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. SECTION 9.03. Expenses; Indemnification. (a) The Borrower shall pay (i) all out-of-pocket expenses of the Agent, including fees and disbursements of special counsel for the Agent, in connection with the preparation and administration of the Financing Documents, any waiver or consent thereunder or any amendment thereof or any Default thereunder or any event or condition reasonably alleged by any Bank to be a possible Default thereunder and (ii) if an Event of Default occurs, all out-of-pocket expenses incurred by the Agent and each Bank, including fees and disbursements of counsel, in connection with such Event of Default and collection, bankruptcy, insolvency and other enforcement proceedings resulting therefrom. (b) The Borrower agrees to indemnify the Agent, each Co-Agent and each Bank, their respective affiliates and the respective directors, officers, agents and employees of the foregoing (each an "Indemnitee") and hold each Indemnitee harmless from and against any and all liabilities, losses, damages, costs and expenses of any kind, including, without limitation, the reasonable fees and disbursements of counsel, which may be incurred by such Indemnitee in connection with any investigative, administrative or judicial proceeding (whether or not such Indemnitee shall be designated a party thereto) brought or threatened relating to or arising out of the Financing Documents (other than the provisions thereof relating to Letters of Credit as to which indemnification is provided in Section 2.15(k)) or any actual or proposed use of proceeds of Loans hereunder; provided that no Indemnitee shall have the right to be indemnified hereunder for such Indemnitee's own gross negligence or willful misconduct as determined by a court of competent jurisdiction. SECTION 9.04. Sharing of Set-Offs. Each Bank agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise, receive (i) payment of a proportion of the aggregate amount of principal and interest due with respect to any Note held by it which is greater than the proportion received by any other Bank in respect of the aggregate amount of principal and interest due with respect to any Note held by such other Bank or (ii) payment of a proportion of its participation in the LC Liabilities which is greater that the proportion received by any other Bank in respect of its participation in the LC Liabilities, the Bank receiving such proportionately greater payment shall purchase such participations in the Notes or the LC Liabilities (as the case may be) held by the other Banks, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Notes held by the Banks shall be shared by the Banks pro rata and all such payments with respect to the LC Liabilities shall be shared pro rata by the Banks participating therein; provided that nothing in this Section shall impair the right of any Bank to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower other than its indebtedness under the Notes and the LC Liabilities. The Borrower agrees, to the fullest extent it may effectively do so under applicable law, that any holder of a participation in a Note or the LC Liabilities, whether or not acquired pursuant to the foregoing arrangements, may exercise rights of set-off or counterclaim and other rights with respect to such participation as fully as if such holder of a participation were a direct creditor of the Borrower in the amount of such participation. SECTION 9.05. Amendments and Waivers. Any provision of this Agreement or the Notes may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower and the Required Banks (and, if the rights or duties of the Agent or the LC Issuing Banks are affected thereby, by the Agent or the LC Issuing Banks, as the case may be); provided that no such amendment or waiver shall, unless signed by all the Banks, (i) increase or decrease the Commitment of any Bank (except for a ratable decrease in the Commitments of all Banks) or subject any Bank to any additional obligation, (ii) reduce the principal of or rate of interest on any Loan or any fees hereunder, (iii) postpone the date fixed for any payment of principal of or interest on any Loan, any Reimbursement Obligation or any fees hereunder or for any termination of any Commitment or (iv) change any provision of this Section or change the percentage of the Commitments, the Outstanding Credit Exposures or the Outstanding LC Exposures or of the aggregate unpaid principal amount of the Notes, or the number of Banks, which shall be required for the Banks or any of them to take any action under this Section or any other provision of the Financing Documents. SECTION 9.06. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrower may not assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all Banks. (b) Any Bank may at any time grant to one or more banks or other institutions (each a "Participant") participating interests in its Commitment or any or all of its Loans or its Outstanding LC Exposure. Within five Domestic Business Days after such grant, unless such grant consists solely of a participating interest in the Money Market Loans of such Bank, such Bank shall notify the Borrower of the name of such Participant and the amount of its participating interest. In the event of any such grant by a Bank of a participating interest to a Participant, whether or not upon notice to the Agent, such Bank shall remain responsible for the performance of its obligations hereunder, and the Borrower and the Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Borrower hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement described in clause (i), (ii) or (iii) of Section 9.05 without the consent of the Participant. The Borrower agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Article VIII with respect to its participating interest. An assignment or other transfer which is not permitted by subsection (c) or (d) below shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection (b). (c) Any Bank may at any time assign to one or more banks or other institutions (each an "Assignee") all, or, subject to the next sentence, a proportionate part of all, of its rights and obligations under this Agreement and the Notes, and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit G hereto (an "Assignment and Assumption Agreement") executed by such Assignee and such transferor Bank, with (and subject to) the subscribed consent of the Borrower (which shall not be unreasonably withheld), the LC Issuing Banks and the Agent; provided that if an Assignee is an affiliate of such transferor Bank or another Bank, the consent of the Borrower and the Agent shall not be required; and provided further that such assignment may, but need not, include rights of the transferor Bank in respect of outstanding Money Market Loans. No assignment of a proportionate part of the rights and obligations of a Bank under this Agreement and the Notes may be made unless the "Assigned Amount" set forth in the related Assignment and Assumption Agreement equals or exceeds $5,000,000. Upon execution and delivery of an Assignment and Assumption Agreement and payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, such Assignee shall be a Bank party to this Agreement and shall have all the rights and obligations of a Bank with a Commitment as set forth in such Assignment and Assumption Agreement, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this subsection (c), the transferor Bank, the Agent and the Borrower shall make appropriate arrangements so that, if required, a new Note is issued to the Assignee. In connection with any such assignment, the transferor Bank shall pay to the Agent an administrative fee for processing such assignment in the amount of $2,500. If the Assignee is not incorporated under the laws of the United States of America or a state thereof, it shall deliver to the Borrower and the Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 8.04. (d) Any Bank may at any time assign all or any portion of its rights under this Agreement and its Note to a Federal Reserve Bank. No such assignment shall release the transferor Bank from its obligations hereunder. (e) No Assignee, Participant or other transferee of any Bank's rights shall be entitled to receive any greater payment under Section 8.03 or 8.04 than such Bank would have been entitled to receive with respect to the rights transferred, unless such transfer is made with the Borrower's prior written consent or by reason of the provisions of Section 8.02, 8.03 or 8.04 requiring such Bank to designate a different Applicable Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist. SECTION 9.07. Collateral. Each of the Banks represents to the Agent and each of the other Banks that it in good faith is not relying upon any "margin stock" (as defined in Regulation U) as collateral in the extension or maintenance of the credit provided for in this Agreement. SECTION 9.08. Governing Law; Submission to Jurisdiction. This Agreement and each Note shall be governed by and construed in accordance with the laws of the State of New York. The Borrower hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to the Financing Documents or the transactions contemplated thereby. The Borrower irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. SECTION 9.09. Counterparts; Integration. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof. SECTION 9.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE AGENT, THE CO-AGENTS, THE LC ISSUING BANKS AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE FINANCING DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY. SECTION 9.11. Confidentiality. The Agent, each LC Issuing Bank and each Bank agrees to keep confidential any proprietary or financial information obtained by the Agent, such LC Issuing Bank or such Bank, as the case may be, based on a review of the books and records of the Borrower or any Subsidiary pursuant to Section 5.06 and any other information to the extent such information has been stated by the Borrower to be confidential; provided that nothing herein shall prevent the Agent, any LC Issuing Bank or any Bank from disclosing such information (i) to the Agent, any LC Issuing Bank or any other Bank in connection with the transactions contemplated by the Financing Documents, (ii) to the officers, directors, employees, agents, attorneys and accountants of such party and its affiliates who have a need to know such information in accordance with customary banking practices and who receive such information having been made aware of the restrictions set forth in this Section, (iii) upon the order of any court or administrative agency, (iv) upon the request or demand of any regulatory agency or authority having jurisdiction over such party, (v) which has been publicly disclosed, (vi) which has been obtained from any Person other than the Borrower and its Subsidiaries, provided that such Person is not known to it to be bound by a confidentiality agreement with the Borrower or its Subsidiaries or known to it to be otherwise prohibited from transmitting the information to it by a contractual, legal or fiduciary obligation, (vii) in connection with the exercise of any remedy under the Financing Documents or (viii) to any actual or proposed participant or assignee of all or any of its rights under the Financing Documents, provided that such proposed participant or assignee shall have agreed in writing, for the benefit of the Borrower as a third-party beneficiary, to be bound by the provisions of this Section. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. CONSOLIDATED FREIGHTWAYS, INC. By /s/ R. Guy Kraines Title: Assistant Treasurer 3240 Hillview Avenue Palo Alto, California 94304 Telex number: (910) 373-2105 Facsimile number: (415) 813-0160 Telephone number: (415) 494-2900 Commitment: $30,000,000 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By /s/ Carl J. Mehldau, Jr. Title: Associate $30,000,000 ABN-AMRO BANK, N.V. By /s/ Jeffrey A. French Title: Vice President By /s/ L.T. Osborne Title: Group Vice President $30,000,000 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By /s/ Michael J. Dasher Title: Vice President $30,000,000 THE FIRST NATIONAL BANK OF CHICAGO By /s/ Karen J. Andrews Title: Vice President $30,000,000 MELLON BANK, N.A. By /s/ Harry F. Kusick, Jr. Title: First Vice President and Department Senior Credit Officer $25,000,000 THE INDUSTRIAL BANK OF JAPAN, LIMITED, SAN FRANCISCO AGENCY By /s/ Makoto Masuda Title: Deputy General Manager $25,000,000 THE LONG-TERM CREDIT BANK OF JAPAN, LTD., LOS ANGELES AGENCY By /s/ Curt Biren Title: Vice President $20,000,000 UNION BANK By /s/ Jana P. Strycker Title: Vice President $20,000,000 UNITED STATES NATIONAL BANK OF OREGON By /s/ Ann C. Smith Title: Vice President $15,000,000 THE BANK OF CALIFORNIA, N.A. By /s/ Robert J. Vernagallo Title: Vice President $15,000,000 CREDIT SUISSE By /s/ David J. Worthington Title: Member of Senior Management By /s/ Marilou Palenzuela Title: Member of Senior Management $15,000,000 FIRST INTERSTATE BANK OF OREGON, N.A. By /s/ Dave Perry Title: Vice President $15,000,000 PNC BANK, NATIONAL ASSOCIATION By /s/ J. Gregory Seibly Title: Vice President Total Commitments: $300,000,000 ============ ABN-AMRO BANK, N.V., as LC Issuing Bank 101 California Street Suite 4550 San Francisco, CA 94111-5612 Attn: Jeffrey A. French, Vice President Telex number: 278137 ABNSF UR Facsimile number: (415) 362-3524 Telephone number: (415) 984-3703 By /s/ Jeffrey A. French Title: Vice President By /s/ L.T. Osborne Title: Group Vice President BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as LC Issuing Bank By /s/ Michael J. Dasher Title: Vice President 555 California Street San Francisco, CA 94104 Attn: Michael J. Dasher, Vice President Credit Products 3838 Facsimile number: (415) 622-4585 Telephone number: (415) 622-2126 with a copy to: Bank of America National Trust and Savings Association 1850 Gateway Boulevard Concord, CA 94520 Attn: Cheryl Colombo Customer Services Officer Global Payment Operations Domestic Account Administration 5693 Facsimile number: (510) 885-7531 Telephone number: (510) 885-7040 THE FIRST NATIONAL BANK OF CHICAGO, as LC Issuing Bank By /s/ Karen J. Andrews Title: Vice President 1 First National Plaza 10th Floor, Suite 0362 Chicago, Illinois 60670 Attention: Gerald F. Mackin, Vice President Facsimile number: (312) 732-3055 Telephone number: (312) 732-1905 with a copy to: The First National Bank of Chicago 1 North Dearborn 9th Floor Chicago, Illinois 60670 Attention: Mark Klatt Facsimile number: (312) 407-1065 Telephone number: (312) 407-3024 MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as LC Issuing Bank By /s/ Carl J. Mehldau, Jr. Title: Associate J.P. Morgan Delaware Morgan Christiana Center 500 Stanton Christiana Road Newark, Delaware 19713 Attention: Barbara Martel, Associate Facsimile number: (302) 634-1838 Telephone number: (302) 634-1925 with a copy to: 60 Wall Street New York, New York 10260-0060 Attention: David Ellis, Vice President Telex number: 177615 Facsimile number: (212) 648-5014 Telephone number: (212) 648-7638 ABN-AMRO BANK, N.V., as Co-Agent 101 California Street Suite 4550 San Francisco, CA 94111-5612 Attn: Jeffrey A. French, Vice President Telex number: 278137 ABNSF UR Facsimile number: (415) 362-3524 Telephone number: (415) 984-3703 By /s/ Jeffrey A. French Title: Vice President By /s/ L.T. Osborne Title: Group Vice President BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Co-Agent 555 California Street San Francisco, CA 94104 Attn: Michael J. Dasher, Vice President Credit Products 3838 Facsimile number: (415) 622-4585 Telephone number: (415) 622-2126 By /s/ Michael J. Dasher Title: Vice President THE FIRST NATIONAL BANK OF CHICAGO, as Co-Agent By /s/ Karen J. Andrews Title: Vice President 1 First National Plaza 10th Floor, Suite 0362 Chicago, Illinois 