Exhibit 10.1
FOURTH AMENDMENT TO LETTER OF CREDIT AGREEMENTS
THIS FOURTH AMENDMENT TO LETTER OF CREDIT AGREEMENTS
(this "Amendment"), is made and entered into as of October 18,
2001 (the "Effective Date"), by and between CONSOLIDATED
FREIGHTWAYS CORPORATION, a Delaware corporation ("Debtor"), the
other Credit Parties signatory to the Letter of Credit Agreements
described below (collectively, together with the Debtor, the
"Credit Parties") and GENERAL ELECTRIC CAPITAL CORPORATION, a
Delaware corporation ("GE Capital").
W I T N E S E T H:
WHEREAS, Debtor and GE Capital are parties to that
certain Letter of Credit Agreement, dated as of April 27, 2001
(as amended to the date hereof, the "Letter of Credit Agreement";
capitalized terms used herein and not otherwise defined herein
shall have the meanings given such terms in the Letter of Credit
Agreement), pursuant to which GE Capital has committed to make
certain letters of credit available to Debtor; and
WHEREAS, Debtor, the other Credit Parties and GE
Capital desire to modify the Letter of Credit Agreement, the
Security Agreement and the Cash Collateral Account Agreement and
the Subsidiary Guaranty (collectively, the "Letter of Credit
Agreements") in certain respects and that certain waivers with
respect thereto be granted, all in accordance with and subject to
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises, the
covenants and agreements contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Debtor, the other Credit Parties and GE
Capital do hereby agree that all capitalized terms used herein
shall have the meanings ascribed thereto in the Letter of Credit
Agreement (except as otherwise expressly defined or limited
herein) and do hereby further agree as follows:
1. Waivers of Certain Defaults. Subject to the terms and
conditions of this Amendment, including without limitation the
fulfillment of the conditions to effectiveness specified in
Section 7 below, the Creditor hereby waives any Default or Event
of Default under Section 8.1(n)(i) of the Letter of Credit
Agreement (as such section was in effect immediately prior to the
effectiveness of this Amendment) which may have resulted from the
failure of Debtor prior to October 15, 2001, to receive the
proceeds of the Debt specified therein; provided that the
aforesaid waivers relate solely to the specific covenants, period
and event described above, and nothing in this Amendment is
intended, or shall be construed, to waive any other Default or
Event of Default (including without limitation any Default or
Event of Default with may result from any failure by Debtor and
its Subsidiaries to comply with any of the financial covenants in
Annex C to the Letter of Credit Agreement or Annex 4.02(p) to the
Receivables Sale and Contribution Agreement, as such annexes are
in effect after giving effect to this Amendment and the Fourth
Securitization Agreement Amendment, for the Fiscal Quarter ending
September 30, 2001).
2. Amendments of the Letter of Credit Agreements. Subject to
the terms and conditions of this Amendment, including without
limitation the fulfillment of the conditions precedent specified
in Section 7 below, the Letter of Credit Agreements are hereby
amended as follows:
(A) Amendments to Letter of Credit Agreement. The
Letter of Credit Agreement shall be amended as follows:
(1) Section 1.1(a) of the Letter of Credit Agreement
is deleted in its entirety and the following new Section
1.1(a) is substituted in lieu thereof:
(a) Issuance. Subject to the terms and
conditions of this Agreement, Creditor agrees to incur
from time to time prior to the earlier of the Election
Notice Date or the Commitment Termination Date, upon
the request of Debtor, Letter of Credit Obligations by
causing Letters of Credit to be issued by a bank or
other legally authorized Person selected by or
acceptable to Creditor in its sole discretion and
acceptable to the proposed beneficiary of the Letter of
Credit (each, an "L/C Issuer") for the account of
Debtor and guaranteed by Creditor; provided, however,
that the aggregate amount of all such Letter of Credit
Obligations shall not at any time exceed the lesser of
(i) the Commitment less the aggregate outstanding
principal balance of the Reimbursement Obligations, and
(ii) the sum of (A) the Pledged Entity Value less (B)
the sum of the aggregate outstanding principal balance
of the Reimbursement Obligations for any and all
payments made by Creditor on or pursuant to any and all
Letter of Credit Obligations. No such Letter of Credit
shall have an expiry date which is more than one year
following the date of issuance thereof, and Creditor
shall be under no obligation to incur Letter of Credit
Obligations in respect of any Letter of Credit having
an expiry date which is later than the Commitment
Termination Date. Not later than 12:00 noon (New York
time) on each Business Day, as well as on each date on
which the Receivable Subsidiary delivers a Borrowing
Base Certificate under (and as such term is defined in)
the Funding Agreement, Debtor shall deliver to the
Creditor an Officer's Certificate substantially in the
form of Exhibit 1.1(a) (each, a "Pledged Entity
Valuation Certificate"). The Pledged Entity Value
shall be determined by the Creditor based on
information related to the Pledged Entity Asset Base
and Pledged Entity Adjusted Debt available to it,
including (A) any information obtained in connection
with any audit or reflected in the most recent Pledged
Entity Valuation Certificate or (B) any other
information that may be available to the Creditor.
