Exhibit 10.05
EIGHTH AMENDMENT TO LETTER OF CREDIT AGREEMENTS
THIS EIGHTH AMENDMENT TO LETTER OF CREDIT AGREEMENTS
(this "Amendment"), is made and entered into as of February 19,
2002 (the "Effective Date"), by and among CONSOLIDATED
FREIGHTWAYS CORPORATION, a Delaware corporation ("Debtor"), the
other Credit Parties signatory to the Letter of Credit Agreements
described below (collectively, together with the Debtor, the
"Credit Parties") and GENERAL ELECTRIC CAPITAL CORPORATION, a
Delaware corporation ("GE Capital").
W I T N E S S E T H:
WHEREAS, Debtor and GE Capital are parties to that
certain Letter of Credit Agreement, dated as of April 27, 2001
(as amended to the date hereof, the "Letter of Credit Agreement";
capitalized terms used herein and not otherwise defined herein
shall have the meanings given such terms in the Letter of Credit
Agreement), pursuant to which GE Capital has committed to make
certain letters of credit available to Debtor; and
WHEREAS, Debtor, the other Credit Parties and GE
Capital desire to modify the Letter of Credit Agreement in
certain respects, all in accordance with and subject to the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises, the
covenants and agreements contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Debtor, the other Credit Parties and GE
Capital do hereby agree that all capitalized terms used herein
shall have the meanings ascribed thereto in the Letter of Credit
Agreement (except as otherwise expressly defined or limited
herein) and do hereby further agree as follows:
1. Waiver. Subject to the terms and conditions of this
Amendment, including without limitation the fulfillment of the
conditions to effectiveness specified in Section 7 below, the
Creditor hereby waives (i) the minimum Excess Liquidity
requirements in clauses (i)(A) and (ii)(A) of Section 2.2(f) of
the Letter of Credit Agreement solely with respect to that
certain Letter of Credit in the amount of $20,000,000 to be
issued to United States Fidelity and Guaranty, Co. on or about
the date hereof (the "Fidelity Letter of Credit") and the Bayview
Letters of Credit (as such term is defined in Section 2 below);
provided that the aforesaid waiver relates solely to the issuance
of the Fidelity Letter of Credit and the Bayview Letters of
Credit (as such term is defined in Section 2 below) and to the
specific conditions precedent to issuance of each such Letter of
Credit, and nothing in this Amendment is intended, or shall be
construed, to waive any of the conditions precedent in Section
2.2(f) with respect to the issuance of any other Letters of
Credit; (ii) any Default or Event of Default arising under
Sections 6.1, 6.2, 6.4, 6.5 and 6.8 of the Letter of Credit
Agreement solely as a result of (a) the formation of CFL Holding
Ltd, an Alberta corporation ("CFLH") as a new Subsidiary of CF
Delaware and the issuance of stock by CFLH to CF Delaware in
connection therewith, and (b) CF Delaware's exchange of shares of
Canadian Freightways, Ltd. with CFLH for shares of CFLH prior to
the date hereof, without Creditor's prior written consent; and
(iii) solely for the period commencing on December 31, 2001 and
ending on the Effective Date, any Default or Event of Default
resulting from the failure of Debtor to meet the Minimum EBITDA
financial covenant solely for the Fiscal Quarter ending December
31, 2001, as such financial covenant is in effect immediately
prior to the date of this Amendment. Creditor hereby further
waives any Default or Event of Default arising under Sections 4.1
and paragraph (f) of Annex E as a result of the failure by Debtor
to give Creditor timely notice of any of the foregoing Events of
Default described in the immediately preceding sentence.
2. Amendment of the Letter of Credit Agreement. Subject to the
terms and conditions of this Amendment, including without
limitation the fulfillment of the conditions precedent specified
in Section 7 below, the Letter of Credit Agreement is hereby
amended as follows:
(A) Section 1.1(c)(iv) to the Letter of Credit
Agreement is hereby amended by deleting the first word of
the first sentence of said Section 1.1(c)(iv) and
substituting in lieu thereof the following words "Subject to
Section 1.3, neither" to the beginning of the first sentence
of said section.
