EXHIBIT 10.41

 

CREDIT AGREEMENT

 

THIS AGREEMENT is entered into as of July 1, 2002, by and between EXPEDITORS
INTERNATIONAL OF WASHINGTON, INC., a Washington corporation (“Borrower”), and
WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”).

 

 

RECITALS

 

Borrower has requested that Bank extend or continue credit to Borrower as
described below, and Bank has agreed to provide such credit to Borrower on the
terms and conditions contained herein.

 

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Bank and Borrower hereby agree as follows:

 

 

ARTICLE I

CREDIT TERMS

 

SECTION 1.1.          LINE OF CREDIT.

 

(a)             Line of Credit.  Subject to the terms and conditions of this
Agreement, Bank hereby agrees to make advances to Borrower from time to time up
to and including July 1, 2003, not to exceed at any time the aggregate principal
amount of Fifty Million Dollars ($50,000,000.00) (“Line of Credit”), the
proceeds of which shall be used to finance Borrower’s working capital
requirements and to finance loans and advances by Borrower to Borrower’s
subsidiaries.  Borrower’s obligation to repay advances under the Line of Credit
shall be evidenced by a promissory note substantially in the form of Exhibit A
attached hereto (“Line of Credit Note”), all terms of which are incorporated
herein by this reference.

 

(b)             Borrowing and Repayment.  Borrower may from time to time during
the term of the Line of Credit borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions contained herein or in the Line of Credit Note; provided however,
that the total outstanding borrowings under the Line of Credit shall not at any
time exceed the maximum principal amount available thereunder, as set forth
above.

 

SECTION 1.2.          INTEREST/FEES.

 

(a)             Interest.  The outstanding principal balance of each credit
subject hereto shall bear interest at the rate of interest set forth in each
promissory note or other instrument executed in connection therewith.

 

(b)             Computation and Payment.  Interest shall be computed on the
basis of a 360-day year, actual days elapsed.  Interest shall be payable at the
times and place set forth in each promissory note or other instrument required
hereby.

 

(c)             Unused Commitment Fee.  Borrower shall pay to Bank a fee equal
to 0.185% per annum (computed on the basis of a 360-day year, actual days
elapsed) on the average daily unused amount of the Line of Credit, which fee
shall be calculated on a quarterly basis by Bank and shall be due and payable by
Borrower in arrears within thirty (30) days after each billing is sent by Bank.

 

SECTION 1.3.          COLLECTION OF PAYMENTS.  Borrower authorizes Bank to
collect all principal, interest and fees whenever due under the Line of Credit
by charging Borrower’s deposit account number                  with Bank, or any
other deposit account maintained by Borrower with Bank, for the full amount
thereof.  Should there be insufficient funds in any such deposit account to pay
all such sums when due, the full amount of such deficiency shall be immediately
due and payable by Borrower.

 

ARTICLE II

REPRESENTATIONS AND WARRANTIES

 

Borrower makes the following representations and warranties to Bank, which
representations and warranties shall survive the execution of this Agreement and
shall continue in full force and effect until the full and final payment, and
satisfaction and discharge, of all obligations of Borrower to Bank subject to
this Agreement.

 

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SECTION 2.1.          LEGAL STATUS.  Borrower is a corporation, duly organized
and existing and in good standing under the laws of the State of Washington, and
is qualified or licensed to do business (and is in good standing as a foreign
corporation, if applicable) in all jurisdictions in which such qualification or
licensing is required or in which the failure to so qualify or to be so licensed
could have a material adverse effect on Borrower.

 

SECTION 2.2.          AUTHORIZATION AND VALIDITY.  This Agreement and each
promissory note, contract, instrument and other document required hereby or at
any time hereafter delivered to Bank in connection herewith (collectively, the
“Loan Documents”) have been duly authorized, and upon their execution and
delivery in accordance with the provisions hereof will constitute legal, valid
and binding agreements and obligations of Borrower or the party which executes
the same, enforceable in accordance with their respective terms.

 

SECTION 2.3.          NO VIOLATION.  The execution, delivery and performance by
Borrower of each of the Loan Documents do not violate any provision of any law
or regulation, or contravene any provision of the Articles of Incorporation or
By-Laws of Borrower, or result in any breach of or default under any contract,
obligation, indenture or other instrument to which Borrower is a party or by
which Borrower may be bound.