(2) Section 1.7(a) of the Letter of Credit Agreement
is deleted in its entirety and the following new Section
1.7(a) is substituted in lieu thereof:
(a) As to all payments made on any of the
Obligations when a Default or Event of Default
shall have occurred and be continuing or following
the Commitment Termination Date, Debtor hereby
irrevocably waives the right to direct the
application of any and all payments received from
or on behalf of Debtor, and Debtor hereby
irrevocably agrees that Creditor shall have the
continuing exclusive right to apply any and all
such payments against the Obligations as Creditor
may deem advisable notwithstanding any previous
entry by Creditor in the Letter of Credit Account
or any other books and records. In the absence of
a specific determination by Creditor with respect
thereto, payments shall be applied to amounts then
due and payable in the following order: (1) to
Fees and Creditor's expenses reimbursable
hereunder; (2) to accrued but unpaid interest on
the Obligations; (3) to the outstanding principal
balance of the Obligations and to provide cash
collateral for Letter of Credit Obligations in the
manner described in Section 1.1(c), ratably to the
aggregate, combined outstanding principal balance
of the Obligations and outstanding Letter of
Credit Obligations; and (4) to all other
Obligations. In the event of any conflict between
this Section 1.7(a) and Section 1.7(a) of the
Revolving Credit Agreement, this Section 1.7(a)
shall control for purposes of determining
application and allocation of any payments
received by the Creditor hereunder.
(3) Section 4.1(b) of the Letter of Credit Agreement
is deleted in its entirety and the following new Section
4.1(b) is substituted in lieu thereof:
(b) The Debtor hereby agrees that, from and
after the Closing Date and until the Termination
Date, it shall deliver or cause to be delivered to
Creditor (i) as soon as available and in any event
no later than 12:00 noon (New York time) on each
Business Day, a Pledged Entity Valuation
Certificate, and (ii) such other reports,
statements and reconciliations with respect to the
Pledged Entity Asset Base or the Collateral as
Creditor shall from time to time request in its
reasonable discretion.
(4) Section 4.3 of the Letter of Credit Agreement is
deleted in its entirety and the following new Section 4.3 is
substituted in lieu thereof:
Section 4.3 Pledged Entity Valuation
Certificate. Debtor hereby agrees that, from and
after the Closing Date and until the Termination
Date, it shall deliver or cause to be delivered to
the Creditor (i) as soon as available and in any
event not later than 12:00 noon (New York time) on
each Business Day, a Pledged Entity Valuation
Certificate, and (ii) such other reports,
statements and reconciliations with respect to the
Pledged Entity Asset Base or the Pledged Entity
Adjusted Debt as the Creditor shall from time to
time request in its reasonable discretion.
(5) The Letter of Credit Agreement is hereby amended
by adding thereto the following new Section 6.19:
6.19 Certain Transactions. Notwithstanding
anything in this Agreement to the contrary, no
Credit Party shall make, grant, incur, enter into,
or otherwise consummate any of the following
transactions on or after the Fourth Amendment
Effective Date without the prior written consent
of the Creditor: (i) any Permitted Acquisition,
(ii) any of the Term Debt, the Sale-Leaseback
Debt, the Vancouver Secured Debt, or the
Additional Secured Debt, (iii) any of the Liens
described in Section 6.7(d) or (e), (iv) any sale
of the Menlo Park Property so long as it
constitutes part of the Collateral, or (v) any
Permitted Stock Repurchase.
(6) Section 8.1(f) of the Letter of Credit Agreement
is hereby deleted in its entirety and the following new
Section 8.1(f) is substituted in lieu thereof:
(f) (i) Any information contained in any Pledged
Entity Valuation Certificate is untrue or incorrect in
any respect, or (ii) any representation or warranty
herein or in any Letter of Credit Document or in any
written statement, report, financial statement or
certificate (other than a Pledged Entity Valuation
Certificate) made or delivered to Creditor by any
Credit Party is untrue or incorrect in any material
respect as of the date when made or deemed made.