60670 Attention: Gerald F. Mackin, Vice President Facsimile number: (312) 732-3055 Telephone number: (312) 732-1905 MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent By /s/ Carl J. Mehldau, Jr. Title: Associate J.P. Morgan Delaware Morgan Christiana Center 500 Stanton Christiana Road Newark, Delaware 19713 Attention: Jeannie Mattson, Associate Facsimile number: (302) 634-1092 Telephone number: (302) 634-1938 with a copy to: 60 Wall Street New York, New York 10260-0060 Attention: David T. Ellis, Vice President Telex number: 177615 Facsimile number: (212) 648-5014 Telephone number: (212) 648-7638 EX-10.38 10 EXHIBIT 10.38 AMENDED AND RESTATED CONSOLIDATED FREIGHTWAYS, INC. 1993 NONQUALIFIED EMPLOYEE BENEFIT PLANS TRUST AGREEMENT (a) This Amended and Restated Agreement, effective this 1st day of January, 1995, by and between CONSOLIDATED FREIGHTWAYS, INC., a Delaware corporation (Company) and MELLON BANK, N.A., (Trustee); (b) WHEREAS, Company has adopted the nonqualified deferred compensation Plan(s) as listed in Appendix A; (c) WHEREAS, Company has incurred or expects to incur liability under the terms of such Plan(s) with respect to the individuals participating in such Plan(s); (d) WHEREAS, Company now wishes to establish and contribute to this trust (the "Trust") assets that shall be held therein, subject to the claims of Company's creditors in the event of Company's Insolvency, as herein defined, until paid to Plan participants and their beneficiaries in such manner and at such times as specified in the Plan(s); (e) WHEREAS, it is the intention of the parties that this Trust shall constitute an unfunded arrangement and shall not affect the status of the Plan(s) as an unfunded plan maintained for the purpose of providing deferred compensation for a select group of management or highly compensated employees for purposes of Title I of the Employee Retirement Income Security Act of 1974; (f) WHEREAS, it is the intention of Company to make contributions to the Trust to provide itself with a source of funds to assist it in the meeting of its liabilities under the Plan(s); NOW, THEREFORE, the parties do hereby establish the Trust and agree that the Trust shall be comprised, held and disposed of as follows: Section 1. Establishment of Trust (a) Company hereby deposits with Trustee in trust $100.00, which shall become the principal of the Trust to be held, administered and disposed of by Trustee as provided in this Trust Agreement.2 (b) The Trust hereby established shall be irrevocable. (c) The Trust is intended to be a grantor trust, of which Company is the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended, and shall be construed accordingly. (d) The principal of the Trust, and any earnings thereon shall be held separate and apart from other funds of Company and shall be used exclusively for the uses and purposes of Plan participants and general creditors as herein set forth. Plan participants and their beneficiaries shall have no preferred claim on, or any beneficial ownership interest in, any assets of the Trust. Any rights created under the Plan(s) and this Trust Agreement shall be mere unsecured contractual rights of Plan participants and their beneficiaries against Company. Any assets held by the Trust will be subject to the claims of Company's general creditors under federal and state law in the event of Insolvency, as defined in Section 3(a) herein. (e) Within 90 days following the end of each Plan Year, and within 30 days following any change in control, as defined in Section 14(e), below, Company shall irrevocably deposit additional cash or other property (which shall not be Company stock) to the Trust in an appropriate amount sufficient to pay each Plan participant or beneficiary the benefits payable pursuant to the terms of the Plan(s) as of the close of such Plan Year based on the distributions elected by Plan participants other than upon termination of employment, or as of the date of such change in control (as the case may be). (f) Trustee accepts the Trust established under this Trust Agreement on the terms and subject to the provisions set forth herein, and it agrees to discharge and perform fully and faithfully all of the duties and obligations imposed upon it under this Trust Agreement. Section 2. Payments to Plan Participants and Their Beneficiaries (a) Company shall deliver to Trustee a schedule (the "Payment Schedule") that indicates the amounts payable in respect of each Plan participant (and his or her beneficiaries), that provides a formula or other instructions acceptable to Trustee for determining the amounts so payable, the form in which such amount is to be paid (as provided for or available under the Plan(s)), and the time of commencement for payment of such amounts. Except as otherwise provided in Section 2(c) below or elsewhere herein, Trustee shall make payments to the Plan participants and their beneficiaries in accordance with such Payment Schedule and shall make payments of legal fees and expenses as required by the Plan(s). The Trustee shall make provisions for the reporting and withholding of any federal, state or local taxes that may be required to be withheld with respect to the payment of benefits pursuant to the terms of the Plan(s) and shall pay amounts withheld to the appropriate taxing authorities or determine that such amounts have been reported, withheld and paid by the Company. Company shall provide Trustee with the rates at which taxes are to be withheld and shall be responsible for providing payees with all required state and federal notices regarding withholding. Company shall also be responsible for depositing all withheld amounts with the appropriate taxing authorities and for providing each Plan participant (or beneficiary) with the appropriate information evidencing such withholding payments. (b) The entitlement of a Plan participant or his or her beneficiaries to benefits or legal fees and expenses under the Plan(s) shall be determined by Company or such party as it shall designate under the Plan(s), and any claim for such benefits shall be considered and reviewed under the procedures set out in the Plan(s). (c) Company may make payment of benefits and legal fees and expenses directly to Plan participants or their beneficiaries as they become due under the terms of the Plan(s). Company shall notify Trustee of its decision to make payment of benefits or legal fees and expenses directly prior to the time amounts are payable to participants or their beneficiaries. In addition, if the principal of the Trust, and any earnings thereon, are not sufficient to make payments of benefits in accordance with the terms of the Plan(s), Company shall make the balance of each such payment as it falls due. Trustee shall notify Company when principal and earnings are not sufficient. (d) Trustee shall not be liable for any failure by Company to provide contributions sufficient to pay all benefits and legal fees and expenses under the Plan(s) in full. Section 3. Trustee Responsibility Regarding Payments to Trust Beneficiary When Company Is Insolvent (a) Trustee shall cease payment of benefits and legal fees and expenses to Plan participants and their beneficiaries if the Company is Insolvent. Company shall be considered "Insolvent" for purposes of this Trust Agreement if (i) Company is unable to pay its debts as they become due, or (ii) Company is subject to a pending proceeding as a debtor under the United States Bankruptcy Code. (b) At all times during the continuance of this Trust, as provided in Section 1(d) hereof, the principal and income of the Trust shall be subject to claims of general creditors of Company under federal and state law as set forth below. (1) The Board of Directors and the Chief Executive Officer of Company shall have the duty to inform Trustee in writing of Company's Insolvency. If a person claiming to be a creditor of Company alleges in writing to Trustee that Company has become Insolvent, Trustee shall determine whether Company is Insolvent and, pending such determination, Trustee shall discontinue payment of benefits and legal fees and expenses to Plan participants or their beneficiaries. In all cases, Trustee shall be entitled to conclusively rely upon the written certification of the Board of Directors or the Chief Executive Officer of the Company when determining whether the Company is solvent. (2) Unless Trustee has actual knowledge of Company's Insolvency, or has received notice from Company or a person claiming to be a creditor alleging that Company is Insolvent, Trustee shall have no duty to inquire whether Company is Insolvent. Trustee may in all events rely on such evidence concerning Company's solvency as may be furnished to Trustee and that provides Trustee with a reasonable basis for making a determination concerning Company's solvency. (3) If at any time Trustee has determined that Company is Insolvent, Trustee shall discontinue payments to Plan participants or their beneficiaries and shall hold the assets of the Trust for the benefit of Company's general creditors. Nothing in this Trust Agreement shall in any way diminish any rights of Plan participants or their beneficiaries to pursue their rights as general creditors of Company with respect to benefits due under the Plan(s) or otherwise. (4) Trustee shall resume the payment of benefits and legal fees and expenses to Plan participants or their beneficiaries in accordance with Section 2 of this Trust Agreement only after Trustee has determined that Company is not Insolvent (or is no longer Insolvent). (5) Provided that there are sufficient assets, if Trustee discontinues the payment of benefits and legal fees and expenses from the Trust pursuant to Section 3(b) hereof and subsequently resumes such payments, the first payment following such discontinuance shall include the aggregate amount of all payments due to Plan participants or their beneficiaries under the terms of the Plan(s) for the period of such discontinuance, less the aggregate amount of any payments made to Plan participants or their beneficiaries by Company in lieu of the payments provided for hereunder during any such period of discontinuance. Section 4. Payments to Company (a) Except as provided in Section 3 hereof or in subsection (b) below, Company shall have no right or power to direct Trustee to return to Company or to divert to others any of the Trust assets before all payment of benefits have been made to Plan participants and their beneficiaries pursuant to the terms of the Plan(s). (b) If Company elects to make payment of benefits directly to Plan participants or their beneficiaries pursuant to the terms of Section 2(c), above, the Trustee shall distribute to Company within 30 days of a request for payment an amount equal to each such payment made by Company, excluding any legal fees or expenses. Section 5. Investment and Administration of the Trust (a) Trustee shall have the power: (i) To invest the assets of the Trust as directed by the Board of Directors of Company or a Committee thereof. In no event, shall the Trustee be instructed to invest in real estate, options or future contracts. If the Board wants to invest all or part of the assets in collective funds, the Company shall add to this Trust Agreement such collective fund language as may from time to time be required by the Trustee. Such Board reserves the right to delegate this investment authority to Trustee or an investment manager; (ii) To collect and receive any and all money and other property due to the Trust and to give full discharge therefor; (iii) To settle, compromise or submit to arbitration any claims, debts or damages due or owing to or from the Trust; to commence or defend suits or legal proceedings to protect any interest of the Trust; and to represent the Trust in all suits or legal proceedings in any court or before any other body or tribunal; (iv) Generally to do all acts, whether or not expressly authorized, which Trustee may deem necessary or desirable for the protection of the Trust. (b) Persons dealing with Trustee shall be under no obligation to see to the proper application of any money paid or property delivered to Trustee or to inquire into Trustee's authority as to any transaction. (c) Company shall have the right at any time, and from time to time in its sole discretion, to substitute assets of equal fair market value for any asset held by the Trust. This right is exercisable by Company in a nonfiduciary capacity without the approval or consent of any person in a fiduciary capacity. Section 6. Disposition of Income During the term of this Trust, all income received by the Trust, net of expenses and taxes, shall be accumulated and reinvested. Section 7. Accounting by Trustee (a) Trustee shall keep accurate and detailed records of all investments, receipts, disbursements, and all other transactions required to be made, including such specific records as shall be agreed upon in writing between Company and Trustee. All such accounts, books and records shall be open to inspection and audit at all reasonable times by Company or Company's representatives or agents. Within 120 days following the close of each calendar year and within 120 days after the removal or resignation of Trustee, Trustee shall deliver to Company a written account of its administration of the Trust during such year or during the period from the close of the last preceding year to the date of such removal or resignation, setting forth all investments, receipts, disbursements and other transactions effected by it, including a description of all securities and investments purchased and sold with the cost or net proceeds of such purchases or sales (accrued interest paid or receivable being shown separately), and showing all cash, securities and other property held in the Trust at the end of such year or as of the date of such removal or resignation, as the case may be. (b) The written approval of any accounting by Company shall be final as to all matters and transactions stated or shown therein and shall be binding upon Company and all beneficiaries of the Trust and other persons who then shall be or thereafter become interested in the Trust, except for Trustee's gross negligence or willful misconduct. Failure of Company to notify Trustee within 180 days after receipt of any accounting of its disapproval of such accounting shall be the equivalent of written approval. (c) Trustee shall timely provide Company with such information as Trustee possesses as Company may need for tax or other reporting purposes. Trustee shall also furnish such information to any participant so requesting in writing. Section 8. Responsibility of Trustee (a) Trustee shall act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims, provided, however, that Trustee shall incur no liability to any person for any action taken pursuant to a direction, request or approval given by Company, which is contemplated by, and in conformity with, the terms of the Plan(s) or this Trust and is given in writing by Company, and to that extent, Trustee shall be relieved of liability for the prudent person rule for investments. In the event of a dispute between Company and a party, Trustee may apply to a court of competent jurisdiction to resolve the dispute. (b) Trustee shall not be required to undertake or to defend any litigation arising in connection with this Trust Agreement, unless it be first indemnified by Company against its prospective costs, expenses and liability, and Company hereby agrees to indemnify Trustee for such costs, expenses and liability. (c) Trustee may hire agents, accountants, actuaries, investment advisors, financial consultants or other professionals to assist it in performing any of its duties or obligations hereunder. Expenses of such persons shall be deemed to be expenses of management and administration of the Trust within the meaning of Section 