 

SECTION 2.4.          LITIGATION.  There are no pending, or to the best of
Borrower’s knowledge threatened, actions, claims, investigations, suits or
proceedings by or before any governmental authority, arbitrator, court or
administrative agency which could have a material adverse effect on the
financial condition or operation of Borrower other than those disclosed by
Borrower to Bank in writing prior to the date hereof.

 

SECTION 2.5.          CORRECTNESS OF FINANCIAL STATEMENT.  The financial
statement of Borrower dated June 30, 2002, a true copy of which has been
delivered by Borrower to Bank prior to the date hereof, (a) is complete and
correct and presents fairly the financial condition of Borrower, (b) discloses
all liabilities of Borrower that are required to be reflected or reserved
against under generally accepted accounting principles, whether liquidated or
unliquidated, fixed or contingent, and (c) has been prepared in accordance with
generally accepted accounting principles consistently applied.  Since the date
of such financial statement there has been no material adverse change in the
financial condition of Borrower, nor has Borrower mortgaged, pledged, granted a
security interest in or otherwise encumbered any material portion of its assets
or properties.

 

SECTION 2.6.          INCOME TAX RETURNS.  Borrower has no knowledge of any
pending material assessments or adjustments of its income tax payable with
respect to any year.

 

SECTION 2.7.          NO SUBORDINATION.  There is no agreement, indenture,
contract or instrument to which Borrower is a party or by which Borrower may be
bound that requires the subordination in right of payment of any of Borrower’s
obligations subject to this Agreement to any other obligation of Borrower.

 

SECTION 2.8.          PERMITS, FRANCHISES.  Borrower possesses, and will
hereafter possess, all permits, consents, approvals, franchises and licenses
required and rights to all trademarks, trade names, patents, and fictitious
names, if any, necessary to enable it to conduct the business in which it is now
engaged in compliance with applicable law.

 

SECTION 2.9.          ERISA.  Borrower is in compliance in all material respects
with all applicable provisions of the Employee Retirement Income Security Act of
1974, as amended or recodified from time to time (“ERISA”); Borrower has not
violated any provision of any defined contribution plan (as defined in ERISA)
maintained or contributed to by Borrower (each, a “Plan”); no Reportable Event
as defined in ERISA has occurred and is continuing with respect to any Plan
initiated by Borrower; and each Plan will be able to fulfill its benefit
obligations as they come due in accordance with the Plan documents and under
generally accepted accounting principles.

 

SECTION 2.10.        OTHER OBLIGATIONS.  Borrower is not in default on any
obligation for borrowed money, any purchase money obligation or any other
material lease, commitment, contract, instrument or obligation in excess of
$1,000,000.00 in the aggregate.

 

SECTION 2.11.        ENVIRONMENTAL MATTERS.  Except as disclosed by Borrower to
Bank in writing prior to the date hereof, Borrower is in compliance in all
material respects with all applicable federal or state environmental, hazardous
waste, health and safety statutes, and any rules or regulations adopted pursuant
thereto, which govern or affect any of Borrower’s operations and/or properties,
including without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act
of 1976, and the Federal Toxic Substances Control Act, as any of the same may be
amended, modified or supplemented from time to time.  None of the operations of
Borrower is the subject of any federal or state investigation evaluating whether
any remedial action involving a material expenditure is needed to respond to a
release of any toxic or hazardous waste or substance into the environment. 
Borrower has no material contingent liability in connection with any release of
any toxic or hazardous waste or substance into the environment.

 

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ARTICLE III

CONDITIONS

 

SECTION 3.1.          CONDITIONS OF INITIAL EXTENSION OF CREDIT.  The obligation
of Bank to extend any credit contemplated by this Agreement is subject to the
fulfillment to Bank’s satisfaction of all of the following conditions:

 

(a)             Approval of Bank Counsel.  All legal matters incidental to the
extension of credit by Bank shall be satisfactory to Bank’s counsel.

 

(b)             Documentation.  Bank shall have received, in form and substance
satisfactory to Bank, each of the following, duly executed:

 

(i)              This Agreement and each promissory note or other instrument
required hereby.

(ii)             Articles of Incorporation.

(iii)            Corporate Resolution:  Borrowing

(iv)            Certificate of Incumbency

(v)             Such other documents as Bank may require under any other Section
of this Agreement.