(7) Section 8.1(n) of the Letter of Credit Agreement
is hereby deleted in its entirety and the following new
Section 8.1(n) is substituted in lieu thereof:
(n) (i) Debtor shall fail on or before October
31, 2001 to (x) enter into the Revolving Credit
Agreement with Creditor on terms and conditions
satisfactory in all respects to Creditor (but nothing
in this Agreement is intended, or shall be construed,
to be an offer, promise, commitment or agreement by
Creditor to enter into the Revolving Credit Agreement
or to extend any credit thereunder to Debtor) and (y)
cause all conditions precedent to the effectiveness of
Creditor's obligation thereunder to made loans to
Debtor to be fulfilled or (ii) from and after the
execution and delivery of the Credit Agreement, any
Event of Default under (and as such term is defined in)
the Revolving Credit Agreement shall occur.
(8) Annex A to the Letter of Credit Agreement is
hereby amended by adding the following new definitions
thereto in the appropriate alphabetical order:
"Fourth Amendment Effective Date" shall mean
October 18, 2001.
"Fourth Securitization Agreement Amendment" shall
mean the Fourth Amendment to Securitization Agreements,
dated as of October 18, 2001, among the Receivables
Subsidiary, CF Delaware and GE Capital in various
capacities.
"Revolving Credit Agreement" shall mean the Credit
Agreement contemplated to be entered into on or before
October 31, 2001 among the Debtor, as Borrower, the
Creditor, as Lender, and certain Subsidiaries of the
Debtor as Credit Parties, pursuant to which (and
subject to the terms and conditions of which) it is
contemplated that Debtor may obtain a revolving loan
facility from Creditor of up to $50,000,000, as such
agreement may be amended, supplemented or replaced from
time to time.
"Revolving Credit Documents" shall mean the
Revolving Credit Agreement and the other Loan Documents
(as such term is defined in the Revolving Credit
Agreement); provided, however, that the term "Revolving
Credit Documents" as used herein shall not include any
"Related Documents" as such term is defined in Annex X
to the Receivables Funding Agreement or any of the
Program Documents.
"Revolving Credit Obligations" shall mean the
Obligations as such term is defined in the Revolving
Credit Agreement.
(9) Annex A to the Letter of Credit Agreement is
hereby amended by deleting therefrom the definitions of
terms "Applicable L/C Margin", "Collateral Documents",
"Letter of Credit Documents", "Obligations", and
"Termination Date" in their entireties and by substituting
the following amended respective definitions of such terms
in lieu thereof:
"Applicable L/C Margin" shall mean a per
annum rate equal to 2.50%.
"Collateral Documents" shall mean the
Security Agreement, the Pledge Agreement, the
Guaranties, the Cash Collateral Account Agreement, the
Blocked Account Agreement, the Mortgages (as defined in
the Revolving Credit Agreement), and all similar
agreements entered into guaranteeing payment of, or
granting a Lien upon property as security for payment
of, the Obligations.
"Letter of Credit Documents" shall mean this
Agreement, the Collateral Documents, the Revolving
Credit Documents, and all other agreements,
instruments, documents and certificates identified in
Annex B executed and delivered to, or in favor of,
Creditor and including all other pledges, powers of
attorney, consents, assignments, contracts, notices,
and all other written matter whether heretofore, now or
hereafter executed by or on behalf of any Credit Party,
and delivered to Creditor in connection with this
Agreement or the transactions contemplated hereby. Any
reference in this Agreement or any other Letter of
Credit Document to a Letter of Credit Document shall
include all appendices, exhibits or schedules thereto,
and all amendments, restatements, supplements or other
modifications thereto, and shall refer to such
Agreement as the same may be in effect at any and all
times such reference becomes operative; provided,
however, that the term "Letter of Credit Documents" as
used herein shall not include any "Related Documents"
as such term is defined in Annex X to the Receivables
Funding Agreement or any of the Program Documents.
"Obligations" shall mean (i) all
Reimbursement Obligations, and (ii) all advances,
debts, liabilities and obligations, for the performance
of covenants, tasks or duties or for payment of
monetary amounts (whether or not such performance is
then required or contingent, or such amounts are
liquidated or determinable) owing by any Credit Party
to Creditor, and all covenants and duties regarding
such amounts, of any kind or nature, present or future,
whether or not evidenced by any note, agreement or
other instrument, arising under this Agreement, the
Revolving Credit Agreement, or any of the other Letter
of Credit Documents. This term includes all principal,
interest (including all interest which accrues after
the commencement of any case or proceeding in
bankruptcy after the insolvency of, or for the
reorganization of any Credit Party, whether or not
allowed in such proceeding), Fees, Charges, expenses,
attorneys' fees and any other sum chargeable by
Creditor to any Credit Party under this Agreement, the
Revolving Credit Agreement, or any of the other Letter
of Credit Documents.