(B) Section 1.3 to the Letter of Credit Agreement is
hereby amended by adding a new sentence at the end thereof
to read in its entirety as follows:
On Wednesday of each calendar week (or if Wednesday is
not a Business Day, the immediately succeeding Business
Day) (each, a "Cash Collateral Valuation Date"),
Creditor shall determine whether a Letter of Credit
Exposure Excess is then continuing, based upon the
Pledged Entity Valuation Certificate dated as of the
determination date, the amount of cash and Cash
Equivalents on deposit in the Cash Collateral Account
at such time and the Letter of Credit Exposure at such
time. After taking into consideration the foregoing
factors, if no Letter of Credit Exposure Excess exists
on any such Cash Collateral Valuation Date, then
Creditor will within two (2) Business Days after such
Cash Collateral Valuation Date (the "Cash Collateral
Return Date"), at the request of Debtor, return to
Debtor the amount of cash and Cash Equivalents, if any,
then on deposit in the Cash Collateral Account equal to
the Cash Collateral Return Amount (defined below), free
and clear of any lien granted in favor of Creditor
hereunder, provided that Creditor shall have no
obligation to return any such cash or Cash Equivalents
on the Cash Collateral Return Date if, on such Cash
Collateral Return Date and after giving effect to such
return of the Cash Collateral Return Amount (i) a
Letter of Credit Exposure Excess would exist, or (ii) a
Default or an Event of Default would exist. As used
herein, the term "Cash Collateral Return Amount" means,
as of any date of determination thereof, an amount
equal to (i) the aggregate amount of cash and Cash
Equivalents then held in the Cash Collateral Account in
accordance with Section 1.1(c)(i) that are in excess of
the amount of the Letter of Credit Exposure Excess that
would exist as of such determination date if there were
no cash or Cash Equivalents on deposit in the Cash
Collateral Account at such time divided by (ii) 105%.
The Cash Collateral Return Amount if a negative number
shall be deemed to be equal to Zero Dollars ($0).
(C) Section 5.10 to the Letter of Credit Agreement is
hereby amended by deleting said Section and substituting in
lieu thereof the following new Section 5.10 to read in its
entirety as follows:
Section 5.10 Additional Subsidiary Guarantors.
Promptly (and in any event within five (5) Business
Days) after the creation or acquisition of any Domestic
Subsidiary of Debtor (other than the Receivables
Subsidiary and the SPE Subsidiaries), Debtor shall
cause to be executed and delivered, (i) by such new
Domestic Subsidiary, a supplement to the Subsidiary
Guaranty in substantially the form of Schedule 1 to the
Subsidiary Guaranty, (ii) by such new Subsidiary, an
Acknowledgement to the Security Agreement in
substantially the form of Exhibit B to the Security
Agreement, and (iii) such other related documents
(including closing certificates and legal opinions) as
Creditor may reasonably request, all in form and
substance reasonably satisfactory to Creditor.
(D) Section 6.1 to the Letter of Credit Agreement is
hereby amended by deleting the word "or" from the end of
clause (iii) and adding the word "or" to the end of clause
(iv) and adding a new clause (v) to read in its entirety as
follows:
(v) the formation of the SPE Subsidiaries.
(E) Section 6.2 to the Letter of Credit Agreement is
hereby amended by deleting the word "and" from the end of
clause (h) and adding the word "and" to the end of clause
(i) and adding a new clause (j) to read in its entirety as
follows:
(j) Credit Parties may invest up to $1,000 in
each of the SPE Subsidiaries.
(F) Section 6.3 to the Letter of Credit Agreement is
hereby amended by deleting the word "and" from the end of
clause (m) and adding the word "and" to the end of clause
(n) and adding a new clause (o) to read in its entirety as
follows:
(o) Indebtedness for borrowed money incurred by
one or more of the SPE Subsidiaries from Bayview and
any reimbursement obligations incurred by Debtor in
respect of any Bayview Letters of Credit or other
Letters of Credit issued after the date hereof in
favor of Bayview as required under the Bayview
Commitment Letter (each such Indebtedness being herein
called a "Bayview Indebtedness"), provided that (i) the
aggregate outstanding principal amount of all Bayview
Indebtedness shall not exceed $45,000,000 plus
capitalized fees at any one time, (ii) the terms and
conditions of all Bayview Indebtedness, including,
without limitation, the interest, fees, other charges
and payments of principal to be paid by the SPE
Subsidiaries to Bayview under any notes, instruments or
other documents from time to time evidencing any or all
of the Bayview Indebtedness, are substantially the same
as those set forth in the Bayview Commitment Letter,
(iii) the form and substance of any note, instrument or
other documents from time to time evidencing the
Bayview Indebtedness shall be substantially the same as
set forth as Exhibit B to the Eighth Amendment to
Letter of Credit Agreement, (iv) all Bayview
Indebtedness shall be secured only by Liens on assets
of the SPE Subsidiaries permitted under Section 6.7(g),
(v) the scheduled final maturity of all Bayview
Indebtedness shall be at least fifteen years from the
date of funding of the initial advance of funds
pursuant to the Bayview Commitment Letter, and (vi) the
proceeds of such Bayview Indebtedness shall be used to
finance the transfer and lease-back transaction
permitted under the proviso to Section 6.8(i) and
closing costs and fees payable on account of the
Bayview Commitment Letter.
(G) The first sentence of Section 6.6 to the Letter of
Credit Agreement is hereby amended by deleting the word
"and" from the end of clause (e) and adding the word "and"
to the end of clause (f) and adding a new clause (g) to read
in its entirety as follows:
(g) for unsecured Guaranteed Indebtedness of
Debtor and CF Delaware incurred as a result of the
guaranty by Debtor and CF Delaware of any Bayview
Indebtedness to the extent such Bayview Indebtedness is
permitted under Section 6.3(o).