 

(c)             Financial Condition.  There shall have been no material adverse
change, as determined by Bank, in the financial condition or business of
Borrower, nor any material decline, as determined by Bank, in the market value
of any collateral required hereunder or a substantial or material portion of the
assets of Borrower.

 

SECTION 3.2.          CONDITIONS OF EACH EXTENSION OF CREDIT.  The obligation of
Bank to make each extension of credit requested by Borrower hereunder shall be
subject to the fulfillment to Bank’s satisfaction of each of the following
conditions:

 

(a)             Compliance.  The representations and warranties contained herein
and in each of the other Loan Documents shall be true on and as of the date of
the signing of this Agreement and on the date of each extension of credit by
Bank pursuant hereto, with the same effect as though such representations and
warranties had been made on and as of each such date, and on each such date, no
Event of Default as defined herein, and no condition, event or act which with
the giving of notice or the passage of time or both would constitute such an
Event of Default, shall have occurred and be continuing or shall exist.

 

(b)             Documentation.  Bank shall have received all additional
documents which may be required in connection with such extension of credit.

 

 

ARTICLE IV

AFFIRMATIVE COVENANTS

 

Borrower covenants that so long as Bank remains committed to extend credit to
Borrower pursuant hereto, or any liabilities (whether direct or contingent,
liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents
remain outstanding, and until payment in full of all obligations of Borrower
subject hereto, Borrower shall, unless Bank otherwise consents in writing:

 

SECTION 4.1.          PUNCTUAL PAYMENTS.  Punctually pay all principal,
interest, fees or other liabilities due under any of the Loan Documents at the
times and place and in the manner specified therein.

 

SECTION 4.2.          ACCOUNTING RECORDS.  Maintain adequate books and records
in accordance with generally accepted accounting principles consistently
applied.

 

SECTION 4.3.          FINANCIAL STATEMENTS.  Provide to Bank all of the
following, in form and detail satisfactory to Bank:

 

(a)             not later than 90 days after and as of the end of each fiscal
year, a 10K report of Borrower filed with the Securities Exchange Commission;

 

(b)             not later than 45 days after and as of the end of each fiscal
quarter, a 10Q report of Borrower filed with the Securities Exchange Commission;

 

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(c)             contemporaneously with each annual and quarterly financial
statement of Borrower required hereby, a certificate of the chief financial
officer of Borrower that said financial statements are accurate and that there
exists no Event of Default nor any condition, act or event which with the giving
of notice or the passage of time or both would constitute an Event of Default.

 

SECTION 4.4.          COMPLIANCE.  Preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its business; and comply with the provisions of all documents
pursuant to which Borrower is organized and/or which govern Borrower’s continued
existence and shall conduct its business in a lawful manner.

 

SECTION 4.5.          INSURANCE.  Maintain and keep in force insurance of the
types and in amounts customarily carried in lines of business similar to that of
Borrower, including but not limited to fire, extended coverage, public
liability, flood, property damage and workers’ compensation.

 

SECTION 4.6.          FACILITIES.  Keep all properties useful or necessary to
Borrower’s business in good repair and condition, and from time to time make
necessary repairs, renewals and replacements thereto so that such properties
shall be fully and efficiently preserved and maintained.

 

SECTION 4.7.          TAXES AND OTHER LIABILITIES.  Pay and discharge when due
any and all indebtedness, obligations, assessments and taxes, both real or
personal, including without limitation federal and state income taxes and state
and local property taxes and assessments, except such (a) as Borrower may in
good faith contest or as to which a bona fide dispute may arise, and (b) for
which Borrower has made provision, to Bank’s satisfaction, for eventual payment
thereof in the event Borrower is obligated to make such payment.

 

SECTION 4.8.          LITIGATION.  Promptly give notice in writing to Bank of
any litigation pending or threatened against Borrower with a claim in excess of
$10,000,000.00.

 

SECTION 4.9.          FINANCIAL CONDITION.  Maintain Borrower’s financial
condition on a consolidated basis as follows using generally accepted accounting
principles consistently applied and used consistently with prior practices
(except to the extent modified by the definitions herein), with compliance
determined commencing with Borrower’s financial statements for the period ending
June 30, 2002:

 

(a)             Current Ratio not at any time less than 1.25 to 1.0, with
“Current Ratio” defined as total current assets divided by total current
liabilities.