9(b), below. (d) Trustee shall have, without exclusion, all powers conferred on Trustees by applicable law, unless expressly provided otherwise herein, provided, however, that if an insurance policy is held as an asset of the Trust, Trustee shall have no power to name a beneficiary of the policy other than the Trust, to assign the policy (as distinct from conversion of the policy to a different form) other than to a successor Trustee, or to loan to any person the proceeds of any borrowing against such policy. (e) However, notwithstanding the provisions of Section 8(d) above, Trustee may loan to Company the proceeds of any borrowing against an insurance policy held as an asset of the Trust. (f) Notwithstanding any powers granted to Trustee pursuant to this Trust Agreement or to applicable law, Trustee shall not have any power that could give this Trust the objective of carrying on a business and dividing the gains therefrom, within the meaning of section 301.7701-2 of the Procedure and Administrative Regulations promulgated pursuant to the Internal Revenue Code. Section 9. Taxes, Compensation and Expenses of Trustee (a) Company shall from time to time pay taxes (references in this Trust Agreement to the payment of taxes shall include interest and applicable penalties) of any and all kind whatsoever which at any time are lawfully levied or assessed upon or become payable in respect of the Trust, the income or any property forming a part thereof, or any security transaction pertaining thereto. To the extent that any taxes levied or assessed upon the Trust are not paid by Company or contested by Company pursuant to the last sentence of this Section 9(a), Trustee shall pay such taxes out of the Trust, and Company shall, upon notice by Trustee, deposit into the Trust an amount equal to the amount paid from the Trust to satisfy such tax liability. If requested by Company, and agreed to by Trustee, Trustee shall at Company's expense, contest the validity of such taxes in any manner deemed appropriate by Company or its counsel, but only if it has received an indemnity bond or other security satisfactory to it to pay any expenses of such contest. Alternatively, Company may itself contest the validity of any such taxes, but any such contest shall not affect Company's obligation to reimburse the Trust for taxes paid from the Trust. (b) Trustee may be paid compensation by Company in accordance with any written agreement for this purpose between them. Trustee shall be reimbursed by Company for its reasonable expenses of management and administration of the Trust, including reasonable compensation of any agent engaged by Trustee to assist it in such management and administration. The fees for Legal Counsel, as defined in Section 10(c), below, and other reasonable expenses, will be paid by Company. Trustee shall be able to charge the Trust for such compensation and for any reasonable expenses including Legal Counsel, appraisal or accounting fees, and the same may be deducted from the Trust unless paid by Company within 60 days after Company receives written billing by Trustee; provided that this paragraph shall not apply while a dispute over the amount of such charges exists. Section 10. For Protection of Trustee (a) Company shall certify to Trustee the name or names of any person or persons authorized to act for Company. Such certification shall be signed by the Chief Executive Officer or other officer of Company duly authorized by the Board of Directors of Company. Until Company notifies Trustee, in a similarly signed notice, that any such person is no longer authorized to act for Company, Trustee may continue to rely upon the authority of such person. Trustee may rely upon any certificate, notice or direction of Company which Trustee reasonably believes to have been signed by a duly authorized officer or agent of Company. (b) Notices to Trustee shall be sent in writing to Trustee's office at One Mellon Bank Center, Room 3346, Pittsburgh, Pennsylvania 15258 or to such other address as Trustee may specify. No communication shall be binding upon Trust or Trustee until it is received by Trustee and unless it is in writing and signed by an authorized person. Notices to Company shall be sent in writing, attention General Counsel, to Company's principal office at 3240 Hillview Avenue, Palo Alto, California 94304 or to such other address as Company may specify. No notice shall be binding upon Company until it is received by Company. (c) Trustee may consult with any legal counsel ("Legal Counsel") for the purpose of obtaining advice on topics including but not limited to the construction of this Trust Agreement, its duties hereunder, or any act which it proposes to take or omit, and shall not be liable for any action taken or omitted in good faith pursuant to such advice. Expenses of Legal Counsel shall be deemed to be an expense of management and administration of the Trust within the meaning of Section 9(b), above. (d) Trustee shall discharge its duties under this Trust Agreement in a manner consistent with the objectives of this Trust Agreement. Trustee shall not be liable for any loss sustained by the Trust by reason of the purchase, retention, sale or exchange of any investment in good faith and in accordance with the provisions of this Trust Agreement. Trustee shall have no responsibility or liability for any failure of Company to make contributions to the Trust. Trustee shall not be liable hereunder for any act taken or omitted, except for its own gross negligence or willful misconduct. Trustee's duties and obligations shall be limited to those expressly imposed upon it by this Trust Agreement, and Trustee shall have no responsibility under the Plan(s), notwithstanding any reference to the Plan(s). (e) Company hereby indemnifies and holds Trustee harmless from and against any and all losses, damages, costs, expenses or liabilities (herein, "Liabilities"), including reasonable attorneys' fees and other costs of litigation, to which Trustee may become subject pursuant to, and arising out of, occasioned by, incurred in connection with or in any way associated with this Trust Agreement, except for any act or omission constituting gross negligence or willful misconduct of Trustee. (f) If one or more Liabilities shall arise, or if Company fails to indemnify Trustee as provided herein, then Trustee may engage Legal Counsel of Trustee's choice, but at Company's expense, either to conduct the defense against such Liabilities or to conduct such actions as may be necessary to obtain the indemnity provided for herein, or to take both such actions. Trustee shall notify Company within 15 days after Legal Counsel has been engaged with the name and address of such Legal Counsel. Section 11. Resignation and Removal of Trustee (a) Trustee may resign at any time by written notice to Company, which shall be effective 60 days after receipt of such notice unless Company and Trustee agree otherwise. (b) Trustee may be removed by Company on 60 days' notice or upon shorter notice accepted by Trustee. (c) If Trustee resigns or is removed within 2 years of a change in control, as defined in Section 14(e), below, Trustee shall select a successor Trustee in accordance with the provisions of Section 12(b) hereof prior to the effective date of Trustee's resignation or removal. (d) Upon resignation or removal of Trustee and appointment of a successor Trustee, all assets shall subsequently be transferred to the successor Trustee. The transfer shall be completed within 60 days after receipt of notice of resignation, removal or transfer, unless Company extends the time limit. (e) If Trustee resigns or is removed, a successor shall be appointed, in accordance with Section 12 hereof, by the effective date of resignation or removal under paragraph(s) (a) or (b) of this section. If no such appointment has been made, Trustee may apply to a court of competent jurisdiction for appointment of a successor or for instructions. All expenses of Trustee in connection with the proceeding shall be allowed as administrative expenses of the Trust. Section 12. Appointment of Successor (a) If Trustee resigns or is removed in accordance with Section 11(a) or (b) hereof, Company shall appoint a bank or trust company in good standing, organized and doing business under the laws of the United States or a state thereof, with a combined capital and surplus of not less that $50,000,000 and authorized under the laws governing its organization to exercise corporate trustee powers, as a successor to replace Trustee upon resignation or removal. The appointment shall be effective when accepted in writing by the new Trustee, who shall have all of the rights and powers of the former Trustee, including ownership rights in the Trust assets. The former Trustee shall execute any instrument necessary or reasonably requested by Company or the successor Trustee to evidence the transfer. (b) If Trustee resigns or is removed pursuant to the provisions of Section 11(c) hereof and selects a successor Trustee, Trustee shall appoint a bank or trust company in good standing, organized and doing business under the laws of the United States or a state thereof, with a combined capital and surplus of not less that $50,000,000 and authorized under the laws governing its organization to exercise corporate trustee powers. The appointment of a successor Trustee shall be effective when accepted in writing by the new Trustee. The new Trustee shall have all the rights and powers of the former Trustee, including ownership rights in Trust assets. The former Trustee shall execute any instrument necessary or reasonably requested by the successor Trustee to evidence the transfer. (c) The successor Trustee need not examine the records and acts of any prior Trustee and may retain or dispose of existing Trust assets, subject to Sections 5, 7 and 8 hereof. The successor Trustee shall not be responsible for and Company shall indemnify and defend the successor Trustee from any claim or liability resulting from any action or inaction of any prior Trustee or from any other past event, or any condition existing at the time it becomes successor trustee. Section 13. Amendment or Termination (a) This Trust Agreement may be amended by a written instrument executed by Trustee and Company, provided that no amendment which would materially affect the likelihood that assets of the Trust will be available to fund benefits payable under the Plan(s) shall be made unless the prior written approval of 75% of the Plan participants (or beneficiaries as the case may be) has been obtained; and provided further, that no amendment shall increase the duties or responsibilities of Trustee unless Trustee consents thereto in writing. (b) The Trust shall not terminate until the date on which Plan participants and their beneficiaries are no longer entitled to benefits pursuant to the terms of the Plan(s). The Trust shall terminate at the discretion of Company if the Internal Revenue Service or any court rules that Company is not the owner of the Trust, that Plan participants (or their beneficiaries) are taxable on payment of Plan benefits prior to their becoming payable or that Plan participants (or their beneficiaries) have greater rights to assets of the Trust than other general creditors of Company. (c) Upon written approval of 75 percent of the Plan participants or beneficiaries entitled to payment of benefits pursuant to the terms of the Plan(s), Company may terminate this Trust prior to the time all benefit payments under the Plan(s) have been made. (d) Upon termination of the Trust, after its final accounting, Trustee shall distribute the net balance of any assets of the Trust remaining after all benefits, legal fees and expenses, and management and administration expenses have been paid. Upon making such a distribution, Trustee shall be relieved from all further liability. Section 14. Miscellaneous (a) Any provision of this Trust Agreement prohibited by law shall be ineffective to the extent of such prohibition, without invalidating the remaining provisions hereof. (b) Any reference to Plan(s) provisions which require knowledge of the Plan shall impose a duty on the Company to communicate such knowledge to the Trustee by giving the Trustee relevant portions of the Plan((s) and the Trustee shall be entitled to rely upon such provisions until notified by the Company. (c) Benefits payable to Plan participants and their beneficiaries under this Trust Agreement may not be anticipated, assigned (either at law or in equity), alienated, pledged, encumbered or subjected to attachment, garnishment, levy, execution or other legal or equitable process. (d) This Trust Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania. (e) For purposes of this Trust, "change in control" shall have the same meaning as provided in the Plan(s). (f) The headings of sections of this Trust Agreement and defined terms are used herein for convenience of reference only and in case of any conflict the text of this Agreement shall control. (g) This Agreement shall be binding upon and inure to the benefit of any successor to Company or its business as the result of merger, consolidation, reorganization, transfer of assets or otherwise and any subsequent successor thereto, and any such successor shall be deemed to be the "Company" under this Agreement. In the event of any such merger, consolidation, reorganization, transfer of assets or other similar transaction, the successor to Company or its business or any subsequent successor thereto shall promptly notify Trustee in writing of its successorship and furnish the Trustee with the information specified in Section 10(a) of this Agreement. In no event shall any such transaction described herein suspend or delay the rights of Plan participants (or their beneficiaries) to receive benefits hereunder. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers as of the day and year first above written. CONSOLIDATED FREIGHTWAYS, INC. MELLON BANK, N.A. By: /s/Eberhard G.H. Schmoleler By: ___________________ Name: /s/Eberhard G.H. Schmoleler Name: ___________________ Title: Senior Vice President Title: ___________________ and General Counsel EX-10.40 11 Exhibit 10.40 AMENDED AND RESTATED RETIREMENT PLAN FOR DIRECTORS OF CONSOLIDATED FREIGHTWAYS, INC. January 1, 1994 I. PURPOSE The Consolidated Freightways, Inc. Retirement Plan for Directors (the "Plan") has been established to provide retirement income to eligible directors and to assist Consolidated Freightways, Inc. (the "Company") in attracting and retaining individuals with the desired skills to serve on the Board of Directors of the Company (the "Board") and effectively carry out their duties in representing the Company and its shareholders. II. TERM The Plan is effective as of May 1, 1989 and shall remain in effect unless amended or terminated by the Board or ter- minated by change of control, as described in Section V of this Plan. III. ELIGIBILITY AND VESTING A director of the Company shall automatically participate in the Plan by accruing a retirement benefit for each full calendar month he or she is a non-employee director of the Company. The retirement benefit accrued vests when a participant completes sixty months of service as a director, including service as an employee and non-employee director. If a participant terminates service as a director prior to that time, such participant shall not be entitled to any retirement benefit under the Plan. IV. RETIREMENT BENEFIT (a) Accrual of Retirement Benefit For each full calendar month that a director serves as a non-employee director of the Company prior to January 1, 1994, the director will accrue a retirement benefit equal to $2,500. Each month after that date, a director will accrue a retirement benefit equal to one-twelfth of the annual cash retainer, whether paid or deferred, then in effect. The maximum number of months for which benefits may be accrued as a non-employee director is two hundred-forty months (twenty years). (b) Timing of Benefit Payment and Form Should a participant terminate service as a director mid-quarter, the first benefit payment shall be paid the first of the month following termination, provided that the participant is not then an employee of the Company or a subsidiary on such date. If the participant is an employee of the Company or a subsidiary on the first payment date, benefit payments shall commence on the first day of the next subsequent month as of which the participant is not an employee of the Company or a subsidiary. Otherwise, retirement benefits shall be paid quarterly, commencing on the first day of the calendar quarter following termination of service as a director. (c) Amount of Benefit Payments Quarterly benefit payments shall equal three months of accrued benefits, starting with the earliest amounts accrued. If termination of service occurs mid-quarter, the first payment shall be prorated based on the number of full calendar months remaining in the quarter. Payments shall continue until all accrued retirement benefits have been paid. (d) Suspension of Benefits If a participant resumes service as a director or becomes an employee of the Company or a subsidiary after payments begin under the terms of this Plan, benefit payments shall cease during the period of subsequent service or employment. If a participant is a non-employee director, the participant shall continue to accrue a retirement benefit for each full month of service, subject to limitation on accrual of a maximum of two hundred forty months. In no event shall the participant be credited with service for any period in which the participant receives benefit payments under this Plan, nor shall a participant be entitled to payments for more than two- hundred-forty months. (e) Death Benefits If a director dies after having vested in a benefit under this Plan, but before all payments due that director have been made, any remaining payments shall be made to the director's surviving spouse. If at any time after the director is deceased, no surviving spouse exists, or a surviving spouse should die before all payments are made, a lump sum present value of the remaining benefits shall be payable to the director's or spouse's estate, as the case may be. Present value shall be determined as of the date of death using the published prime rate of Bank of America N.T. & S.A. then in effect. (f) Forfeiture Any benefits payable under this Plan shall be forfeited in their entirety by any director who is terminated from service on the Board for cause or who becomes an employee or consultant of a competitor organization without the written consent of the Compensation Committee of the Board of Directors of the Company. In this Plan, cause shall be used to mean acts of moral turpitude. The Compensation Committee shall determine whether or not termination is for cause or if the participant becomes an employee or consultant of a competitor, in its sole discretion. V. CHANGE OF CONTROL If a change of control of the Company occurs, the Plan shall be immediately terminated and all benefits accrued to the date of the change of control shall become immediately payable to the participants, without discount or offset. A "change in control" shall be deemed to have occurred, (i) if at any time (a) the Company shall cease to be a publicly owned corporation having its outstanding common stock listed on a nationally recognized stock exchange or traded over the counter, or (b) more than 25% of the Company's outstanding common stock (or the equivalent in voting power of any class or classes of outstanding securities of the Company ordinarily entitled to vote in the election of directors) shall be beneficially held or acquired by any corporation or person or group; or (ii) if during any period of two consecutive years, individuals, who at the beginning of such period constitute the Board of Directors of the Company, cease for any reason to constitute a majority thereof, unless the election, or nomination for election, by the Company's shareholders of each new director was approved by a vote of a majority of the directors then still in office who were directors at the beginning of such period. "Group" shall mean persons who act in concert as described in Section 14-(d)(2) of the Securities Exchange Act of 1934, as amended. VI. ADMINISTRATION The Plan shall be administered by the Compensation Committee of the Board. The Compensation Committee shall have broad discretion to administer and interpret the Plan and to take any necessary actions not inconsistent with the terms contained elsewhere in this plan document, in its sole discretion. The Committee shall act by majority vote and any decisions of the Committee shall be final and binding on all parties. VII. FUNDING The Plan shall be unfunded and represent an unsecured obligation of the Company. Benefits earned under this Plan shall be paid from the general assets of the Company. Neither the participants nor his or her estate or beneficiaries have any right against the Company with respect to benefits provided under this Plan except as a general unsecured creditor of the Company. VIII. LIMITATION OF RIGHTS/CREDITOR CLAIMS No benefit under this Plan may be sold, assigned, transferred, conveyed, hypothecated, encumbered, anticipated or otherwise disposed of, and any attempt to do so shall be void. No such benefit shall, prior to receipt thereof by the director, be in any manner subject to debts, contracts, liabilities or torts of such director. The Company will not recognize any act by a participant or occurring by operation of law (such as bankruptcy or garnishment) that attempts to pledge, assign or otherwise encumber benefits earned under this Plan, and any attempt to do so shall be null and void. IX. AMENDMENT OR TERMINATION The Board shall have the authority to amend or terminate the Plan at any time. However, no amendment or termination of the Plan shall unilaterally remove any benefit to which the participant would have been entitled had he or she actually terminated on the date immediately prior to the effective date of such plan amendment or termination. IX. GOVERNING LAW The Plan shall be construed and administered in compliance with the laws of the State of California, unless a superseding Federal law applies. CONSOLIDATED FREIGHTWAYS, INC. By /s/Eberhard G.H. Schmoller Eberhard G. H. Schmoller Senior Vice President and General Counsel Dated as of October 1, 1994 EX-13 12 The Company's 1994 operating profit increased by 18.4% to $142.2 million from 1993 despite losses related to the April Teamster's strike at CF MotorFreight (CFMF), the Company's nationwide, full- service carrier. This improvement reflects record profits at Emery Worldwide (Emery) and Con-Way Transportation Services (CTS). Emery posted record operating income of $77.6 million following profit improvements of over $45 million for four consecutive years, while CTS exceeded $100 million in operating income for the first time since its founding in 1983. The Company's 1992 operating income included certain non-recurring charges. Excluding these charges, 1993 operating income improved $54.3 million or 82.4% over 1992. The Company's 1994 revenues increased 11.7% to a record $4.7 billion due primarily to significant growth at CTS and Emery. Despite growth in the second half of the year, full-year revenues from CFMF were down largely as a result of the strike and subsequent recovery. Total Company revenues for 1993 increased 3.4% over 1992 as Emery regained revenues due to various successful marketing programs and CTS continued to grow through expansion into new markets. Significant variations in segment revenue and operating income are as follows. CF MOTORFREIGHT CF MotorFreight's 1994 revenues decreased 0.9% on a tonnage decline of 5.8%. Higher rated less-than-truckload (LTL) tonnage declined 5.4% from 1993. Revenues were down in the first half of 1994 by 11.1% largely because of the Teamster strike in April. This decline was mitigated in the second half of 1994 by tonnage growth of 2.9% and revenue growth from the non-carrier logistics operation. CFMF's 1993 revenues decreased 3.3% on a tonnage decline of 3.1% with higher rated LTL tonnage declining 3.0%, reflecting price erosion and market dilution from competitors. The operating loss of $46.6 million for 1994 declined from a profit of $31.7 million in 1993. The decline was attributable to losses incurred during the April strike and the subsequent recovery period. CFMF reported a $42.1 million loss in the second quarter. Although revenue and tonnage increased in the latter half of 1994, compared with the second half of 1993, operating income declined $23.6 million. The decline is primarily attributable to additional costs incurred due to capacity restraints from a system- wide shortage of trailers, lost productivity and costs associated with re-domiciling employees and equipment following changes in linehaul operations. These operational changes, which began in the fourth quarter, are scheduled to continue through the second quarter of 1995. The programs are designed to take advantage of flexibilities achieved in the new labor contract which will allow CFMF to be more competitive. In 1993, operating income was $31.7 million compared to $27.5 million in 1992, and increase of 15.4%. Management also expects to increase revenues by offering a full range of services and increasing penetration of all markets. Management believes that the implementation of these programs, satisfying equipment requirements, combined with a 4.4% rate increase announced for January, should restore profitability in 1995. CON-WAY TRANSPORTATION SERVICES Con-Way Transportation Services' (CTS) revenues surpassed the billion dollar milestone with an increase of 24.5% from 1993. The revenue growth is largely due to a tonnage gain of 21.0% over 1993, attributable to geographic expansion and growth in existing markets including expanded use of joint service agreements. Also contributing to the tonnage growth was business obtained during the strike of unionized LTL carriers. The higher rated LTL tonnage increase was 23.7% over the prior year. In 1993, revenues increased 13.0% on a tonnage increase of 26.3% from 1992 with the higher rated LTL tonnage increasing 13.9%. CTS's operating income set a record by exceeding the $100 million. Operating income increased 54.8% with an operating margin of 10.9% compared to 8.8% in 1993. CTS has been able to improve margins despite costs associated with the geographic expansions by enhancing yields and improving productivity. Also contributing to the improved margins has been CTS's ability to retain a portion of the strike-related business. CTS's 1993 operating income increased 33.7% over 1992. The 1993 operating margin of 8.8% compares with a 7.4% margin in 1992. CTS continues to respond to customer demands by expanding geographic coverage. Beginning in 1995, CTS combined separate operations in the Southwest and Southeast, enabling CTS to provide a broader, more comprehensive service from Texas to the Carolinas. In addition, CTS is expanding further into the Northeast, Pacific Northwest and New Jersey. Utilizing joint-service agreements among the Con-Way regional carriers will enable CTS to offer superior services to all major areas and with other product offerings, enhance their business levels. Increased market growth, productivity improvements and the benefits of a January rate increase should enable CTS to continue to earn a satisfactory operating margin. However, CTS expects to incur costs associated with its expansion into new markets and may experience some erosion in rates with the deregulation of intrastate operating rights. EMERY WORLDWIDE Emery Worldwide achieved record revenues of $1.6 billion, an increase of 24.3% from 1993. This notable increase was attributable to significant growth in the international area where tonnage increased 45.2% combined with a 30.2% increase domestically. All of the gains in tonnage and revenue came from commercial business as revenues from the U.S. Postal Service (USPS) contract declined 18.5%. Emery accomplished this significant growth by providing a premium service at a time when commercial airlines were curtailing availability of airlift capacity on wide- bodied aircraft. Emery benefited from marketing programs that increased market penetration of traditional industries domestically and in the textile and electronic sectors, internationally. Emery also benefited from the strike of unionized LTL carriers. Revenues in 1993 increased 10.0% from 1992, also due entirely to gains in commercial business as revenues from the USPS contract declined. Operating income reached an all-time high of $77.6 million. This represents a fourfold improvement from 1993 income of $16.6 million. Emery's 1994 operating results marked four consecutive years of more than $45 million annual improvement since the loss in 1990 of $128.0 million. The operating margin in 1994 was 5.0% compared to 1.3% in 1993. Operating income for 1993 was a $49.2 million improvement from the $32.7 million loss in 1992. These improvements are attributed to stringent cost control measures coupled with an increase in business levels resulting from the success of Emery's marketing initiatives and renewed customer confidence. In 1995, management will focus on margin improvements with the same cost reduction strategies that proved successful in the past. Emphasis will be placed on international expansion and new services that will enable Emery to distinguish itself from other carriers in satisfying customer needs. Management expects improvements at its Hub operation, savings associated with increased dedicated lift and other operating efficiencies to yield continued improvements in operating income. OTHER INCOME (EXPENSE) For the Company, other net expense increased marginally in 1994 due to the following reasons. Interest expense decreased 7.9% from 1993 as the Company reduced borrowing costs with debt refinancing and scheduled debt retirements. Offsetting the above was a decrease in investment income of 60.5% as the Company liquidated short-term investments to meet debt retirement and capital expenditure needs as well as to supplement cash flows during the Teamster's strike. The 1993 expenses declined from 1992, as other income and expense in 1992 included non-recurring charges related to the write-down of properties held for sale and certain other intangible assets. NET INCOME TO COMMON SHAREHOLDERS The 1994 net income available to common shareholders of $35.7 million includes a $5.5 million charge for the write-off of intrastate operating rights. Excluding this charge, net income available to common shareholders improved 30.5% over 1993 despite significant costs incurred at CFMF as a result of the strike, subsequent recovery and changes in linehaul operations. A higher effective income tax rate in 1994 was due primarily to restrictions on realizing tax benefits of operating losses in certain states and an increase in certain non-deductible expenses. Net income available to common shareholders in 1993 was $31.6 million compared to the 1992 net loss applicable to common shareholders of $97.7 million which included a $7.4 million extraordinary charge for early retirement of debt, a $70.0 million one-time charge for the adoption of SFAS 106 and $27.8 million in non-recurring charges net of related tax benefits. Excluding these 1992 charges, the 1993 net income available to common shareholders improved $34.0 million over 1992. LIQUIDITY AND CAPITAL RESOURCES At December 31, 1994, the Company had $95.7 million in cash and cash equivalents. Although the Company had positive cash flows from operations, due primarily to net income and significant depreciation and amortization, cash and