(H) Section 6.7 to the Letter of Credit Agreement is
hereby amended by deleting the word "and" from the end of
clause (e) and adding the word "and" to the end of clause
(f) and adding a new clause (g) to read in its entirety as
follows:
(g) Liens granted by any SPE Subsidiaries in
favor of Bayview in the Conveyed Property and any other
assets (including real property) owned by the SPE
Subsidiaries securing any Bayview Indebtedness to the
extent such Bayview Indebtedness is permitted under
Section 6.3(o), provided that such Liens do not attach
to any of the Collateral, the "Collateral" (as such
term is defined in the Revolving Credit Agreement) or
the Receivables.
(I) Section 6.8 to the Letter of Credit Agreement is
hereby amended by deleting the word "and" from the end of
clause (g) and adding the word "and" to the end of clause
(h) and adding a new clause (i) to read in its entirety as
follows:
(i) the transfer of the Conveyed Properties or
any other real property (provided that such real
property does not constitute any of the Collateral, the
"Collateral" (as such term is defined in the Revolving
Credit Agreement) or the Receivables), by CF Delaware
to CFCD 2002 LLC, a Delaware limited liability company
("CFCD 2002 LLC"), and the lease-back of such Conveyed
Properties or other real property (provided that such
real property does not constitute any of the
Collateral, the "Collateral" (as such term is defined
in the Revolving Credit Agreement) or the Receivables)
by CFCD 2002 LLC to CF Delaware provided that (a) the
aggregate rent paid or payable by CF Delaware under all
such lease-back transactions does not exceed an amount
equal to the aggregate fixed monthly prepayment of
principal and interest under all of the Bayview
Indebtedness permitted under Section 6.3(o), subject to
adjustments based on changes in the consumer price
index as set forth in the leases between CF Delaware
and CFCD 2002 LLC, (b) all such rent shall be used by
the SPE Subsidiaries to pay such principal and interest
when due and (c) the proceeds received by CF Delaware
from CFCD 2002 LLC in connection with such transfer
made (i) on the Eighth Amendment Effective Date, shall
be used by CF Delaware to create additional Net
Availability under the Letter of Credit Agreement, and
(ii) after the Eighth Amendment Effective Date, to be
used by CF Delaware for working capital and general
corporate purposes.
(J) Section 6.19 to the Letter of Credit Agreement is
hereby amended by adding a sentence to the to the end of
Section 6.19 to read in its entirety as follows:
Subject to compliance with all of the terms and
conditions set forth in the Eighth Amendment to Letter
of Credit Agreements and the compliance with all of the
covenants contained in the Letter of Credit Agreement,
as amended by the Eighth Amendment to Letter of Credit
Agreement, Creditor hereby agrees that this Section
6.19 shall not prohibit (i) the incurrence by any SPE
Subsidiary of any Bayview Indebtedness to the extent
permitted to be incurred under Section 6.3(o) and (ii)
the formation by CF Delaware of the SPE Subsidiaries.
(K) Section 8.1 to the Letter of Credit Agreement is
hereby amended by adding a new subsection (p) and a new
subsection (q) to read in their entirety as follows:
(p) A drawing is made by Bayview under any Bayview
Letter of Credit.
(q) A default or breach occurs under any
agreement, document or instrument relating to any
Bayview Indebtedness that is not cured within the
applicable grace period therefor and such default or
breach (i) involves the failure to make any payment
when due in respect of such Bayview Indebtedness or
(ii) causes, or permits any holder of such Bayview
Indebtedness to cause, such Bayview Indebtedness to
become due prior to its stated maturity or prior to its
regularly scheduled dates of payment, or cash
collateral in respect thereof to be demanded, in each
case, regardless of whether such default is waived, or
such right is exercised, by such holder.
(L) Disclosure Schedule 3.8 to the Letter of Credit
Agreement is hereby amended by adding to such schedule the
following Subsidiaries:
CF ▇▇▇▇▇▇.▇▇▇ Incorporated, a Delaware corporation
CFCD 2002 Member LLC, a Delaware limited liability
company
CFCD 2002 LLC, a Delaware limited liability
company
CFL Holding Ltd., an Alberta corporation
(M) Annex A to the Letter of Credit Agreement is
hereby amended by deleting therefrom the definitions of
"Applicable L/C Margin", "Commitment" "Guarantors" and
"Subsidiary Guaranty" in their entirety and substituting the
following definitions in lieu thereof:
"Applicable L/C Margin" shall mean a per annum
rate equal to 2.25%.
"Commitment" shall mean commitment of Creditor to
incur Letter of Credit Obligations, which commitment
shall be One Hundred Fifty Million Dollars
($150,000,000) on the Closing Date, as such amount may
be adjusted, if at all, from time to time in accordance
with this Agreement.