 

(b)             Tangible Net Worth not at any time less than $350,000,000.00,
with “Tangible Net Worth” defined as the aggregate of total stockholders’ equity
plus subordinated debt less any intangible assets.

 

(c)             Total Liabilities divided by Tangible Net Worth not at any time
greater than 1.25 to 1.0, with “Total Liabilities” defined as the aggregate of
current liabilities and non-current liabilities less subordinated debt, and with
“Tangible Net Worth” as defined above.

 

SECTION 4.10.        NOTICE TO BANK.  Promptly (but in no event more than five
(5) days after Borrower becomes aware of the occurrence of each such event or
matter) give written notice to Bank in reasonable detail of:  (a) the occurrence
of any Event of Default, or any condition, event or act which with the giving of
notice or the passage of time or both would constitute an Event of Default;
(b) any change in the name or the organizational structure of Borrower; (c) the
occurrence and nature of any Reportable Event or Prohibited Transaction, each as
defined in ERISA, or any funding deficiency with respect to any Plan; or (d) any
termination or cancellation of any insurance policy or policies in excess of
$10,000,000.00 in the aggregate which Borrower is required to maintain, or any
uninsured or partially uninsured loss or losses in excess of $10,000,000.00 in
the aggregate through liability or property damage, or through fire, theft or
any other cause affecting Borrower’s property.

 

ARTICLE V

NEGATIVE COVENANTS

 

Borrower further covenants that so long as Bank remains committed to extend
credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower will not without Bank’s prior written
consent:

 

SECTION 5.1.          USE OF FUNDS.  Use any of the proceeds of any credit
extended hereunder except for the purposes stated in Article I hereof.

 

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SECTION 5.2           MERGER, CONSOLIDATION, TRANSFER OF ASSETS.  Merge into or
consolidate with any other entity unless Borrower is the surviving entity and
the value of the entity being merged into or consolidated with Borrower is less
than 15% of Borrower’s Tangible Net Worth (as defined in Section 4.9 (b) above)
at the time of such merger or consolidation; make any substantial change in the
nature of Borrower’s business as conducted as of the date hereof; acquire all or
substantially all of the assets of any other entity unless the value of assets
to be acquired is less than 15% of Borrower’s Tangible Net Worth (as defined in
Section 4.9(b) above) at the time of such acquisition; nor sell, lease, transfer
or otherwise dispose of all or a substantial or material portion of Borrower’s
assets except in the ordinary course of its business.

 

SECTION 5.3.          PLEDGE OF ASSETS.  Mortgage, pledge, grant or permit to
exist a security interest in, or lien upon, any material portion of Borrower’s
assets now owned or hereafter acquired; provided, however, that Borrower may
grant another lender a lien upon a material portion of Borrower’s real property
to finance the acquisition of such property or to refinance the balance of a
prior acquisition loan secured by such property, so long as Borrower provides
Bank with a reasonable opportunity to provide such financing or refinancing.

 

ARTICLE VI

EVENTS OF DEFAULT

 

SECTION 6.1.          The occurrence of any of the following shall constitute an
“Event of Default” under this Agreement:

 

(a)             Borrower shall fail to pay when due any principal, interest,
fees or other amounts payable under any of the Loan Documents.

 

(b)             Any financial statement or certificate furnished to Bank in
connection with, or any representation or warranty made by Borrower or any other
party under this Agreement or any other Loan Document shall prove to be
incorrect, false or misleading in any material respect when furnished or made.

 

(c)             Any default in the performance of or compliance with any
obligation, agreement or other provision contained herein or in any other Loan
Document (other than those referred to in subsections (a) and (b) above), and
with respect to any such default which by its nature can be cured, such default
shall continue for a period of twenty (20) days from its occurrence.

 

(d)             Any default in the payment or performance of any obligation, or
any defined event of default, under the terms of any contract or instrument
(other than any of the Loan Documents) pursuant to which Borrower has incurred
any debt or other liability to any financial institution or lender, including
Bank; provided however, that in the case of a default or defined event of
default under the terms of indebtedness to a financial institution or lender
other than Bank, such indebtedness is in excess of One Million Dollars
($1,000,000.00), individually or in the aggregate for all such defaults
combined.