investments decreased because of scheduled debt repayments of $39.5 million and capital expenditures. Capital expenditures in 1994 totaled $181.9 million compared with $201.2 million in the prior year. 1993 capital expenditures included approximately $72.2 million in purchases of aircraft and equipment in connection with the USPS contract. In 1994, debt retirement, capital expenditures and preferred stock dividend requirements were satisfied with cash from operations. Certain equipment requirements were supplemented by lease agreements. Capital expenditure in 1995 will come from cash flows from operations supplemented by financing arrangements. In December, 1994, the Board of Directors reinstated quarterly cash dividends of $.10 per common share. The common dividend had been suspended in June 1990. A portion of the funds required to satisfy the dividend will come from the absence of the Series C preferred stock dividend which ends with their conversion in the first quarter of 1995. In May 1994, the Company entered into a $50 million unsecured revolving credit facility to provide for working capital needs. As of December 31, 1994, no amounts were outstanding under this agreement. In 1994, the Company amended an agreement with several banks to increase its Emery's receivables sales facility to $100 million and reduce related fees by approximately one-half. At December 31, 1994, there were $71.7 million of letters of credit issued and secured with receivables under this facility. In January, 1995, the Company amended an agreement with several banks to modify a $300 million unsecured credit facility. The agreement effectively replaces facilities that provided an aggregate capacity of $305 million. The new agreement provides for letter of credit and working capital needs at rates more favorable than the prior facilities. Outstanding letters of credit of $123.3 million at December 31, 1994 under prior facilities were transferred to the new facility beginning in January 1995. At December 31, 1994, the Company's ratio of long-term debt obligations (including guarantees) to total capital (including long-term obligations) was 37.1% compared with 39.6% at year end 1993. The improvement is primarily attributable to net income and the retirement of debt in 1994. The current ratio at December 31, 1994 and 1993 was 1.1 to 1. The Company can successfully maintain this current ratio because of a high turnover of accounts receivable. OTHER The Company's operations necessitate the storage of fuel in underground tanks as well as the disposal of substances regulated by various federal and state laws. The Company adheres to a stringent site-by-site tank testing and maintenance program performed by a qualified independent third party to protect the environment and comply with regulations. Where the need for environmental cleanup is necessary, the Company takes appropriate action. The Company has been designated a Potentially Responsible Party (PRP) by the U.S. Environmental Protection Agency with respect to the disposal of hazardous substances at various sites. However, based upon cost studies performed by independent parties, the Company expects its share of the cleanup costs to be minimal. REPORT OF INDEPENDENT PUBLIC ACCOUNTS To the Shareholders and Board of Directors of Consolidated Freightways, Inc. We have audited the accompanying consolidated balance sheets of Consolidated Freightways, Inc. (a Delaware Corporation) and subsidiaries as of December 31, 1994 and 1993, and the related statements of consolidated operations, cash flows and shareholders' equity for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express and opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Consolidated Freightways, Inc. and subsidiaries as of December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994 in conformity with generally accepted accounting principles. As discussed in Notes 5 and 7 to the consolidated financial statements, effective January 1, 1992 the Company changed its method of accounting for income taxes to reflect the adoption of the Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," and its method of accounting for post retirement benefits to reflect the adoption of the Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Post Retirement Benefits Other than Pensions." /s/Arthur Andersen LLP San Francisco, California January 27, 1995 CONSOLIDATED FREIGHTWAYS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31 (Dollars in thousands) 1994 1993 ASSETS Current Assets Cash and cash equivalents $95,711 $139,044 Trade accounts receivable, net of allowances 659,191 508,669 Other accounts receivable 37,021 24,261 Operating supplies, at lower of average cost 41,719 34,940 Prepaid expenses 71,277 69,009 Deferred income taxes (Note 5) 126,546 108,458 Total Current Assets 1,031,465 884,381 Property, Plant and Equipment, at cost Land 163,965 152,402 Buildings and improvements 510,568 488,292 Revenue equipment 979,002 935,482 Other equipment and leasehold improvements 368,809 347,601 2,022,344 1,923,777 Accumulated depreciation and amortization (1,077,752) (1,013,333) 944,592 910,444 Other Assets Restricted funds 12,861 13,954 Deposits and other assets 80,626 75,032 Unamortized aircraft maintenance, net (Note 1) 81,010 64,736 Costs in excess of net assets of businesses acquired, net of accumulated amortization 322,169 354,076 Marketable securities, at lower of cost or market -- 13,727 496,666 521,525 Total Assets $2,472,723 $2,316,350 The accompanying notes are an integral part of these statements. CONSOLIDATED FREIGHTWAYS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31 (Dollars in thousands) LIABILITIES AND SHAREHOLDERS' EQUITY 1994 1993 Current Liabilities Accounts payable and accrued liabilities (Note 2) $796,381 $634,107 Accrued claims costs 138,800 138,242 Current maturities of long-term debt and capital leases (Notes 3 and 4) 3,712 39,246 Federal and other income taxes (Note 5) 6,275 15,855 Total Current Liabilities 945,168 827,450 Long-Term Liabilities Long-term debt and guarantees (Note 3) 286,833 297,215 Long-term obligations under capital leases (Note 4) 111,024 111,194 Accrued claims costs 163,849 173,999 Deferred income taxes (Note 5) 38,034 22,085 Other liabilities and deferred credits (Note 7) 254,186 261,032 Total Liabilities 1,799,094 1,692,975 Shareholders' Equity (Note 6) Preferred stock, no par value; authorized 5,000,000 shares: Series A, designated 600,000 shares; none issued -- -- Series B, 8.5% cumulative, convertible, $.01 stated value; designated 1,100,000 shares; issued 962,748 and 968,655 shares, respectively 10 10 Series C, 8.738% cumulative, convertible, $.01 stated value; designated and issued 690,000 shares 7 7 Additional paid-in capital, preferred stock 264,284 265,182 Deferred TASP compensation (Note 8) (120,646) (129,276) Total Preferred Shareholders' Equity 143,655 135,923 Common stock, $.625 par value; authorized 100,000,000 shares; issued 43,955,510 and 43,340,801 shares, respectively 27,472 27,090 Additional paid-in capital, common stock 116,209 104,666 Cumulative translation adjustment (1,170) 1,229 Retained earnings 574,885 542,811 Cost of repurchased common stock (7,601,382 and 7,638,809 shares, respectively) (187,422) (188,344) Total Common Shareholders' Equity 529,974 487,452 Total Shareholders' Equity 673,629 623,375 Total Liabilities and Shareholders' Equity $2,472,723 $2,316,350 The accompanying notes are an integral part of these statements. CONSOLIDATED FREIGHTWAYS, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED OPERATIONS Years Ended December 31, (Dollars in thousands except per share data)
1994 1993 1992 REVENUES $ 4,680,479 $ 4,191,811 $ 4,055,589 COSTS AND EXPENSES Operating expenses 3,824,141 3,407,996 3,306,732 Selling and administrative expenses 580,370 528,022 561,581 Depreciation 133,734 135,636 138,695 4,538,245 4,071,654 4,007,008 OPERATING INCOME 142,234 120,157 48,581 OTHER INCOME (EXPENSE) Investment income 2,205 5,586 5,041 Interest expense (27,945) (30,333) (38,893) Miscellaneous, net (4,574) (3,969) (25,462) (30,314) (28,716) (59,314) Income (loss) before income taxes (benefits), extraordinary charges and cumulative effect of accounting change 111,920 91,441 (10,733) Income taxes (benefits) (Note 5) 51,625 40,867 (7,077) Income (loss) before extraordinary charges and cumulative effect of accounting change 60,295 50,574 (3,656) Extraordinary charge from write-off of intrastate operating rights, net of related income tax benefits of $4,056 5,522 -- -- Extraordinary charge from early retirement of debt, net of related income tax benefits of $4,561 -- -- 7,428 Cumulative effect of change in method of accounting for post retirement benefits, net of related income tax benefits of $42,899 (Note 7) -- -- 69,991 Net income (loss) 54,773 50,574 (81,075) Preferred stock dividends 19,063 18,967 16,653 NET INCOME (LOSS) APPLICABLE TO COMMON SHAREHOLDERS $ 35,710 $ 31,607 $ (97,728) Primary average shares outstanding (Note 1) 37,216,044 36,187,682 35,195,743 PRIMARY EARNINGS (LOSS) PER SHARE: Net income (loss) before extraordinary charges and cumulative effect of accounting change $ 1.11 $ 0.87 $ (0.58) Extraordinary charges (0.15) -- (0.21) Cumulative effect of accounting change -- -- (1.99) Net income (loss) $ 0.96 $ 0.87 $ (2.78) FULLY DILUTED EARNINGS (LOSS) PER SHARE (Note 1) $ 0.87 $ 0.77 $ (2.78) The accompanying notes are an intergral part of these statements.
CONSOLIDATED FREIGHTWAYS, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS YEARS ENDED DECEMBER 31 (In thousands) 1994 1993 1992 Cash and Cash Equivalents, Beginning of Period $139,044 $152,064 $284,645 Cash Flows from Operating Activities Income (loss) before extraordinary charges and cumulative effect of accounting change 60,295 50,574 (3,656) Adjustments to reconcile income (loss) to net cash provided by operating activities: Depreciation and amortization 145,765 146,297 166,917 Increase (decrease) in deferred income taxes 3,417 (20,298) (28,661) Losses (gains) from property disposals, net 1,147 (607) 6,688 Changes in assets and liabilities: Receivables (148,934) (194,320) (16,139) Notes receivable from sale of trade accounts -- 166,399 15 Accrued claims costs (9,592) (7,400) 20,359 Accounts payable 46,557 17,225 (2,254) Income taxes (10,873) (9,871) (7,313) Accrued incentive compensation 27,074 7,396 3,686 Accrued liabilities and other 50,326 17,413 (7,863) Net Cash Provided by Operating Activities 165,182 172,808 131,779 Cash Flows from Investing Activities Capital expenditures (181,928) (201,210) (148,706) Purchases of marketable securities -- (54,749) (47,865) Sales of marketable securities 13,727 88,887 -- Proceeds from sales of property 10,325 12,270 4,097 Net Cash Used by Investing Activities (157,876) (154,802) (192,474) Cash Flows from Financing Activities Proceeds from issuance of long-term debt -- 32,000 -- Repayment of long-term debt and capital lease obligations (39,486) (45,236) (164,008) Premium on early retirement of debt -- -- (7,586) Proceeds from issuance of preferred stock -- -- 117,867 Proceeds from issuance of common stock 11,949 5,387 2,808 Payments of preferred dividends (23,102) (23,177) (20,967) Net Cash Used by Financing Activities (50,639) (31,026) (71,886) Decrease in Cash and Cash Equivalents (43,333) (13,020) (132,581) Cash and Cash Equivalents, End of Period $95,711 $139,044 $152,064 Supplemental Disclosure Cash paid for income taxes $56,679 $71,036 $19,053 Cash paid for interest (net of amounts capitalized) $24,401 $30,438 $39,035 The accompanying notes are an integral part of these statements. CONSOLIDATED FREIGHTWAYS, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY (Dollars in thousands)
Preferred Stock Series B Preferred Stock Series C Common Stock Number of Number of Number of Shares Amount Shares Amount Shares Amount Balance, December 31, 1991 978,686 $10 -- $-- 42,821,544 $26,765 Issuance of preferred stock -- -- 690,000 7 -- -- Exercise of stock options, net of tax benefits of $157 -- -- -- -- 194,775 122 Recognition of deferred compensation -- -- -- -- -- -- Repurchased common stock issued for conversion of preferred stock (4,534) -- -- -- -- -- Net loss -- -- -- -- -- -- Series B, Preferred dividends ($12.93 per share) net of tax benefits of $4,315 -- -- -- -- -- -- Series C, Preferred dividends ($15.40 per share) -- -- -- -- -- -- Translation adjustment -- -- -- -- -- -- Balance, December 31, 1992 974,152 10 690,000 7 43,016,319 26,887 Exercise of stock options, net of tax benefits of $708 -- -- -- -- 324,482 203 Recognition of deferred compensation -- -- -- -- -- -- Repurchased common stock issued for conversion of preferred stock (5,497) -- -- -- -- -- Net income -- -- -- -- -- -- Series B, Preferred dividends ($12.93 per share) net of tax benefits of $4,207 -- -- -- -- -- -- Series C, Preferred dividends ($15.40 per share) -- -- -- -- -- -- Translation adjustment -- -- -- -- -- -- Balance, December 31, 1993 968,655 10 690,000 7 43,340,801 27,090 Exercise of stock options, net of tax benefits of $2,400 -- -- -- -- 614,709 382 Recognition of deferred compensation -- -- -- -- -- -- Repurchased common stock issued for conversion of preferred stock (5,907) -- -- -- -- -- Net income -- -- -- -- -- -- Common dividends ($.10 per share) -- -- -- -- -- -- Series B, Preferred dividends ($12.93 per share) net of tax benefits of $4,039 -- -- -- -- -- -- Series C, Preferred dividends ($15.40 per share) -- -- -- -- -- -- Translation adjustment -- -- -- -- -- -- Balance, December 31, 1994 962,748 $10 690,000 $7 43,955,510 $27,472 The accompanying notes are an intergral part of these statements.
CONSOLIDATED FREIGHTWAYS, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY (continued) (Dollars in thousands)
Cost of Additional Cumulative Repurchased Deferred TASP Paid-in Translation Retained Common and EMSOP Capital Adjustment Earnings Stock Compensation Total Balance, December 31, 1991 $246,417 $12,393 $608,935 ($190,643) ($156,794) $547,083 Issuance of preferred stock 117,860 -- -- -- -- 117,867 Exercise of stock options, net of tax benefits of $157 2,686 -- -- -- -- 2,808 Recognition of deferred compensation -- -- -- -- 18,597 18,597 Repurchased common stock issued for conversion of preferred stock (1,097) -- -- 1,097 -- -- Net loss -- -- (81,075) -- -- (81,075) Series B, Preferred dividends ($12.93 per share) net of tax benefits of $4,315 -- -- (8,303) -- -- (8,303) Series C, Preferred dividends ($15.40 per share) -- -- (8,350) -- -- (8,350) Translation adjustment -- (9,466) -- -- -- (9,466) Balance, December 31, 1992 365,866 2,927 511,207 (189,546) (138,197) 579,161 Exercise of stock options, net of tax benefits of $708 5,184 -- -- -- -- 5,387 Recognition of deferred compensation -- -- -- -- 8,921 8,921 Repurchased common stock issued for conversion of preferred stock (1,202) -- -- 1,202 -- -- Net income -- -- 50,574 -- -- 50,574 Series B, Preferred dividends ($12.93 per share) net of tax benefits of $4,207 -- -- (8,343) -- -- (8,343) Series C, Preferred dividends ($15.40 per share) -- -- (10,627) -- -- (10,627) Translation adjustment -- (1,698) -- -- -- (1,698) Balance, December 31, 1993 369,848 1,229 542,811 (188,344) (129,276) 623,375 Exercise of stock options, net of tax benefits of $2,400 11,567 -- -- -- -- 11,949 Recognition of deferred compensation -- -- -- -- 8,630 8,630 Repurchased common stock issued for conversion of preferred stock (922) -- -- 922 -- 0 Net income -- -- 54,773 -- -- 54,773 Common dividends ($.10 per share) -- -- (3,636) -- -- (3,636) Series B, Preferred dividends ($12.93 per share) net of tax benefits of $4,039 -- -- (8,436) -- -- (8,436) Series C, Preferred dividends ($15.40 per share) -- -- (10,627) -- -- (10,627) Translation adjustment -- (2,399) -- -- -- (2,399) Balance, December 31, 1994 $380,493 ($1,170) $574,885 ($187,422) ($120,646) $673,629 The accompanying notes are an intergral part of these statements.