"Guarantors" shall mean each Domestic Subsidiary
of Debtor (other than the Receivables Subsidiary and
SPE Subsidiaries) and each other Person, if any, which
executes a guarantee or other similar agreement in
favor of Creditor in connection with the transactions
contemplated by this Agreement and the other Letter of
Credit Documents.
"Subsidiary Guaranty" shall mean the Subsidiary
Guaranty, dated as of April 27, 2001, executed by all
Domestic Subsidiaries of Debtor (other than the
Receivables Subsidiary and SPE Subsidiaries) in favor
of Creditor.
(N) Annex A to the Letter of Credit Agreement is
hereby further amended by adding in alphabetical order the
following definitions:
"Bayview" shall mean Bayview Financial Trading
Group, L.P., together with its successors and assigns.
"Bayview Commitment Letter" shall mean that
certain commitment letter dated as of January 18, 2002
from Bayview to Debtor, as amended by those certain
letter amendments dated as of February 1, 2002 and
February 7, 2002 from Bayview to Debtor, and without
giving effect to any other amendments, supplements,
replacements or restatements thereof or thereto that
have not been consented to in writing by Creditor.
"Bayview Indebtedness" shall have the meaning
ascribed to such term in Section 6.3(o).
"Bayview Letters of Credit" shall mean,
collectively, those certain Letters of Credit issued by
Debtor to Bayview on the Eight Amendment Effective Date
and identified on Schedule 1 to the Eighth Amendment to
Letter of Credit Agreements, to secure a portion of (i)
the principal and interest payments owing by the SPE
Subsidiaries to Bayview in respect of the Bayview
Indebtedness and (ii) the obligations of the SPE
Subsidiaries in respect of real estate taxes or
property or casualty insurance covering the Conveyed
Properties.
"Conveyed Properties" shall mean and include the
real properties listed on Schedule 2 to the Eighth
Amendment to Letter of Credit Agreements, together with
all buildings and improvements located thereon and all
fixtures, equipment and appliances used in the
operation of such buildings as buildings, including
heating and air conditioning systems and other building
systems used to provide utility services, heating, air
conditioning and ventilation, life safety, or other
services thereto, but excluding the trucks, forklifts,
scales, computers, trade signage showing any Credit
Party's name, and other personal property which is part
of any Credit Party's business operations being
conducted on such real properties or accounts
receivable arising from any Credit Party's business
operations being conducted on such real properties.
"Eighth Amendment Effective Date" shall mean
February 19, 2002.
"Eight Amendment to Letter of Credit Agreements"
shall mean that certain Eighth Amendment to Letter of
Credit Agreements dated as of February 19, 2002 by and
among Debtor, the other Credit Parties signatory
thereto and Creditor.
"SPE Subsidiaries" shall mean, collectively, CFCD
2002 Member LLC, a Delaware limited liability company,
and CFCD 2002 LLC, a Delaware limited liability
company.
(O) Annex C to the Letter of Credit Agreement is
hereby amended by deleting such annex in its entirety and
replacing it with a new Annex C in the form attached hereto
as Exhibit A.
3. No Other Amendments. Except for the waiver expressly set
forth and referred to in Section 1 and the amendments expressly
set forth and referred to in Section 2, each of the Letter of
Credit Agreements shall remain unchanged and in full force and
effect. Nothing in this Amendment is intended or shall be
construed to be a novation of any of the Letter of Credit
Agreements or to affect, modify or impair the continuity or
perfection of the Creditor's Liens under the Collateral
Documents. Without limiting the generality of the foregoing, the
parties hereto hereby acknowledge and agree that this Amendment
is not intended to nor shall it be construed as (i) waiving any
conditions precedent under Section 2.2 of the Letter of Credit
Agreement with respect to any Letter of Credit now or hereafter
requested by Debtor to be issued to Bayview Financial Trading
Group, L.P. (or its successors and assigns) to secure any
obligations of the SPE Subsidiaries (as such term is defined in
Section 2 of this Amendment) in respect of any environmental
condition on or relating to any of the Conveyed Properties (as
such term is defined in Section 2 of this Amendment), or (ii)
waiving any Default or Event of Default that now or hereafter may
exist as a result of any transactions between or among CFLH and
CF Delaware, except for those transactions specifically described
in clauses (a) and (b) of Section 1 of this Amendment.
4. Representations and Warranties. To induce GE Capital to
enter into this Amendment, Debtor and each of the other Credit
Parties hereby warrant, represent and covenant to GE Capital
that: (a) this Amendment has been duly authorized, executed and
delivered by Debtor and each Credit Party signatory thereto, (b)
after giving effect to this Amendment, no Termination Event or
Event of Default has occurred and is continuing as of this date,
(c) after giving effect to this Amendment, all of the
representations and warranties made by Debtor and each Credit
Party in the Letter of Credit Agreement are true and correct in
all material respects on and as of the date of this Amendment
(except to the extent that any such representations or warranties
expressly referred to a specific prior date) and (d) the Credit
Parties have provided GE Capital with a true, correct and
complete copy of the Bayview Commitment Letter and no amendment,
supplement, replacement or restatement thereof or thereto has
been made except as reflected in the copy of the Bayview
Commitment Letter delivered to GE Capital. Any breach in any
material respect by Debtor or any Credit Party of any of its
representations and warranties contained in this Section 4 shall
be an Event of Default under the Letter of Credit Agreement.