 

(e)             The filing of a notice of judgment lien against Borrower or the
recording of any abstract of judgment against Borrower in any county in which
Borrower has an interest in real property; or the service of a notice of levy
and/or of a writ of attachment or execution, or other like process, against the
assets of Borrower or the entry of a judgment against Borrower; provided,
however, that no Event of Default shall be deemed to have occurred hereunder if
such judgments, liens, levies, writs, executions and other process are satisfied
or stayed pending appeal and insured against in a manner satisfactory to Bank
within twenty (20) days after the creation thereof, or at least ten (10) days
prior to the date on which any assets could be lawfully sold in satisfaction
thereof.

 

(f)              Borrower shall become insolvent, or shall suffer or consent to
or apply for the appointment of a receiver, trustee, custodian or liquidator of
itself or any of its property, or shall generally fail to pay its debts as they
become due, or shall make a general assignment for the benefit of creditors;
Borrower shall file a voluntary petition in bankruptcy, or seeking
reorganization, in order to effect a plan or other arrangement with creditors or
any other relief under the Bankruptcy Reform Act, Title 11 of the United States
Code, as amended or recodified from time to time (“Bankruptcy Code”), or under
any state or federal law granting relief to debtors, whether now or hereafter in
effect; or any involuntary petition or proceeding pursuant to the Bankruptcy
Code or any other applicable state or federal law relating to bankruptcy,
reorganization or other relief for debtors is filed or commenced against
Borrower, or Borrower shall file an answer admitting the jurisdiction of the
court and the material allegations of any involuntary petition; or Borrower
shall be adjudicated a bankrupt, or an order for relief shall be entered against
Borrower by any court of competent jurisdiction under the Bankruptcy Code or any
other applicable state or federal law relating to bankruptcy, reorganization or
other relief for debtors.

 

(g)             The dissolution or liquidation of Borrower, or any of its
directors, stockholders or members shall take action seeking to effect the
dissolution or liquidation of Borrower.

 

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SECTION 6.2.          REMEDIES.  Upon the occurrence of any Event of Default: 
(a) all indebtedness of Borrower under each of the Loan Documents, any term
thereof to the contrary notwithstanding, shall at Bank’s option and without
notice become immediately due and payable without presentment, demand, protest
or notice of dishonor, all of which are hereby expressly waived by Borrower;
(b) the obligation, if any, of Bank to extend any further credit under any of
the Loan Documents shall immediately cease and terminate; and (c) Bank shall
have all rights, powers and remedies available under each of the Loan Documents,
or accorded by law, including without limitation the right to resort to any or
all security for any credit subject hereto and to exercise any or all of the
rights of a beneficiary or secured party pursuant to applicable law.  All
rights, powers and remedies of Bank may be exercised at any time by Bank and
from time to time after the occurrence of an Event of Default, are cumulative
and not exclusive, and shall be in addition to any other rights, powers or
remedies provided by law or equity.

 

ARTICLE VII

MISCELLANEOUS

 

SECTION 7.1.          NO WAIVER.  No delay, failure or discontinuance of Bank in
exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy.  Any waiver, permit, consent or approval of any
kind by Bank of any breach of or default under any of the Loan Documents must be
in writing and shall be effective only to the extent set forth in such writing.

 

SECTION 7.2.          NOTICES.  All notices, requests and demands which any
party is required or may desire to give to any other party under any provision
of this Agreement must be in writing delivered to each party at the following
address:

 

BORROWER:

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC.

1015 Third Avenue, 12th Floor

Seattle, WA   98104

Attn: Chief Financial Officer

cc: Chief Operating Officer

 

 

BANK:

WELLS FARGO BANK, NATIONAL ASSOCIATION

999 Third Avenue, 11th Floor

Seattle, WA   98104

 

or to such other address as any party may designate by written notice to all
other parties.  Each such notice, request and demand shall be deemed given or
made as follows:   (a) if sent by mail, upon the earlier of the date of receipt
or three (3) days after deposit in the U.S. mail, first class and postage
prepaid; and (b) if sent by telecopy, upon receipt.