CONSOLIDATED FREIGHTWAYS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Principal Accounting Policies Principles of Consolidation: The accompanying consolidated financial statements include the accounts of Consolidated Freightways, Inc. (the Company), its wholly owned subsidiaries and those of special-purpose financing corporations. Recognition of Revenues: Transportation freight charges are recognized as revenue when freight is received for shipment. The estimated costs of performing the total transportation service are then accrued. Cash and Cash Equivalents: The Company considers highly liquid investments with an original maturity of three months or less to be cash equivalents. Trade Accounts Receivable, Net: Trade accounts receivable are net of allowances of $26,938,000 and $29,780,000 at December 31, 1994 and 1993, respectively. Property, Plant and Equipment: Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives, which are generally 25 years for buildings and improvements, 10 years or less for aircraft, 6 to 10 years for tractor and trailer equipment and 3 to 10 years for most other equipment. Leasehold improvements are amortized over the shorter of the terms of the respective leases or the useful lives of the assets. Expenditures for equipment maintenance and repairs, except for aircraft, are charged to operating expenses as incurred; betterments are capitalized. Gains (losses) on sales of equipment are recorded in operating expenses. The costs to perform required maintenance inspections of engines and aircraft frames for leased and owned aircraft are capitalized and amortized to expense over the shorter of the period until the next scheduled maintenance or the remaining term of the lease agreement. Accordingly, the Company has recorded unamortized maintenance of $140,607,000 and $120,204,000 at December 31, 1994 and 1993, respectively. Under the Company's various aircraft lease agreements, the Company is expected to return the aircraft with a stipulated number of hours remaining on the aircraft and engines until the next scheduled maintenance. The Company has recorded $59,597,000 and $55,468,000, at December 31, 1994 and 1993, respectively, to accrue for this obligation and any anticipated unusable maintenance expected at the date of lease return or other disposal. The net amount, which represents the difference between maintenance performed currently and that required or remaining at the expiration of the lease or other disposal, is classified as unamortized aircraft maintenance, net in the consolidated balance sheets. Costs in Excess of Net Assets of Businesses Acquired: The costs in excess of net assets of businesses acquired are capitalized and amortized on a straight-line basis up to a 40-year period. Income Taxes: The Company follows the liability method of accounting for income taxes. Accrued Claims Costs: The Company provides for the uninsured costs of medical, casualty, liability, vehicular, cargo and workers' compensation claims. Such costs are estimated each year based on historical claims and unfiled claims relating to operations conducted through December 31. The long-term portion of accrued claims costs relate primarily to workers' compensation claims which are payable over several years. Earnings Per Share: Primary earnings per common share are based upon the weighted average number of common shares outstanding during each period after consideration of the dilutive effect of stock options. Fully diluted earnings per share are similarly computed, but include the dilutive effect of the Company's Thrift and Stock Plan (TASP) shares. The 1994 computation includes an addback to income of $478,000 representing the Series B preferred stock dividend net of replacement funding. The number of shares used for the computation of fully diluted earnings per share for 1994 and 1993 are 41,541,388 and 40,857,876, respectively. The fully diluted loss per share computation for 1992 excludes stock options and TASP shares because their inclusion would be anti-dilutive. In November 1993, the Accounting Standards Division of the AICPA issued Statement of Position 93-6, "Employers' Accounting for Employee Stock Ownership Plans" (SOP 93-6). The Company is not required to adopt this method of accounting as its existing ESOP (TASP) was established before December 31, 1992. If this statement had been adopted January 1, 1994, both the primary and fully diluted earnings per share for year-to-date ended December 31, 1994 would have been $.94. Reclassification: Certain amounts in prior year's financial statements have been reclassified to conform to the current year presentation. 2. Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities consist of the following as of December 31: 1994 1993 (Dollars in thousands) Accounts payable $253,584 $206,499 Other accrued liabilities 204,738 157,432 Accrued holiday and vacation pay 95,219 80,661 Accrued pension costs 63,881 50,728 Accrued taxes other than income taxes 46,725 41,785 Accrued incentive compensation 42,344 15,270 Wages and salaries 41,517 38,409 Estimated revenue adjustments 28,157 26,651 Accrued interest 20,216 16,672 Total accounts payable and accrued liabilities $796,381 $634,107 3. Long-Term Debt and Guarantees As of December 31, long-term debt and guarantees consisted of the following: (Dollars in thousands) 1994 1993 8.75% to 8.88% Medium-Term Notes due 1995 ($100 million authorized; interest payable semi-annually) $ 2,000 $40,225 9 1/8% Notes Due 1999 (interest payable semi-annually) 117,705 117,705 7.0% to 12.0% Industrial Revenue Bonds due through 2014 19,900 19,900 Other debt 876 8,291 TASP Notes guaranteed due through 2009 150,000 150,000 290,481 336,121 Less current maturities (3,648) (38,906) Total long-term debt and guarantees $286,833 $297,215 The 9 1/8% notes due 1999 contain certain covenants limiting the incurrence of additional liens. Of the $150 million Thrift and Stock Plan (TASP) Notes, $117.0 million are subject to earlier repurchase by the Company at the option of the holders, with a yield protection penalty, in the event the Company's long- term senior unsecured indebtedness should be rated by both Moody's and S&P as below investment grade. S&P rates the Company's long-term senior unsecured indebtedness at a rating below investment grade. Moody's rating of such indebtedness is investment grade. In November 1992, the terms of the other $33.0 million of the TASP Notes were modified to exclude the holders' early repurchase option. In exchange, the interest rates on the notes were enhanced by .5% and additional financial covenants including a common dividend restriction equal to $10.0 million plus one-half of the Company's earnings since inception of the agreement. The Company has a $100.0 million receivable sale facility under which $71.1 million of letters of credit were issued. The agreement involves the sale of eligible Emery receivables to a special-purpose corporation, Emery Receivables Corporation (ERC), for use as collateral for cash or non- transferrable promissory notes and related letters of credit. The letters of credit may be issued only on behalf of Emery Air Freight Corporation and Emery Worldwide Airlines Inc., for a term of one year with an option to renew. The letters of credit bear a fee of .725% per annum. Under the terms of the agreement, ERC's assets will be available to satisfy its obligations prior to any distribution to its stockholders. The agreement contains various covenants, the most restrictive of which requires the participating companies to maintain specified amounts of tangible net worth. The Company has a $50.0 million unsecured revolving credit facility to provide for working capital needs. Loans bear interest at LIBOR plus a margin dependent on the Company's credit rating. As of December 31, 1994, no amounts were outstanding. In January 1995, the Company entered into a $300.0 million four-year unsecured credit facility to provide for the Company's letter of credit and working capital needs. The agreement replaces prior facilities under which $123.3 million of letters of credit were outstanding at December 31, 1994. Borrowings under the agreement will bear interest at a rate based upon LIBOR plus a margin dependent on the Company's credit rating. The agreement contains various restrictive covenants which limit the incurrence of additional indebtedness and require the Company to maintain minimum amounts of tangible net worth and fixed charge coverage. Based on interest rates currently available to the Company for debt with similar terms and maturities, the fair value of long-term debt approximates book value at December 31, 1994 and 1993. The aggregate annual maturities and sinking fund requirements of long- term debt for each of the next five years ending December 31 are: 1995, $3,648,000; 1996, $2,328,000; 1997, $3,100,000; 1998, $4,200,000; and 1999, $122,905,000. The Company's consolidated interest expense as presented on the statements of consolidated operations is net of interest capitalized of $1,042,000, $1,224,000 and $543,000 for each of the three years in the period ended December 31, 1994. The 1992 statement of consolidated operations reflects $7.4 million of expense for the early retirement of indebtedness under the Secured Note Purchase Agreement. All other debt retirements were at or near par. 4. Leases The Company and its subsidiaries are obligated under various non- cancelable leases which expire at various dates through 2011. The principal capital lease covers a sorting facility in Dayton, Ohio (Facility) for a 30-year lease term. Included in other equipment and leasehold improvements are $83,963,000 and $83,741,000 as of December 31, 1994 and 1993, respectively, related to this facility. The accumulated depreciation at December 31, 1994 and 1993 was $30,426,000 and $30,351,000, respectively. The Facility is financed by City of Dayton, Ohio revenue bonds Series A, C, D, E and F (Bonds). The Series C, D, E and F Bonds bear variable rates of interest, approximately 4.3% at December 31, 1994. The Series A Bonds are due through 2009 with an effective interest rate of 8%. Rental payments under this lease are equivalent to debt service on the Bonds. The Bonds have various call provisions at Emery's option. Series A Bonds are secured by a debt service reserve fund of $7 million which is classified as restricted funds in the consolidated balance sheets, a first lien on the leasehold interests of Emery in the Facility and the leased real property pursuant to a mortgage, and a pledge agreement of the stock of a wholly owned subsidiary of Emery, which is the lessee or sublessee of certain aircraft. The Series C, D, E and F Bonds are secured by irrevocable letters of credit. The Series E and F bonds are also secured by a junior lien on the Facility. Future minimum lease payments under all leases with initial or remaining non-cancelable lease terms in excess of one year, at December 31, 1994, are as follows: Capital Operating (Dollars in thousands) Leases Leases Year ending December 31 1995 $8,864 $156,916 1996 8,864 128,937 1997 8,864 78,085 1998 8,864 45,326 1999 8,864 39,454 Thereafter 197,563 52,253 Total minimum lease payments 241,883 $500,971 Less amount representing interest (130,795) Present value of minimum lease payments 111,088 Less current maturities of obligations under capital leases (64) Long-term obligations under capital leases $111,024 Rental expense for operating leases is comprised of the following: 1994 1993 1992 (Dollars in thousands) Minimum rentals $195,507 $185,425 $176,832 Less: Sublease rentals (6,811) (10,886) (7,727) Amortization of deferred gains (1,785) (1,785) (1,785) $186,911 $172,754 $167,320 5. Income Taxes The components of pretax income (loss) and income taxes (benefits) are as follows: 1994 1993 1992 (Dollars in thousands) Pretax income (loss) U.S. corporations $99,848 $ 84,700 $(10,736) Foreign corporations 12,072 6,741 3 Total pretax income (loss) $111,920 $ 91,441 $(10,733) Income taxes (benefits) Current U.S. federal $37,643 $63,956 $ 12,681 State and local 6,313 7,089 6,457 Foreign 5,855 5,475 6,090 49,811 76,520 25,228 Deferred U.S. federal (766) (31,616) (14,648) Tax credit benefits -- -- (7,600) State and local 2,775 (3,642) (3,705) Foreign (195) (395) (6,352) 1,814 (35,653) (32,305) Total income taxes (benefits) $ 51,625 $ 40,867 $ (7,077) The Company prospectively adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109), effective January 1, 1992. The adoption of SFAS 109 had an immaterial effect on the Company's financial position and statements of consolidated operations. During 1994, the Company utilized $62.0 million of net operating loss carryforwards from an acquired subsidiary to reduce the income tax liability of that subsidiary. The related tax benefit of approximately $22 million was used to reduce costs in excess of net assets of businesses acquired. The Company has remaining net operating loss carryforwards from acquired subsidiaries of approximately $41 million, which expire in 2002 and 2003. The net operating loss carryforwards are restricted to offsetting future years' U.S. federal income tax liabilities of the subsidiary which generated the losses. If realized, this benefit will be used to further reduce costs in excess of net assets of businesses acquired. The components of deferred tax assets and liabilities on the balance sheets at December 31, relate to the following: (Dollars in thousands) Deferred tax assets 1994 1993 Reserves for accrued claims costs $ 78,890 $ 82,663 Reserves for post retirement health benefits 53,729 50,235 Other reserves not currently deductible 42,579 38,741 Reserves for employee benefits 47,644 35,311 Foreign tax and alternative minimum tax credit carryovers 6,707 1,011 229,549 207,961 Deferred tax liabilities Depreciation 105,393 87,971 Tax benefits from leasing transactions 18,477 20,013 Unearned revenue 12,676 9,171 Other 4,491 4,433 141,037 121,588 Net deferred tax asset $ 88,512 $ 86,373 Deferred tax assets and liabilities in the consolidated balance sheets are classified based on the related asset or liability creating the deferred tax. Deferred taxes not related to a specific asset or liability are classified based on the estimated period of reversal. Income taxes (benefits) vary from the amounts calculated by applying the U.S. statutory income tax rate to the pretax income (loss) as set forth in the following reconciliation: 1994 1993 1992 U.S. statutory tax rate 35.0% 35.0% (34.0)% State income taxes (net of federal income tax benefit) 6.3 2.5 5.1 Foreign taxes in excess of U.S. statutory rate 1.3 3.0 (2.4) Dividends paid to TASP (0.7) (0.7) (4.0) Non-deductible operating expenses 3.4 1.9 9.3 Amortization of costs in excess of net assets of businesses acquired 3.1 3.7 31.2 Tax rate change impact on deferred expense -- (1.7) -- Foreign tax credit benefits, net (1.9) (1.0) (70.8) Other, net (0.4) 2.0 (0.3) Effective income tax rate 46.1% 44.7% (65.9)% The cumulative undistributed earnings of the Company's foreign subsidiaries (approximately $63 million at December 31, 1994), which if remitted are subject to withholding tax, have been reinvested indefinitely in the respective foreign subsidiaries' operations unless it becomes advantageous for tax or foreign exchange reasons to remit these earnings. Therefore, no withholding or U.S. taxes have been provided. The amount of withholding tax that would be payable on remittance of the undistributed earnings would approximate $6 million. 