"Termination Date" shall mean the date on
which the Reimbursement Obligations have been
indefeasibly repaid in full and all other Obligations
under this Agreement, the Revolving Credit Agreement
and the other Letter of Credit Documents have been
completely discharged and Letter of Credit Obligations
have been cash collateralized, canceled or backed by
stand-by letters of credit in accordance with Section
1.1(c)(ii), and Debtor shall not have any further right
to obtain any letters of credit under this Agreement or
borrow any monies under the Revolving Credit Agreement.
(10) Annex C to the Letter of Credit Agreement is
hereby deleted in its entirety and the replacement Annex C
attached to this Amendment as Appendix I is substituted in
lieu thereof.
(B) Amendment of Security Agreement. Section 2(a) of the
Security Agreement shall be amended by inserting the words "and
the Revolving Credit Agreement" immediately after the words "all
of Debtor's Obligations under the Letter of Credit Agreement"
which appear in the third line of such Section 2(a).
(C) Amendment of Cash Collateral Agreement. Section 1 of
the Cash Collateral Account Agreement shall be amended by
inserting the words "and the Revolving Credit Agreement (as
defined in the L/C Agreement)" immediately after the words "the
L/C Agreement" which appear in the second line of the first
sentence of such Section 1.
(D) Amendment of Subsidiary Guaranty. Section 1 of the
Subsidiary Guaranty shall be amended by deleting the first
sentence thereof in its entirety and by substituting the
following replacement sentence in lieu thereof:
Subject to the provisions of Section 7 below, each
Guarantor hereby jointly, severally, absolutely,
unconditionally and irrevocably guarantees to the
Guaranteed Party the prompt payment when due, whether
at stated maturity, by acceleration or otherwise, of
all of the Obligations (as defined in each of the
Letter of Credit Agreement and the Revolving Credit
Agreement, and including all renewals, extensions,
modifications, and refinancings thereof) now or
hereafter existing, whether for principal, interest,
fees, reasonable expenses or otherwise, and all
reasonable expenses (including reasonable attorney's
fees and expenses) in enforcing any of its rights under
the Letter of Credit Agreement, the Revolving Credit
Agreement and the other Letter of Credit Documents (all
of the foregoing, collectively, the "Guaranteed
Obligations").
3. No Other Waivers or Amendments. Except for the waiver and
amendments expressly set forth and referred to in Section 1 and
Section 2 above, respectively, each of the Letter of Credit
Agreements shall remain unchanged and in full force and effect.
4. Representations and Warranties. To induce GE Capital to
enter into this Amendment, Debtor and each of the other Credit
Parties hereby warrant, represent and covenant to GE Capital
that: (a) this Amendment has been duly authorized, executed and
delivered by Debtor and each Credit Party signatory thereto, (b)
after giving effect to this Amendment and the Fourth
Securitization Agreement Amendment (as defined below), no
Termination Event or Event of Default has occurred and is
continuing as of this date, and (c) after giving effect to this
Amendment, all of the representations and warranties made by
Debtor and each Credit Party in the Letter of Credit Agreement
are true and correct in all material respects on and as of the
date of this Amendment (except to the extent that any such
representations or warranties expressly referred to a specific
prior date). Any breach in any material respect by Debtor or any
Credit Party of any of its representations and warranties
contained in this Section 4 shall be an Event of Default under
the Letter of Credit Agreement.
5. Ratification and Acknowledgment. Debtor and each of the
other Credit Parties hereby ratify and reaffirm each and every
term, covenant and condition set forth in the Letter of Credit
Agreement and all other documents delivered by such company in
connection therewith (including without limitation the other
Letter of Credit Documents to which Debtor or any Credit Party is
a party), effective as of the date hereof. Without limiting the
generality of the foregoing, Debtor and each of the other Credit
Parties hereby acknowledge and agree that any and all Obligations
of the Debtor arising under the Revolving Credit Agreement shall
be guaranteed by the Domestic Subsidiaries of the Debtor (other
than the Receivables Subsidiary) pursuant to the Subsidiary
Guaranty and shall be secured by all of the Liens granted to GE
Capital pursuant to the Collateral Documents.
6. Estoppel. To induce GE Capital to enter into this
Amendment, Debtor and each of the other Credit Parties hereby
acknowledge and agree that, as of the date hereof, there exists
no right of offset, defense or counterclaim in favor of Debtor or
any Credit Party as against GE Capital with respect to the
obligations of Debtor or any Credit Party to GE Capital under the
Letter of Credit Agreement or the other Letter of Credit
Agreement Documents, either with or without giving effect to this
Amendment.