 

SECTION 7.3.          COSTS, EXPENSES AND ATTORNEYS’ FEES.  Subject to the last
sentence of this paragraph (which provides that the prevailing party in an
action to enforce this Agreement is entitled to recover certain fees and costs
in connection therewith), Borrower shall pay to Bank immediately upon demand the
full amount of all payments, advances, charges, costs and expenses, including
reasonable attorneys’ fees (to include outside counsel fees), expended or
incurred by Bank in connection with (a) the negotiation and preparation of any
mutually agreed to amendments and waivers to this Agreement and the other Loan
Documents, (b) the enforcement of Bank’s rights and/or the collection of any
amounts which become due to Bank under any of the Loan Documents, and (c) the
prosecution or defense of any action in any way related to any of the Loan
Documents, including without limitation, any action for declaratory relief,
whether incurred at the trial or appellate level, in an arbitration proceeding
or otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to
Borrower or any other person or entity.  Notwithstanding anything herein to the
contrary, the prevailing party in any action to enforce this Agreement shall be
entitled to recover its reasonable outside attorneys’ fees and costs incurred in
connection with such action from the non-prevailing party in such action.

 

SECTION 7.4.          SUCCESSORS, ASSIGNMENT.  This Agreement shall be binding
upon and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however, that
Borrower may not assign or transfer its interest hereunder without Bank’s prior
written consent.  Bank reserves the right to sell, assign, transfer, negotiate
or grant participations in all or any part of, or any interest in, Bank’s rights
and benefits under each of the Loan Documents.  In connection therewith, subject
to that certain Confidentiality Agreement dated as of June 15, 2001 between
Borrower and Bank, Bank may disclose all documents and information which Bank
now has or may hereafter acquire relating to any credit subject hereto, Borrower
or its business, or any collateral required hereunder.

 

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SECTION 7.5.          ENTIRE AGREEMENT; AMENDMENT.  This Agreement and the other
Loan Documents constitute the entire agreement between Borrower and Bank with
respect to each credit subject hereto and supersede all prior negotiations,
communications, discussions and correspondence concerning the subject matter
hereof.  This Agreement may be amended or modified only in writing signed by
each party hereto.

 

SECTION 7.6.          NO THIRD PARTY BENEFICIARIES.  This Agreement is made and
entered into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect cause of action­
or claim in connection with, this Agreement or any other of the Loan Documents
to which it is not a party.

 

SECTION 7.7.          TIME.  Time is of the essence of each and every provision
of this Agreement and each other of the Loan Documents.

 

SECTION 7.8.          SEVERABILITY OF PROVISIONS.  If any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or any remaining provisions
of this Agreement.

 

SECTION 7.9.          COUNTERPARTS.  This Agreement may be executed in any
number of counterparts, each of which when executed and delivered shall be
deemed to be an original, and all of which when taken together shall constitute
one and the same Agreement.

 

SECTION 7.10.        GOVERNING LAW.  This Agreement shall be governed by and
construed in accordance with the laws of the State of Washington.

 

SECTION 7.11.        ARBITRATION.

 

(a)  Arbitration.  The parties hereto agree, upon demand by any party, to submit
to binding arbitration all claims, disputes and controversies between or among
them (and their respective employees, officers, directors, attorneys, and other
agents), whether in tort, contract or otherwise arising out of or relating to in
any way (i) the loan and related Loan Documents which are the subject of this
Agreement and its negotiation, execution, collateralization, administration,
repayment, modification, extension, substitution, formation, inducement,
enforcement, default or termination; or (ii) requests for additional credit.

 

(b)  Governing Rules.  Any arbitration proceeding will (i) proceed in a location
in Washington selected by the American Arbitration Association (“AAA”); (ii) be
governed by the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the documents
between the parties; and (iii) be conducted by the AAA, or such other
administrator as the parties shall mutually agree upon, in accordance with the
AAA’s commercial dispute resolution procedures, unless the claim or counterclaim
is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and
costs in which case the arbitration shall be conducted in accordance with the
AAA’s optional procedures for large, complex commercial disputes (the commercial
dispute resolution procedures or the optional procedures for large, complex
commercial disputes to be referred to, as applicable, as the “Rules”).  If there
is any inconsistency between the terms hereof and the Rules, the terms and
procedures set forth herein shall control.  Any party who fails or refuses to
submit to arbitration following a demand by any other party shall bear all costs
and expenses incurred by such other party in compelling arbitration of any
dispute.  Nothing contained herein shall be deemed to be a waiver by any party
that is a bank of the protections afforded to it under 12 U.S.C. §91 or any
similar applicable state law.