5. Ratification and Acknowledgment. Debtor and each of the
other Credit Parties hereby ratify and reaffirm each and every
term, covenant and condition set forth in the Letter of Credit
Agreement and all other documents delivered by such company in
connection therewith (including without limitation the other
Letter of Credit Documents to which Debtor or any Credit Party is
a party), effective as of the date hereof.
6. Estoppel. To induce GE Capital to enter into this
Amendment, Debtor and each of the other Credit Parties hereby
acknowledge and agree that, as of the date hereof, there exists
no right of offset, defense or counterclaim in favor of Debtor or
any Credit Party as against GE Capital with respect to the
obligations of Debtor or any Credit Party to GE Capital under the
Letter of Credit Agreement or the other Letter of Credit
Agreement Documents, either with or without giving effect to this
Amendment.
7. Conditions to Effectiveness. This Amendment shall become
effective, as of the Effective Date, upon (a) receipt by the
Creditor of this Amendment, duly executed, completed and
delivered by Debtor and each other Credit Party, in form and
substance satisfactory to GE Capital (b) the Sixth Amendment to
Credit Agreement dated February 19, 2002, among Debtor, the other
credit parties signatory thereto and GE Capital shall have been
executed and delivered to GE Capital and be in full force and
effect, (c) the Seventh Amendment to Securitization Agreements,
dated February 19, 2002, among Consolidated Freightways Funding
LLC, Consolidated Freightways Corporation of Delaware and GE
Capital shall have been executed and delivered to GE Capital and
be in full force and effect, (d) receipt by the Creditor of Side
Letter Agreement dated the date hereof, duly executed, completed
and delivered by Debtor and Creditor, and (e) the SPE
Subsidiaries shall have incurred not less than $20,000,000 in
Bayview Indebtedness in accordance with the terms of Section
6.3(o) of the Letter of Credit Agreement as amended hereby and
the proceeds of such Bayview Indebtedness shall have been used in
accordance with the requirements of Section 6.3(o) and Section
6.8(i)(c)(i) of the Letter of Credit Agreement as amended hereby.
Upon the effective date of this Amendment, the waivers set forth
in Section 1 and the amendments set forth in Section 2 of this
Amendment shall become effective as of the effective date of this
Amendment.
8. Reimbursement of Expenses. Debtor and each of the other
Credit Parties hereby agree that Debtor and each of the other
Credit Parties shall reimburse GE Capital on demand for all costs
and expenses (including without limitation reasonable attorney's
fees) incurred by GE Capital in connection with the negotiation,
documentation and consummation of this Amendment and the other
documents executed in connection herewith and therewith and the
transactions contemplated hereby and thereby.
9. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
FOR CONTRACTS TO BE PERFORMED ENTIRELY WITHIN SAID STATE.
10. Severability of Provisions. Any provision of this Amendment
which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction. To
the extent permitted by applicable law, Debtor and each of the
other Credit Parties hereby waive any provision of law that
renders any provision hereof prohibited or unenforceable in any
respect.
11. Counterparts. This Amendment may be executed in any number
of several counterparts, all of which shall be deemed to
constitute but one original and shall be binding upon all
parties, their successors and permitted assigns.
12. Entire Agreement. The Letter of Credit Agreement as amended
by this Amendment embodies the entire agreement between the
parties hereto relating to the subject matter hereof and
supersedes all prior agreements, representations and
understandings, if any, relating to the subject matter hereof.
[Remainder of page intentionally blank; next page is
signature page]
IN WITNESS WHEREOF, the parties have caused
this Eighth Amendment to Letter of Credit Agreements to be duly
executed by their respective officers thereunto duly authorized,
as of the date first above written.
DEBTOR:
CONSOLIDATED FREIGHTWAYS CORPORATION
By
Name:
Title:
CREDITOR:
GENERAL ELECTRIC CAPITAL CORPORATION
By
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Its Duly Authorized Signatory
SUBSIDIARY GUARANTORS:
CONSOLIDATED FREIGHTWAYS CORPORATION OF
DELAWARE
By:
Name:
Title:
CF AIRFREIGHT CORPORATION
By:
Name:
Title:
REDWOOD SYSTEMS, INC.