7. Conditions to Effectiveness. This Amendment shall become
effective, as of the Effective Date, subject to the prior or
subsequent (i) receipt by the GE Capital of this Amendment, duly
executed, completed and delivered by Debtor and each Credit
Party, (ii) receipt by GE Capital of a Pledged Entity Valuation
Certificate dated as of the date hereof, in form and substance
satisfactory to GE Capital, and (iii) receipt by GE Capital of
evidence satisfactory to it that all conditions precedent to the
effectiveness of the Fourth Amendment to Securitization
Agreements of even date among the Receivables Subsidiary, CF
Delaware as Servicer, GE Capital as the Receivables Lenders and
the Receivables Administrative Agent (the "Fourth Securitization
Agreement Amendment") have been fulfilled (other than the
effectiveness of this Amendment). GE Capital shall promptly
notify the Credit Parties in writing when the conditions
specified in clauses (i) and (ii) above are satisfied. Upon the
effective date of this Amendment, (i) the amendment to the
financial covenants in Annex C to the Letter of Credit Agreement
as provided for in Appendix I attached hereto shall be deemed
effective retroactively as of July 1, 2001, and (ii) all other
amendments set forth in Section 2 of this Amendment shall become
effective as of the Effective Date of this Amendment.
8. Reimbursement of Expenses. Debtor and each of the other
Credit Parties hereby agree that Debtor and each of the other
Credit Parties shall reimburse GE Capital on demand for all costs
and expenses (including without limitation reasonable attorney's
fees) incurred by GE Capital in connection with the negotiation,
documentation and consummation of this Amendment and the other
documents executed in connection herewith and therewith and the
transactions contemplated hereby and thereby.
9. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
FOR CONTRACTS TO BE PERFORMED ENTIRELY WITHIN SAID STATE.
10. Severability of Provisions. Any provision of this Amendment
which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction. To
the extent permitted by applicable law, Debtor and each of the
other Credit Parties hereby waive any provision of law that
renders any provision hereof prohibited or unenforceable in any
respect.
11. Counterparts. This Amendment may be executed in any number
of several counterparts, all of which shall be deemed to
constitute but one original and shall be binding upon all
parties, their successors and permitted assigns.
12. Entire Agreement. The Letter of Credit Agreement as amended
by this Amendment embodies the entire agreement between the
parties hereto relating to the subject matter hereof and
supersedes all prior agreements, representations and
understandings, if any, relating to the subject matter hereof.
IN WITNESS WHEREOF, the parties have caused this
Amendment to be duly executed by their respective officers
thereunto duly authorized, as of the date first above written.
DEBTOR:
CONSOLIDATED FREIGHTWAYS CORPORATION
By:/s/Xxxxxx X. Xxxxxxxxx
Name:Xxxxxx X. Xxxxxxxxx
Title:Executive Vice President and
Chief Financial Officer
CREDITOR:
GENERAL ELECTRIC CAPITAL CORPORATION
By:/s/Xxxxx Xxxxxxx
Name:Xxxxx Xxxxxxx
Title:Duly Authorized Signatory
SUBSIDIARY GUARANTORS:
CONSOLIDATED FREIGHTWAYS CORPORATION OF
DELAWARE
By:/s/Xxxxxx X. Xxxxxxxxx
Name:Xxxxxx X. Xxxxxxxxx
Title:Executive Vice President and
Chief Financial Officer
CF AIRFREIGHT CORPORATION
By:/s/Xxxxxx X. Xxxxxxxxx
Name:Xxxxxx X. Xxxxxxxxx
Title:Executive Vice President and
Chief Financial Officer
CF XXXXXX.XXX INCORPORATED
By:/s/Xxxxx X. Xxxxxx
Name:Xxxxx X. Xxxxxx
Title:Vice President and Treasurer
REDWOOD SYSTEMS, INC.
By:/s/Xxxxxx X. Xxxxxxxxx
Name:Xxxxxx X. Xxxxxxxxx
Title:Executive Vice President and
Chief Financial Officer
XXXXXX XXXXX XXXXXXX CORPORATION
By:/s/Xxxxxx X. Xxxxxxxxx
Name:Xxxxxx X. Xxxxxxxxx
Title:Executive Vice President and
Chief Financial Officer
APPENDIX I TO FOURTH AMENDMENT TO LETTER OF CREDIT AGREEMENTS
ANNEX C (Section 6.10)
to
CREDIT AGREEMENT
FINANCIAL COVENANTS
(a) Minimum Fixed Charge Coverage Ratio. The Debtor
and its Subsidiaries shall have on a consolidated basis, as of
the end of each Fiscal Quarter set forth below, a Fixed Charge
Coverage Ratio for the Rolling Period then ended of not less than
the following:
Fiscal Quarter Minimum Fixed
Charge
Coverage Ratio
Fiscal Quarter ending 0.20 to 1.00
September 30, 2001
Fiscal Quarter ending 0.01 to 1.00
December 31, 2001
Fiscal Quarter ending -1.0 to 1.00
March 31, 2002
Fiscal Quarter ending 0.30 to 1.00
June 30, 2002
Fiscal Quarter ending 1.60 to 1.00
September 30, 2002
Fiscal Quarter ending 1.70 to 1.00
December 31, 2002 and
each Fiscal Quarter
thereafter
(b) Minimum Tangible Net Worth. Debtor and its
Subsidiaries on a consolidated basis shall have a Tangible Net
Worth, (i) as of the Closing Date and as of the end of each of
the second and third Fiscal Quarters of the Fiscal Year ending
December 31, 2001, of not less than $180,000,000, (ii) as of the
end of the fourth Fiscal Quarter of the Fiscal Year ending
December 31, 2001, of not less than $150,000,000, (iii) as of the
end of each of the first, second and third Fiscal Quarters of the
Fiscal Year ending December 31, 2002, of not less than
$120,000,000, and (iv) as of the end of the fourth Fiscal Quarter
of the Fiscal Year ending December 31, 2002 and as of the end of
each of the first, second and third Fiscal Quarters of the Fiscal
Year ending December 31, 2003, of not less than $130,000,000.