6. Shareholders' Equity In 1986, the Board of Directors designated a series of 600,000 shares as Series A Participating Preferred Stock from the Company's 5,000,000 shares of preferred stock, no par value. The Board also declared a dividend of one preferred stock purchase right for each outstanding share of the Company's common stock. Under certain conditions, each right may be exercised to purchase one one-hundredth share of the Company's Series A Participating Preferred Stock at an exercise price of $140 per right. The rights may be exercisable only after a party acquires beneficial ownership of 20% or more of the Company's common stock or announces an offer for 30% or more of the Company's common stock. The rights, which do not have voting rights, expire November 7, 1996, and may be redeemed at the Company's option for $.01 per right at any time prior to their expiration or the acquisition of 20% or more of the Company's common stock. In the event that the Company is acquired in a merger or other business combination transaction, each right that has not previously been exercised will entitle its holder, upon exercise thereof at the exercise price, that number of shares of common stock of the surviving company which at the time of such transaction would have a market value of two times the exercise price of the right. The Company intends to redeem these rights on November 7, 1995. In 1989, as part of an amendment to the TASP, the Board of Directors authorized the expenditure of up to $150,000,000 to repurchase up to 7,500,000 shares of the Company's common stock. Under such authorization, the Company repurchased 4,859,029 shares of its outstanding common stock in open market transactions for an aggregate purchase price, including commissions, of approximately $150 million. In 1989, as part of an amendment to the TASP, the Board of Directors designated a series of 1,100,000 preferred shares as Series B Cumulative Convertible Preferred Stock, $.01 stated value. The Series B preferred stock is convertible into common stock at the option of the holder at the rate of four shares for each share of preferred stock subject to antidilution adjustments in certain circumstances. Holders of the Series B preferred stock are entitled to vote with the common stock as a single class on all matters upon which the common stock is entitled to vote and are entitled to a number of votes in such circumstances equal to the product of (a) 1.3 multiplied by (b) the number of shares of common stock into which the Series B preferred stock is convertible (as described above) on the record date of such vote. Holders of the Series B preferred stock are also entitled to vote separately as a class on certain other matters. The TASP trustee is required to vote the allocated shares based upon instructions from the participants; unallocated shares are voted in proportion to the voting instructions received from the participants with allocated shares. The Series B preferred stock is senior to the Company's Series A and C preferred stock with respect to dividends and liquidation. The Series B preferred stock is also subject to automatic conversion into common stock in the manner described in Note 8. In 1992, the Company issued 6,900,000 depository shares each representing one-tenth of a share of Series C Conversion Preferred Stock, no par value. The depository shares were sold at a price of $17.625. The net capital proceeds of $117.9 million were used to retire debt. The depository shares provide for cumulative quarterly dividends at a per share rate of $1.54 per annum. Holders of the shares have no voting rights, except as otherwise provided under designated circumstances. Each depository share automatically converts into one share of common stock, plus unpaid dividends in the form of cash or additional common stock, on March 15, 1995. The Series C preferred stock is senior to the Company's Series A preferred stock and common stock with respect to dividends and liquidation. 7. Employee Benefit Plans The Company has a non-contributory defined benefit pension plan (the Pension Plan) covering non-contractual employees in the United States. Although it is the Company's funding policy to contribute the minimum required tax-deductible contribution for the year, it may increase its contribution above the minimum if appropriate to its tax and cash position and the plan's funded status. Benefits under the Pension Plan are based on a career average final five-year pay formula. The Company's annual pension provision is based on an independent actuarial computation that required a pension provision of $22,138,000 in 1994, $14,165,000 in 1993 and $18,045,000 in 1992. Approximately 88% of the Pension Plan assets are invested in publicly traded stocks and bonds. The remainder is invested in temporary cash investments, real estate funds and investment capital funds. Following is additional information relating to the Pension Plan at December 31: 1994 1993 (Dollars in thousands) Pension Plan assets at market value $325,102 $326,915 Less actuarial present value of projected benefit obligation Vested benefits (242,638) (250,564) Non-vested benefits (19,001) (27,299) Accumulated benefit obligation (261,639) (277,863) Effect of projected future compensation levels (75,466) (88,922) Projected benefit obligation (337,105) (366,785) Pension Plan assets under projected benefit obligation (12,003) (39,870) Unrecognized prior service costs 24,676 29,897 Unrecognized net gain (46,673) (7,174) Unrecognized net asset at transition, being amortized over 18 years (20,096) (22,329) Pension Plan liability $(54,096) $(39,476) Weighted average discount rate 8.5% 7.5% Expected long-term rate of return on assets 9.0% 9.5% Rate of increase in future compensation levels 5.5% 5.5% Net pension cost includes the following: 1994 1993 1992 (Dollars in thousands) Cost of benefits earned during the year $ 23,767 $ 15,789 $ 18,236 Interest cost on projected benefit obligation 28,736 26,378 24,857 Actual gain arising from plan assets (4,056) (41,891) (12,976) Amortization of unrecognized net asset at transition (2,233) (2,233) (2,233) Amortization of unrecognized net (gain) loss 136 (111) -- Deferred investment gain (loss) (26,538) 13,658 (12,397) Amortization of unrecognized prior service cost 2,326 2,575 2,558 Net pension cost $ 22,138 $ 14,165 $ 18,045 The Company's Pension Plan includes programs to provide additional benefits for compensation excluded from the basic Pension Plan. The annual provision for these programs is based on independent actuarial computations using assumptions consistent with the Pension Plan. In 1994 and 1993, the total pension liability was $11,033,000 and $10,202,000, respectively, and the total pension cost was $2,458,000 in 1994, $1,633,000 in 1993 and $1,767,000 in 1992. Approximately 51% of the Company's employees are covered by union- sponsored, collectively bargained, multi-employer pension plans. The Company contributed and charged to expense $93,933,000 in 1994, $98,090,000 in 1993, and $97,048,000 in 1992 for such plans. Those contributions were made in accordance with negotiated labor contracts and generally were based on time worked. The Company has a retiree health plan that provides benefits to all non- contractual employees at least 55 years of age with 10 years or more of service. In 1992, the plan was amended to modify benefits for all future participants unless they were eligible to retire at January 1, 1993. The most significant amendments limit the benefits for participants to a defined dollar amount based on age and years of service and eliminate employer- subsidized retiree health care benefits for employees hired on or after January 1, 1993. In the fourth quarter of 1992, the Company elected to prospectively adopt, effective January 1, 1992, the Financial Accounting Standards Board Statement No. 106, "Employer's Accounting for Post Retirement Benefits Other Than Pensions" (SFAS 106). At adoption of SFAS 106 in 1992, the Company elected to take $70.0 million as a one-time, non-cash charge, net of related income tax benefits, in the statement of consolidated operations. The following information sets forth the total post retirement benefit amounts included in Other Liabilities and Deferred Credits in the Company's consolidated balance sheets at December 31. (Dollars in thousands) 1994 1993 Accumulated post retirement benefit obligation Retirees and other inactives $ 50,720 $ 62,161 Participants currently eligible to retire 26,358 29,699 Other active participants 25,692 26,085 102,770 117,945 Unrecognized valuation gain 37,213 15,349 Accrued post retirement benefit cost $139,983 $133,294 Weighted average discount rate 8.5% 7.5% Average health care cost trend rate First year 11.0% 12.0% Declining to (year 1999) 6.0% 6.0% Net periodic post retirement benefit costs include the following components: 1994 1993 1992 (Dollars in thousands) Cost of benefits earned during the year $ 3,593 $ 2,877 $ 3,340 Interest cost on accumulated post retirement obligation 8,396 8,683 9,746 Amortization of unrecognized prior service cost (86) -- -- Amortization of unrecognized net gain (570) (411) -- Net periodic post retirement benefit cost $ 11,333 $ 11,149 $13,086 The increase in the accumulated post retirement benefit obligation and the net periodic post retirement benefit cost, given a 1 percent increase in the health care cost trend rate assumption, would be 9.6% for the years ended December 31, 1994 and 1993 and 10.8% for the year ended December 31, 1992. In 1992, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 112, "Employer's Accounting for Post- employment Benefits" (SFAS 112). The adoption of this statement in 1994 did not have a material impact on the financial statements. The Company and each of its subsidiaries have adopted various plans relating to the achievement of specific goals to provide incentive compensation for designated employees. Total incentive compensation earned by the participants of those plans is as follows: (Dollars in thousands) 1994 1993 1992 Incentive compensation $81,700 $54,600 $22,500 Participants 22,300 17,200 8,900 8. Thrift and Stock Plan On January 1, 1988, the Company adopted a 401(k) Plan for non- contractual U.S. employees to which it makes contributions to be used to purchase the Company's common stock. The Company's contribution vests immediately with the employee and totaled $7,966,000 in 1994, $7,248,000 in 1993 and $6,852,000 in 1992. The Company's contributions were substantially all in the form of preferred stock as described below. On May 18, 1989, the Company issued 986,259 shares of Series B Cumulative Convertible Preferred Stock to the Consolidated Freightways Thrift and Stock Plan (TASP) for an aggregate purchase price of $150,010,000. The Series B preferred stock is issuable only to the TASP trustee. Upon termination of an employee's participation in the TASP, the Series B preferred stock is automatically converted into common stock at a rate generally equal to that number of shares of common stock that could be purchased for $152.10, but not less than the minimum conversion rate of four shares of common stock for each share of Series B preferred stock. The preferred stock is allocated among participants by the Company matching participants' contributions at a rate of 50% of the first three percent of the participants' basic compensation. The total preferred shares allocated annually are based upon the principal and interest method. If the allocated preferred shares do not meet the Company's matching requirement, an additional cash contribution is made to the TASP. Deferred compensation expense is recognized as the preferred shares are allocated to participants; the amount recognized is equivalent to the interest on the TASP debt plus shares allocated to participants less preferred dividends paid to the TASP. During 1994, 1993 and 1992, $5,780,000, $5,598,000 and $5,359,000, respectively, of deferred compensation expense was recognized. The TASP guarantees are reduced as principal is paid. At December 31, 1994, the TASP owned 962,748 shares of Series B preferred stock, of which 169,546 shares have been allocated to employees. At December 31, 1994, the Company has reserved, authorized and unissued common stock adequate to satisfy the conversion feature of the Series B preferred stock. 