By:
Name:
Title:
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ CORPORATION
By:
Name:
Title:
CF ▇▇▇▇▇▇.▇▇▇ INCORPORATED
By:
Name:
Title:
EXHIBIT A
ANNEX C (Section 6.10)
to
CREDIT AGREEMENT
FINANCIAL COVENANTS
(a) Minimum Fixed Charge Coverage Ratio. The Debtor
and its Subsidiaries shall have on a consolidated basis, as of
the end of each Fiscal Quarter set forth below, a Fixed Charge
Coverage Ratio for the period set forth below of not less than
the following:
Fiscal Quarter Minimum Fixed
Charge
Coverage Ratio
for the Rolling Period 0.20 to 1.00
ending September 30,
2001
for the Rolling Period 0.01 to 1.00
ending December 31, 2001
for the three month -1.00 to 1.00
period ending March 31,
2002
for the sixth month -0.10 to l.00
period ending June 30,
2002
for the nine month 0.50 to 1.00
period ending September
30, 2002
for the Rolling Period 0.80 to 1.00
ending December 31, 2002
for the Rolling Period 1.70 to 1.00
ending on each Fiscal
Quarter thereafter
(b) Minimum Tangible Net Worth. Debtor and its
Subsidiaries on a consolidated basis shall have a Tangible Net
Worth, (i) as of the Closing Date and as of the end of each of
the second and third Fiscal Quarters of the Fiscal Year ending
December 31, 2001, of not less than $180,000,000, (ii) as of the
end of the fourth Fiscal Quarter of the Fiscal Year ending
December 31, 2001, of not less than $150,000,000, (iii) as of the
end of each of the first, second and third Fiscal Quarters of the
Fiscal Year ending December 31, 2002, of not less than
$120,000,000, and (iv) as of the end of the fourth Fiscal Quarter
of the Fiscal Year ending December 31, 2002 and as of the end of
each of the first, second and third Fiscal Quarters of the Fiscal
Year ending December 31, 2003, of not less than $130,000,000.
Thereafter, Debtor and its Subsidiaries on a consolidated basis
shall have, as of the end of each Fiscal Year ending on or after
December 31, 2003 (each such Fiscal Year herein called the
"Subject Fiscal Year") and as of the end of the first three
Fiscal Quarters of the immediately succeeding Fiscal Year, a
Tangible Net Worth of not less than the sum of (i) the minimum
Tangible Net Worth required hereunder for the Fiscal Year which
immediately preceded the Subject Fiscal Year (or, where the
Subject Fiscal Year is the Fiscal Year ending December 31, 2003,
the sum of $130,000,000) plus (ii) an amount equal to fifty
percent (50%) of the positive net income of the Debtor and its
Subsidiaries on a consolidated basis for the Subject Fiscal Year
plus (iii) an amount equal to one hundred percent (100%) of the
amount of any equity raised by or capital contributed to the
Debtor during the Subject Fiscal Year (in the case of equity
raised or capital contributed, net of the bona fide, reasonable
expenses, if any, relating to the raising of such equity or such
capital contribution and paid to Persons who are not Affiliates
of the Debtor).
(b) Minimum EBITDA. Debtor and its Subsidiaries shall
have on a consolidated basis, for each period set forth below, an
EBITDA for such period of not less than the following:
Fiscal Quarter Minimum EBITDA
for the Rolling Period $8,000,000
ending September 30,
2001
for the Rolling Period -$3,200,000
ending December 31, 2001
for the three month -$7,900,000
period ending March 31,
2002
for the sixth month $5,600,000
period ending June 30,
2002
for the nine month $24,400,000
period ending September
30, 2002
for the Rolling Period $43,800,000
ending December 31, 2002
for the Rolling Period $80,000,000
ending on each Fiscal
Quarter thereafter
(d) Maximum Capital Expenditures. Debtor and its
Subsidiaries shall not make or incur any Capital Expenditures if,
after giving effect thereto, the aggregate amount of all Capital
Expenditures made or incurred by Debtor and its Subsidiaries
during any period of four (4) consecutive Fiscal Quarters would
exceed the amounts set forth below for such period:
Four Consecutive Fiscal Maximum Capital
Quarters Ending Expenditures
Fiscal Quarter ending $35,000,000
June 30, 2001
Fiscal Quarter ending $36,000,000
September 30, 2001
Fiscal Quarter ending $30,000,000
December 31, 2001
Fiscal Quarter ending $25,000,000
March 31, 2002 and for
each Fiscal Quarter
thereafter
Capitalized terms used in this Annex C and not
otherwise defined below shall have the respective meanings
ascribed to them in Annex A. The following terms shall have the
respective meanings set forth below:
"Capital Expenditures" shall mean, with respect to any
Person, all expenditures (by the expenditure of cash or the
incurrence of Indebtedness) by such Person during any measuring
period for any fixed assets or improvements or for replacements,
substitutions or additions thereto, that have a useful life of
more than one year and that are required to be capitalized under
GAAP, but excluding (i) Capital Expenditures of the Debtor or any
Subsidiary Guarantor financed by the incurrence of Term Debt to
the extent that such Term Debt is permitted to be incurred under
Section 6.3, provided that on or prior to the date of incurrence
of such Term Debt, Debtor has furnished to Creditor a written
statement of sources and uses of such Term Debt, which statement
describes with particularity the principal amount of the Term
Debt to be used for the proposed Capital Expenditure and the
fixed assets or improvements to be acquired, replaced,
substituted or added to in connection with such proposed Capital
Expenditure, (ii) the purchase of the Vancouver Property by the
Debtor, provided that to the extent the purchase price of the