Thereafter, Debtor and its Subsidiaries on a consolidated basis
shall have, as of the end of each Fiscal Year ending on or after
December 31, 2003 (each such Fiscal Year herein called the
"Subject Fiscal Year") and as of the end of the first three
Fiscal Quarters of the immediately succeeding Fiscal Year, a
Tangible Net Worth of not less than the sum of (i) the minimum
Tangible Net Worth required hereunder for the Fiscal Year which
immediately preceded the Subject Fiscal Year (or, where the
Subject Fiscal Year is the Fiscal Year ending December 31, 2003,
the sum of $130,000,000) plus (ii) an amount equal to fifty
percent (50%) of the positive net income of the Debtor and its
Subsidiaries on a consolidated basis for the Subject Fiscal Year
plus (iii) an amount equal to one hundred percent (100%) of the
amount of any equity raised by or capital contributed to the
Debtor during the Subject Fiscal Year (in the case of equity
raised or capital contributed, net of the bona fide, reasonable
expenses, if any, relating to the raising of such equity or such
capital contribution and paid to Persons who are not Affiliates
of the Debtor).
(c) Minimum EBITDA. Debtor and its Subsidiaries shall
have on a consolidated basis for each Fiscal Quarter set forth
below an EBITDA for the Rolling Period then ended of not less
than the following:
Fiscal Quarter Minimum EBITDA
Fiscal Quarter ending $8,000,000
September 30, 2001
Fiscal Quarter ending $6,000,000
December 31, 2001
Fiscal Quarter ending -$17,000,000
March 31, 2002
Fiscal Quarter ending $15,000,000
June 30, 2002
Fiscal Quarter ending $53,000,000
September 30, 2002
Fiscal Quarter ending $80,000,000
December 31, 2002 and
for each Fiscal Quarter
thereafter
(d) Maximum Capital Expenditures. Debtor and its
Subsidiaries shall not make or incur any Capital Expenditures if,
after giving effect thereto, the aggregate amount of all Capital
Expenditures made or incurred by Debtor and its Subsidiaries
during any period of four (4) consecutive Fiscal Quarters would
exceed the amounts set forth below for such period:
Four Consecutive Fiscal Maximum Capital
Quarters Ending Expenditures
Fiscal Quarter ending $35,000,000
June 30, 2001
Fiscal Quarter ending $36,000,000
September 30, 2001
Fiscal Quarter ending $30,000,000
December 31, 2001
Fiscal Quarter ending $25,000,000
March 31, 2002 and for
each Fiscal Quarter
thereafter
Capitalized terms used in this Annex C and not
otherwise defined below shall have the respective meanings
ascribed to them in Annex A. The following terms shall have the
respective meanings set forth below:
"Capital Expenditures" shall mean, with respect to any
Person, all expenditures (by the expenditure of cash or the
incurrence of Indebtedness) by such Person during any measuring
period for any fixed assets or improvements or for replacements,
substitutions or additions thereto, that have a useful life of
more than one year and that are required to be capitalized under
GAAP, but excluding (i) Capital Expenditures of the Debtor or any
Subsidiary Guarantor financed by the incurrence of Term Debt to
the extent that such Term Debt is permitted to be incurred under
Section 6.3, provided that on or prior to the date of incurrence
of such Term Debt, Debtor has furnished to Creditor a written
statement of sources and uses of such Term Debt, which statement
describes with particularity the principal amount of the Term
Debt to be used for the proposed Capital Expenditure and the
fixed assets or improvements to be acquired, replaced,
substituted or added to in connection with such proposed Capital
Expenditure, (ii) the purchase of the Vancouver Property by the
Debtor, provided that to the extent the purchase price of the
Vancouver Property exceeds $25,000,000, such excess shall be
included as a Capital Expenditure for purposes of determining
compliance with the Maximum Capital Expenditure covenant set
forth in paragraph (d) of this Annex C, (iii) any Capital
Expenditures incurred by the Debtor in connection with the
refinancing of the Participation Agreement, provided that to the
extent that such Capital Expenditures exceed $22,500,000, such
excess shall be included as a Capital Expenditure for purposes of
determining compliance with the Maximum Capital Expenditure
covenant set forth in paragraph (d) of this Annex C, (iv) any
purchase by the Debtor or any Subsidiary of fixed assets or
improvements to the extent that such purchase qualifies for like-
kind tax treatment under Section 1031 of the IRC, provided that
such exclusion from Capital Expenditures under this clause (iv)
shall be limited to an amount not to exceed the lesser of (x) the