9. Stock Option Plans Officers and key employees have been granted options under the Company's stock option plans to purchase common stock of the Company at prices not less than the fair market value of the stock on the date of grant. Outstanding options become fully exercisable one year after date of grant; any unexercised options expire after 10 years. A stock option plan under which options may be granted to purchase up to 3,000,000 shares of common stock of the Company became effective January 1, 1988. In 1992, the plan was amended to include authority to grant an additional 3,000,000 options. Following is a summary of stock option unit data: 1994 1993 1992 Outstanding at January 1 3,813,599 3,552,068 3,516,634 Granted 736,800 650,000 300,000 Exercised (614,709) (324,482) (194,775) Expired, canceled or surrendered (157,262) (63,987) (69,791) Outstanding at December 31 3,778,428 3,813,599 3,552,068 Options which became exercisable during the year 644,500 300,000 580,000 Options exercisable at December 31 3,041,628 3,163,599 3,252,068 Shares reserved at December 31 For future option grants 1,485,275 2,119,200 2,725,975 For issuance (including future option grants, if any) 5,263,703 5,932,799 6,278,043 Exercise prices related to options outstanding at December 31, 1994 ranged from $10.75 to $32.75 per share and aggregated $68,102,367. Exercise prices related to options exercised during 1994 ranged from $10.75 to $26.38, during 1993, $12.19 to $19.94 and during 1992, $12.19 to $16.40. 10. Commitments and Contingencies The Company has entered into interest rate swap agreements that expire in 1999. These agreements effectively convert $60 million of variable rate debt to fixed rate debt. Interest rate differentials to be paid or received are recognized over the life of each agreement as adjustments to interest expense. The Company is exposed to credit loss on the interest rate swap in the event of non-performance by counter parties, but the Company does not anticipate nonperformance by any of these counter parties. The approximate fair value of the interest rate swaps at December 31, 1994 was $838,000. The Company and its subsidiaries are defendants in various lawsuits incidental to their businesses. It is the opinion of management that the ultimate outcome of these actions will not have a material impact on the Company's financial position or results of operations. 11. Industry Group Analysis and Foreign Operations The operations of the Company and its subsidiaries, which are conducted primarily in the United States and Canada, encompass principally three business segments: nationwide, full-service trucking (CF MotorFreight), regional trucking and full-service truckload (Con-Way Transportation Services), and air freight (Emery Worldwide). The activities of these groups are fully described elsewhere in this Annual Report. Revenues and expenses are allocated between the United States and international, depending on whether the shipments are between locations within the United States or between locations where one or both are outside the United States. Following is an analysis by geographic and industry group. Operating income is net of general corporate expenses, a portion of which has been allocated to subsidiaries on a revenue and capital basis. Intersegment revenues and earnings thereon have been eliminated. The identifiable assets of the parent consist principally of cash, cash equivalents and receivables. GEOGRAPHIC GROUP INFORMATION (Dollars in thousands) Consolidated U.S. International Year Ended December 31, 1994 Revenues $4,680,749 $3,981,036 $699,713 Operating income 142,234 114,732 27,502 Identifiable assets 2,472,723 2,388,953 83,770 Year Ended December 31, 1993 Revenues $4,191,811 $3,665,654 $526,157 Operating income 120,157 113,179 6,978 Identifiable assets 2,316,350 2,231,469 84,881 Year Ended December 31, 1992 Revenues $4,055,589 $3,542,521 $513,068 Operating income (loss) 48,581 56,437 (7,856) Identifiable assets 2,293,067 2,198,386 94,681 Consolidated Freightways, Inc. and Subsidiaries INDUSTRY GROUP INFORMATION
(Dollars in thousands) Industry Group Adjustments Con-Way Eliminations and CF Motor Transportation Emery Consolidated the Parent Freight Services Worldwide Year Ended December 31, 1994 Revenues $4,680,479 $2,094,081 $1,018,544 $1,567,854 Operating expenses 3,824,141 1,823,792 748,086 1,252,263 Selling and administrative expenses 580,370 243,810 124,719 211,841 Depreciation 133,734 73,081 34,519 26,134 Operating income (loss) 142,234 ($46,602) $111,220 $77,616 Other income (expense) (30,314) Income before income taxes $111,920 Capital expenditures $181,928 ($961) $36,849 $97,392 $48,648 Identifiable assets $2,472,723 $193,733 $866,353 $420,744 $991,893 Year Ended December 31, 1993 Revenues $4,191,811 $2,112,237 $818,301 $1,261,273 Operating expenses 3,407,996 1,770,148 615,585 1,022,263 Selling and administrative expenses 528,022 226,405 101,144 200,473 Depreciation 135,636 83,972 29,718 21,946 Operating income 120,157 $31,712 $71,854 $16,591 Other income (expense) (28,716) Income before income taxes $91,441 Capital expenditures $201,210 $2,789 $52,470 $63,823 $82,128 Identifiable assets $2,316,350 $205,280 $864,748 $338,567 $907,755 Year Ended December 31, 1992 Revenues $4,055,589 $2,184,190 $724,195 $1,147,204 Operating expenses 3,306,732 1,803,854 532,476 970,402 Selling and administrative expenses 561,581 269,849 105,001 186,731 Depreciation 138,695 83,002 32,971 22,722 Operating income (loss) 48,581 $27,485 $53,747 ($32,651) Other income (expense) (59,314) Loss before income tax benefits ($10,733) Capital expenditures $148,706 $1,267 $91,026 $36,317 $20,096 Identifiable assets $2,293,067 $392,120 $803,300 $228,565 $869,082
CONSOLIDATED FREIGHTWAYS, INC. AND SUBSIDIARIES 12. Quarterly Financial Data (Unaudited) (Dollars in thousands except per share data)
March 31 June 30 * September 30 December 31 1994 - Quarter Ended Revenues $1,103,221 $1,059,775 $1,236,483 $1,281,000 Operating income 35,484 17,972 48,365 40,413 Income before income taxes 28,758 10,805 41,913 30,444 Income taxes 13,502 5,598 21,632 10,893 Extraordinary charge -- -- 5,522 -- Net income available to common shareholders 10,522 444 9,991 14,753 Per share: Primary net income 0.28 0.01 0.27 ** 0.40 Fully diluted net income 0.25 0.01 0.24 ** 0.37 Market price range $29.25-$23.25 $27.50-$21.75 $25.13-$20.75 $23.00-$18.00 Common dividends -- -- -- 0.10 March 31 June 30 September 30 December 31 1993 - Quarter Ended Revenues $992,981 $1,020,224 $1,067,003 $1,111,603 Operating income 21,350 25,315 38,448 35,044 Income before income taxes 15,481 16,937 31,678 27,345 Income taxes 7,213 8,545 14,599 10,510 Net income available to common shareholders 3,519 3,645 12,382 12,061 Per share: Primary net income 0.10 0.10 0.35 0.33 Fully diluted net income 0.09 0.09 0.31 0.29 Market price range $20.38-$16.25 $18.75-$14.75 $16.88-$13.63 $24.00-$15.50 * Results include the affects of the 24 day Teamster strike at CF MotorFreight. ** Includes losses per common share of $.15 primary and $.13 fully diluted for the extraordinary charge, net of tax benefits, for the write-off of intrastate operating rights.
Ten Year Financial Summary Consolidated Freightways, Inc. and Subsidiaries Years Ended December 31 (Dollars in thousands except per share data)
1994 1993 1992 1991 1990 SUMMARY OF OPERATIONS Revenues $4,680,479 $4,191,811 $4,055,589 $4,082,257 $4,208,527 CF MotorFreight 2,094,081 2,112,237 2,184,190 2,142,603 2,185,271 Con-Way Transportation Services 1,018,544 818,301 724,195 639,443 638,098 Emery Worldwide 1,567,854 1,261,273 1,147,204 1,300,211 1,385,158 Operating income (loss) 142,234 120,157 48,581 1,736 6,044 CF MotorFreight (46,602) 31,712 27,485 (b) 51,991 108,462 Con-Way Transportation Services 111,220 71,854 53,747 33,318 25,547 (d) Emery Worldwide 77,616 16,591 (32,651) (83,573) (127,965) Depreciation and amortization 145,765 146,297 166,917 168,527 170,757 Investment income 2,205 5,586 5,041 10,558 2,531 Interest expense 27,945 30,333 38,893 46,703 40,178 Income (loss) before income taxes (benefits) 111,920 91,441 (10,733) (43,337) (32,678) Income taxes (benefits) 51,625 40,867 (7,077) (2,916) (4,697) Net income (loss) applicable to common shareholders 35,710 (a) 31,607 (97,728)(c) (53,112) (40,727) Cash from operations 165,182 172,808 131,779 192,356 194,821 PER SHARE Net income (loss) applicable to common shareholders .96 (a) .87 (2.78)(c) (1.52) (1.16) Dividends on common stock .10 -- -- -- .53 Common shareholders' equity 14.58 13.65 12.64 15.30 16.50 FINANCIAL POSITION Cash and cash equivalents 95,711 139,044 152,064 284,645 217,680 Property, plant and equipment, net 944,592 910,444 886,834 896,922 953,504 Total assets 2,472,723 2,316,350 2,293,067 2,285,466 2,412,003 Capital expenditures 181,928 201,210 148,706 98,073 141,784 Long-term debt and capital leases 397,857 408,409 505,320 646,655 673,611 Shareholders' equity 673,629 623,375 579,161 547,083 581,979 RATIOS AND STATISTICS Current ratio 1.1 to 1 1.1 to 1 1.2 to 1 1.2 to 1 1.2 to 1 Income (loss) as % of revenues .76% .75% (2.4)% (1.3)% (1.0)% Effective income tax rate 46.1% 44.7% (65.9%) (6.7%) (14.4)% Long-term debt and capital leases as % of total capitalization 37% 40% 47% 54% 54% Return on average invested capital 6% 5% -- (3)% (2)% Return on average shareholders' equity 9% 8% (1)% (7)% (7)% Common dividends as % of net income (loss) 10% -- -- -- 46% Average shares outstanding 37,216,044 36,187,682 35,195,743 35,033,738 34,988,778 Market price range $29.25-$18.00 $24.00-$13.63 $19.63-$12.50 $21.50-$9.50 $26.88-$10.75 Number of shareholders 16,015 15,785 15,260 14,300 14,500 Number of employees 40,500 39,100 37,900 37,700 41,300
Ten Year Financial Summary (continued)
1989 (e) 1988 1987 1986 1985 SUMMARY OF OPERATIONS Revenues $3,760,193 $2,689,075 $2,296,911 $2,124,467 $1,882,142 CF MotorFreight 1,996,681 1,836,141 1,621,148 1,524,336 1,382,637 Con-Way Transportation Services 558,517 463,918 370,940 318,841 233,930 Emery Worldwide 1,204,995 389,016 304,823 281,290 265,575 Operating income (loss) 50,855 162,727 101,248 135,045 112,235 CF MotorFreight 107,895 119,116 92,456 128,927 109,005 Con-Way Transportation Services 40,365 33,373 6,404 11,359 (731) Emery Worldwide (97,405) 10,238 2,388 (5,241) 3,961 Depreciation and amortization 159,282 116,204 102,165 94,262 85,953 Investment income 5,418 13,950 25,182 16,942 22,468 Interest expense 38,471 6,324 6,016 7,298 6,159 Income (loss) before income taxes (benefits) 24,297 173,330 119,311 147,639 127,408 Income taxes (benefits) 15,685 60,177 44,741 58,530 48,117 Net income (loss) applicable to common shareholders 12,048 (f) 113,153 74,570 89,109 79,291 Cash from operations 81,031 243,595 206,841 224,242 176,356 PER SHARE Net income (loss) applicable to common shareholders .33 (f) 3.00 1.93 2.31 2.06 Dividends on common stock 1.04 .96 .88 .80 .72 Common shareholders' equity 18.01 20.32 18.16 17.22 15.69 FINANCIAL POSITION Cash and cash equivalents 111,081 134,783 161,590 153,334 119,614 Property, plant and equipment, net 1,016,325 760,349 622,181 573,092 537,659 Total assets 2,391,826 1,536,099 1,377,329 1,288,063 1,134,430 Capital expenditures 255,793 258,368 155,127 136,278 164,862 Long-term debt and capital leases 652,169 47,677 50,935 58,700 62,539 Shareholders' equity 630,122 766,248 687,857 665,048 603,794 RATIOS AND STATISTICS Current ratio 1.2 to 1 1.3 to 1 1.4 to 1 1.5 to 1 1.6 to 1 Income (loss) as % of revenues .3% 4.2% 3.2% 4.2% 4.2% Effective income tax rate 64.6% 34.7% 37.5% 39.6% 37.8% Long-term debt and capital leases as % of total capitalization 51% 6% 7% 8% 9% Return on average invested capital 2% 12% 9% 11% 10% Return on average shareholders' equity 2% 16% 11% 14% 14% Common dividends as % of net income (loss) 315% 32% 46% 35% 35% Average shares outstanding 36,791,182 37,712,402 38,579,572 38,586,375 38,428,242 Market price range $37.75-$25.25 $34.75-$25.25 $41.25-$22.75 $36.50-$23.67 $27.50-$18.67 Number of shareholders 13,427 12,789 12,202 11,622 10,901 Number of employees 40,800 29,400 26,300 24,600 21,700 (a) Includes $5.5 million ($.15 per share primary and $.13 per share fully diluted) extraordinary charge, net of related tax benefits, for the write-off of intrastate operating rights. (b) Includes special charges of $17.3 million related to CF MotorFreight and write-off of Canadian operating authorities. (c) Includes $70 million ($1.99 per share) cumulative effect of change in method of accounting for post retirement benefits and $7.4 million ($.21 per share) extraordinary charge from early retirement of debt. Also included are special charges of $17.3 million, $10.5 million of charges for the write-down of properties held for sale and certain other intangibles and related tax benefits (d) Includes one-time subsidiary closure costs of $11.3 million. (e) Includes the results of operations of Emery Air Freight Corporation since its acquisition in April. (f) Includes $11.3 million ($.31 per share) cumulative effect of change in method of accounting for income taxes.
EX-22 13 PAGE 1 EXHIBIT 22 ---------- CONSOLIDATED FREIGHTWAYS, INC. SIGNIFICANT SUBSIDIARIES OF THE COMPANY December 31, 1994 The Company and its significant subsidiaries were: State or Percent of Province or Stock Owned Country of Parent and Significant Subsidiaries by Company Incorporation - ----------------------------------- --------------- --------------- Consolidated Freightways, Inc. Delaware Significant Subsidiaries of Consolidated Freightways, Inc. - ---------------------------------------------------------- Consolidated Freightways Corporation of Delaware 100 Delaware Canadian Freightways, Limited 100 Alberta, Canada Milne & Craighead Customs Brokers (Canada) Ltd. 100 Canada Canadian Freightways Eastern Limited 100 Ontario, Canada United Terminals LTD. 100 Canada Menlo Logistics, Inc. 100 California Road Systems, Inc. 100 California Willamette Sales Co. 100 Oregon Con-Way Transportation Services, Inc. 100 Delaware Con-Way Western Express, Inc. 100 Delaware Con-Way Central Express, Inc. 100 Delaware Con-Way Southern Express, Inc. 100 Delaware Con-Way Truckload Services, Inc. 100 Delaware Emery Air Freight Corporation 100 Delaware Emery Worldwide Airlines, Inc. 100 Nevada EX-27 14
5 YEAR DEC-31-1994 DEC-31-1994 95,711 0 686,129 (26,938) 41,719 1,031,465 2,022,344 (1,077,752) 2,472,723 945,168 397,857 143,681 0 264,301 265,647 2,472,723 0 4,680,479 0 4,538,245 30,314 6,676 27,945 111,920 51,625 41,232 0 5,522 0 35,710 .96 .87
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