Vancouver Property exceeds $25,000,000, such excess shall be
included as a Capital Expenditure for purposes of determining
compliance with the Maximum Capital Expenditure covenant set
forth in paragraph (d) of this Annex C, (iii) any Capital
Expenditures incurred by the Debtor in connection with the
refinancing of the Participation Agreement, provided that to the
extent that such Capital Expenditures exceed $22,500,000, such
excess shall be included as a Capital Expenditure for purposes of
determining compliance with the Maximum Capital Expenditure
covenant set forth in paragraph (d) of this Annex C, (iv) any
purchase by the Debtor or any Subsidiary of fixed assets or
improvements to the extent that such purchase qualifies for like-
kind tax treatment under Section 1031 of the IRC, provided that
such exclusion from Capital Expenditures under this clause (iv)
shall be limited to an amount not to exceed the lesser of (x) the
cash proceeds received from the transfer of the property
relinquished in the like-kind exchange, assuming for purposes
hereof that the Debtor or Subsidiary does not qualify for like-
kind tax treatment under Section 1031 of the IRC in connection
with such transfer and (y) the value of the fixed assets or
improvements purchased by the Debtor in the subject transaction
which qualifies for like-kind tax treatment under Section 1031 of
the IRC, (v) any purchase by the Debtor or any Subsidiary of
fixed assets or improvements with the proceeds received from the
sale of the Menlo Park Property, provided that on or prior to the
date of any such Capital Expenditures, Debtor has furnished to
Creditor a written statement of sources and uses of the proceeds
from the sale of the Menlo Park Property, which statement
describes with particularity the amount of the proceeds from the
sale of the Menlo Park Property to be used for the proposed
Capital Expenditure and the fixed assets or improvements to be
acquired, replaced, substituted or added to in connection with
such proposed Capital Expenditures, and (vi) such other items as
Debtor and Creditor may agree in writing to exclude.
"EBITDA" shall mean, with respect to any Person for any
fiscal period, the amount equal to (a) consolidated net income of
such Person for such period, plus (b) the sum of (i) any
provision for income taxes, (ii) Interest Expense, (iii) loss
from extraordinary items for such period, (iv) depreciation and
amortization for such period, (v) amortized debt discount for
such period, (vi) the amount of any deduction to consolidated net
income as the result of any grant to any members of the
management of such Person of any Stock, and (vii) Lease Expenses,
in each case to the extent included in the calculation of
consolidated net income of such Person for such period in
accordance with GAAP, but without duplication, minus (c) the sum
of (i) income tax credits, (ii) interest income, (iii) gain from
extraordinary items for such period, (iv) any aggregate net gain
(but not any aggregate net loss) during such period arising from
the sale, exchange or other disposition of capital assets by such
Person (including any fixed assets, whether tangible or
intangible, all inventory sold in conjunction with the
disposition of fixed assets and all securities), provided that
there shall be excluded from the amount of any aggregate net gain
under this clause (iv), in solely the Fiscal Quarter ending March
31, 2001, an amount equal to the lesser of (x) $19,200,000 and
(y) the actual gain recognized by the Debtor and its Subsidiaries
from the sale of its Portland, Oregon administrative complex and
(v) any other non-cash gains that have been added in determining
consolidated net income (including LIFO adjustments), in each
case to the extent included in the calculation of consolidated
net income of such Person for such period in accordance with
GAAP, but without duplication,. For purposes of this definition,
the following items shall be excluded in determining consolidated
net income of a Person: (A) the income (or deficit) of any other
Person accrued prior to the date it became a Subsidiary of, or
was merged or consolidated into, such Person or any of such
Person's Subsidiaries; (B) the income (or deficit) of any other
Person (other than a Subsidiary) in which such Person has an
ownership interest, except to the extent any such income has
actually been received by such Person in the form of cash
dividends or distributions; (C) the undistributed earnings of any
Subsidiary of such Person to the extent that the declaration or
payment of dividends or similar distributions by such Subsidiary
is not at the time permitted by the terms of any contractual
obligation or requirement of law applicable to such Subsidiary;
(D) any restoration to income of any contingency reserve, except
to the extent that provision for such reserve was made out of
income accrued during such period; (E) any write-up of any asset;
(F) any net gain from the collection of the proceeds of life
insurance policies; (G) any net gain arising from the acquisition
of any securities, or the extinguishment, under GAAP, of any
Indebtedness, of such Person, (H) in the case of a successor to
such Person by consolidation or merger or as a transferee of its
assets, any earnings of such successor prior to such
consolidation, merger or transfer of assets, and (I) any deferred
credit representing the excess of equity in any Subsidiary of
such Person at the date of acquisition of such Subsidiary over
the cost to such Person of the investment in such Subsidiary.