cash proceeds received from the transfer of the property
relinquished in the like-kind exchange, assuming for purposes
hereof that the Debtor or Subsidiary does not qualify for like-
kind tax treatment under Section 1031 of the IRC in connection
with such transfer and (y) the value of the fixed assets or
improvements purchased by the Debtor in the subject transaction
which qualifies for like-kind tax treatment under Section 1031 of
the IRC, (v) any purchase by the Debtor or any Subsidiary of
fixed assets or improvements with the proceeds received from the
sale of the Menlo Park Property, provided that on or prior to the
date of any such Capital Expenditures, Debtor has furnished to
Creditor a written statement of sources and uses of the proceeds
from the sale of the Menlo Park Property, which statement
describes with particularity the amount of the proceeds from the
sale of the Menlo Park Property to be used for the proposed
Capital Expenditure and the fixed assets or improvements to be
acquired, replaced, substituted or added to in connection with
such proposed Capital Expenditures, and (vi) such other items as
Debtor and Creditor may agree in writing to exclude.
"EBITDA" shall mean, with respect to any Person for any
fiscal period, the amount equal to (a) consolidated net income of
such Person for such period, plus (b) the sum of (i) any
provision for income taxes, (ii) Interest Expense, (iii) loss
from extraordinary items for such period, (iv) depreciation and
amortization for such period, (v) amortized debt discount for
such period, (vi) the amount of any deduction to consolidated net
income as the result of any grant to any members of the
management of such Person of any Stock, and (vii) Lease Expenses,
in each case to the extent included in the calculation of
consolidated net income of such Person for such period in
accordance with GAAP, but without duplication, minus (c) the sum
of (i) income tax credits, (ii) interest income, (iii) gain from
extraordinary items for such period, (iv) any aggregate net gain
(but not any aggregate net loss) during such period arising from
the sale, exchange or other disposition of capital assets by such
Person (including any fixed assets, whether tangible or
intangible, all inventory sold in conjunction with the
disposition of fixed assets and all securities), provided that
there shall be excluded from the amount of any aggregate net gain
under this clause (iv), in solely the Fiscal Quarter ending March
31, 2001, an amount equal to the lesser of (x) $19,200,000 and
(y) the actual gain recognized by the Debtor and its Subsidiaries
from the sale of its Portland, Oregon administrative complex and
(v) any other non-cash gains that have been added in determining
consolidated net income (including LIFO adjustments), in each
case to the extent included in the calculation of consolidated
net income of such Person for such period in accordance with
GAAP, but without duplication,. For purposes of this definition,
the following items shall be excluded in determining consolidated
net income of a Person: (A) the income (or deficit) of any other
Person accrued prior to the date it became a Subsidiary of, or
was merged or consolidated into, such Person or any of such
Person's Subsidiaries; (B) the income (or deficit) of any other
Person (other than a Subsidiary) in which such Person has an
ownership interest, except to the extent any such income has
actually been received by such Person in the form of cash
dividends or distributions; (C) the undistributed earnings of any
Subsidiary of such Person to the extent that the declaration or
payment of dividends or similar distributions by such Subsidiary
is not at the time permitted by the terms of any contractual
obligation or requirement of law applicable to such Subsidiary;
(D) any restoration to income of any contingency reserve, except
to the extent that provision for such reserve was made out of
income accrued during such period; (E) any write-up of any asset;
(F) any net gain from the collection of the proceeds of life
insurance policies; (G) any net gain arising from the acquisition
of any securities, or the extinguishment, under GAAP, of any
Indebtedness, of such Person, (H) in the case of a successor to
such Person by consolidation or merger or as a transferee of its
assets, any earnings of such successor prior to such
consolidation, merger or transfer of assets, and (I) any deferred
credit representing the excess of equity in any Subsidiary of
such Person at the date of acquisition of such Subsidiary over
the cost to such Person of the investment in such Subsidiary.
"Fixed Charges" shall mean, with respect to any Person
for any fiscal period, the aggregate of, without duplication, (a)
all Interest Expense and Lease Expense paid or accrued during
such period, plus (b) all regularly scheduled payments of
principal or implied principal with respect to Indebtedness
(including any lease payments by any Person in respect of any
Capital Leases, any Sale-Leaseback Debt or any Vancouver Secured
Debt) due or made during such period, plus (c) all Restricted
Payments made during such period (other than Permitted Stock
Repurchases covered by Section 6.14(vii)) plus (d) any cash
payments made by such Person in connection with any Permitted
Acquisitions.
"Fixed Charge Coverage Ratio" shall mean, with respect
to any Person for any fiscal period, the ratio of (i) the sum of
(x) EBITDA for such period less (y) cash taxes made during such
period to (ii) Fixed Charges for such period.
"Interest Expense" shall mean, with respect to any
Person for any fiscal period, the sum of (a) interest expense
(whether cash or non-cash) of such Person determined in
accordance with GAAP for the relevant period ended on such date,
including (i) amortization of original issue discount on any
Indebtedness and of all fees payable in connection with the
incurrence of such Indebtedness (to the extent included in
interest expense), (ii) the interest portion of any deferred
payment obligation, (iii) the interest component of any Capital
Lease Obligation plus (b) the amount of any Letter of Credit Fee
(as such term is defined in the Letter of Credit Agreement) paid
during the relevant period ended on such date, plus (c) the
amount of any payments by such Person, as lessee, under any sale-
leaseback or synthetic lease transaction.
"Lease Expenses" shall mean, with respect to any Person
for any fiscal period, the aggregate rental obligations of such
Person determined in accordance with GAAP that are payable in
respect of such period under operating leases of equipment having
an original non-cancelable term (as determined in accordance with
GAAP) in excess of twelve months (net of income from subleases
thereof, but including taxes, insurance, maintenance and similar
expenses that the lessee is obligated to pay under the terms of
such leases), whether or not such obligations are reflected as
liabilities or commitments on a consolidated balance sheet of
such Person or in the notes thereto, excluding, however, any such
obligations under Capital Leases.
"Net Worth" shall mean, with respect to any Person as
of any date of determination, (a) the book value of the assets of
such Person, minus (b) reserves applicable thereto, minus (c) all
of such Person's liabilities on a consolidated basis (including
accrued and deferred income taxes), all as determined in
accordance with GAAP.
"Rolling Period" shall mean, as of the end of any
Fiscal Quarter, the immediately preceding four (4) Fiscal
Quarters, including the Fiscal Quarter then ending.
"Tangible Net Worth" shall mean, with respect to any
Person at any date, the Net Worth of such Person at such date,
(x) excluding, however, from the determination of the total
assets at such date, (a) all goodwill, capitalized organizational
expenses, capitalized research and development expenses,
trademarks, trade names, copyrights, patents, patent
applications, licenses (excluding software licenses) and rights
in any thereof, and other intangible items (other than software
licenses), (b) all unamortized debt discount and expense, (c)
treasury Stock, and (d) any write-up in the book value of any
asset resulting from a revaluation thereof, but (y) including any
non-cash valuation reserves for deferred taxes and any foregone
tax benefits provided that such reserves are established in
accordance with Financial Accounting Standard Number 109 and do
not result in an increase in such Person's future cash tax
payments.
Rules of Construction Concerning Financial Covenants. Unless
otherwise specifically provided therein, any accounting term used
in any Loan Document shall have the meaning customarily given
such term in accordance with GAAP, and all financial computations
thereunder shall be computed in accordance with GAAP consistently
applied. That certain items or computations are explicitly
modified by the phrase "in accordance with GAAP" shall in no way
be construed to limit the foregoing. If any Accounting Changes
occur and such changes result in a change in the calculation of
the financial covenants, standards or terms used in any Loan
Document, then the parties thereto agree to enter into
negotiations in order to amend such provisions so as to equitably
reflect such Accounting Changes with the desired result that the
criteria for evaluating the financial condition of such Persons
and their Subsidiaries shall be the same after such Accounting
Changes as if such Accounting Changes had not been made. If the
parties thereto agree upon the required amendments thereto, then
after appropriate amendments have been executed and the
underlying Accounting Change with respect thereto has been
implemented, any reference to GAAP contained therein shall, only
to the extent of such Accounting Change, refer to GAAP
consistently applied after giving effect to the implementation of
such Accounting Change. If such parties cannot agree upon the
required amendments within 30 days following the date of
implementation of any Accounting Change, then all financial
statements delivered and all calculations of financial covenants
and other standards and terms in accordance with the Related
Documents shall be prepared, delivered and made without regard to
the underlying Accounting Change.