"Fixed Charges" shall mean, with respect to any Person
for any fiscal period, the aggregate of, without duplication, (a)
all Interest Expense and Lease Expense paid or accrued during
such period, plus (b) all regularly scheduled payments of
principal or implied principal with respect to Indebtedness
(including any lease payments by any Person in respect of any
Capital Leases, any Sale-Leaseback Debt, any Vancouver Secured
Debt or any Bayview Indebtedness) due or made during such period,
plus (c) all Restricted Payments made during such period (other
than Permitted Stock Repurchases covered by Section 6.14(vii))
plus (d) any cash payments made by such Person in connection with
any Permitted Acquisitions.
"Fixed Charge Coverage Ratio" shall mean, with respect
to any Person for any fiscal period, the ratio of (i) the sum of
(x) EBITDA for such period less (y) cash taxes made during such
period to (ii) Fixed Charges for such period.
"Interest Expense" shall mean, with respect to any
Person for any fiscal period, the sum of (a) interest expense
(whether cash or non-cash) of such Person determined in
accordance with GAAP for the relevant period ended on such date,
including (i) amortization of original issue discount on any
Indebtedness and of all fees payable in connection with the
incurrence of such Indebtedness (to the extent included in
interest expense), (ii) the interest portion of any deferred
payment obligation, (iii) the interest component of any Capital
Lease Obligation plus (b) the amount of any Letter of Credit Fee
(as such term is defined in the Letter of Credit Agreement) paid
during the relevant period ended on such date, plus (c) the
amount of any payments by such Person, as lessee, under any sale-
leaseback or synthetic lease transaction.
"Lease Expenses" shall mean, with respect to any Person
for any fiscal period, the aggregate rental obligations of such
Person determined in accordance with GAAP that are payable in
respect of such period under operating leases of equipment having
an original non-cancelable term (as determined in accordance with
GAAP) in excess of twelve months (net of income from subleases
thereof, but including taxes, insurance, maintenance and similar
expenses that the lessee is obligated to pay under the terms of
such leases), whether or not such obligations are reflected as
liabilities or commitments on a consolidated balance sheet of
such Person or in the notes thereto, excluding, however, any such
obligations under Capital Leases.
"Net Worth" shall mean, with respect to any Person as
of any date of determination, (a) the book value of the assets of
such Person, minus (b) reserves applicable thereto, minus (c) all
of such Person's liabilities on a consolidated basis (including
accrued and deferred income taxes), all as determined in
accordance with GAAP.
"Rolling Period" shall mean, as of the end of any
Fiscal Quarter, the immediately preceding four (4) Fiscal
Quarters, including the Fiscal Quarter then ending.
"Tangible Net Worth" shall mean, with respect to any
Person at any date, the Net Worth of such Person at such date,
(x) excluding, however, from the determination of the total
assets at such date, (a) all goodwill, capitalized organizational
expenses, capitalized research and development expenses,
trademarks, trade names, copyrights, patents, patent
applications, licenses (excluding software licenses) and rights
in any thereof, and other intangible items (other than software
licenses), (b) all unamortized debt discount and expense, (c)
treasury Stock, and (d) any write-up in the book value of any
asset resulting from a revaluation thereof, but (y) including any
non-cash valuation reserves for deferred taxes and any foregone
tax benefits provided that such reserves are established in
accordance with Financial Accounting Standard Number 109 and do
not result in an increase in such Person's future cash tax
payments.
Rules of Construction Concerning Financial Covenants. Unless
otherwise specifically provided therein, any accounting term used
in any Loan Document shall have the meaning customarily given
such term in accordance with GAAP, and all financial computations
thereunder shall be computed in accordance with GAAP consistently
applied. That certain items or computations are explicitly
modified by the phrase "in accordance with GAAP" shall in no way
be construed to limit the foregoing. If any Accounting Changes
occur and such changes result in a change in the calculation of
the financial covenants, standards or terms used in any Loan
Document, then the parties thereto agree to enter into
negotiations in order to amend such provisions so as to equitably
reflect such Accounting Changes with the desired result that the
criteria for evaluating the financial condition of such Persons
and their Subsidiaries shall be the same after such Accounting
Changes as if such Accounting Changes had not been made. If the
parties thereto agree upon the required amendments thereto, then
after appropriate amendments have been executed and the
underlying Accounting Change with respect thereto has been
implemented, any reference to GAAP contained therein shall, only
to the extent of such Accounting Change, refer to GAAP
consistently applied after giving effect to the implementation of
such Accounting Change. If such parties cannot agree upon the
required amendments within 30 days following the date of
implementation of any Accounting Change, then all financial
statements delivered and all calculations of financial covenants
and other standards and terms in accordance with the Related
Documents shall be prepared, delivered and made without regard to
the underlying Accounting Change.