 

(c)        No Waiver of Provisional Remedies, Self-Help and Foreclosure.  The
arbitration requirement does not limit the right of any party to (i) foreclose
against real or personal property collateral; (ii) exercise self-help remedies
relating to collateral or proceeds of collateral such as setoff or repossession;
or (iii) obtain provisional or ancillary remedies such as replevin, injunctive
relief, attachment or the appointment of a receiver, before during or after the
pendency of any arbitration proceeding.  This exclusion does not constitute a
waiver of the right or obligation of any party to submit any dispute to
arbitration or reference hereunder, including those arising from the exercise of
the actions detailed in sections (i), (ii) and (iii) of this paragraph.

 

(d)        Arbitrator Qualifications and Powers.  Any arbitration proceeding in
which the amount in controversy is $5,000,000.00 or less will be decided by a
single arbitrator selected according to the Rules, and who shall not render an
award of greater than $5,000,000.00.  Any dispute in which the amount in
controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel
of three arbitrators; provided however, that all three arbitrators must actively
participate in all hearings and deliberations.  The arbitrator will be a neutral
attorney licensed in the State of Washington or a neutral retired judge of the
state or federal judiciary of Washington, in either case with a minimum of ten
years experience in the substantive law applicable to the subject matter of the
dispute to be arbitrated.  The arbitrator will determine whether or not an issue
is arbitratable and will give effect to the statutes of limitation in
determining any claim.  In any arbitration proceeding the arbitrator will decide
(by documents only or with a hearing at the arbitrator’s discretion) any
pre-hearing motions which are similar to motions to dismiss for failure to state
a claim or motions for

 

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summary adjudication.  The arbitrator shall resolve all disputes in accordance
with the substantive law of Washington and may grant any remedy or relief that a
court of such state could order or grant within the scope hereof and such
ancillary relief as is necessary to make effective any award.  The arbitrator
shall also have the power to award recovery of all costs and fees, to impose
sanctions and to take such other action as the arbitrator deems necessary to the
same extent a judge could pursuant to the Federal Rules of Civil Procedure, the
Washington Rules of Civil Procedure or other applicable law.  Judgment upon the
award rendered by the arbitrator may be entered in any court having
jurisdiction.  The institution and maintenance of an action for judicial relief
or pursuit of a provisional or ancillary remedy shall not constitute a waiver of
the right of any party, including the plaintiff, to submit the controversy or
claim to arbitration if any other party contests such action for judicial
relief.

 

(e)        Discovery.  In any arbitration proceeding discovery will be permitted
in accordance with the Rules.  All discovery shall be expressly limited to
matters directly relevant to the dispute being arbitrated and must be completed
no later than 20 days before the hearing date and within 180 days of the filing
of the dispute with the AAA.  Any requests for an extension of the discovery
periods, or any discovery disputes, will be subject to final determination by
the arbitrator upon a showing that the request for discovery is essential for
the party’s presentation and that no alternative means for obtaining information
is available.

 

(f)        Class Proceedings and Consolidations.  The resolution of any dispute
arising pursuant to the terms of this Agreement shall be determined by a
separate arbitration proceeding and such dispute shall not be consolidated with
other disputes or included in any class proceeding.

 

(g)        Payment Of Arbitration Costs And Fees.  The arbitrator shall award
all costs and expenses of the arbitration proceeding.

 

(h)        Miscellaneous.  To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the dispute with the
AAA.  No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business or by applicable law or
regulation.  If more than one agreement for arbitration by or between the
parties potentially applies to a dispute, the arbitration provision most
directly related to the Loan Documents or the subject matter of the dispute
shall control.  This arbitration provision shall survive termination, amendment
or expiration of any of the Loan Documents or any relationship between the
parties.

 

ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR
ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the day and year first written above.

 

 

WELLS FARGO BANK,

EXPEDITORS INTERNATIONAL
OF WASHINGTON, INC.

NATIONAL ASSOCIATION

 

 

 

 

By:

/s/ Jordan Gates

 

By:

/s/ Donald Ralston

 

 

Jordan Gates

 

Donald Ralston

 

Executive Vice President
and Chief Financial Officer

 

Vice President

 

 

 

 

By:

/s/ Charles Lynch

 

 

 

Charles Lynch

 

 

Vice President-Corporate
Controller

 

 

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EXHIBIT A

 

REVOLVING LINE OF CREDIT NOTE

 

$50,000,000.00

 

Seattle, Washington

 

 

July 1, 2002

 

FOR VALUE RECEIVED, the undersigned EXPEDITORS INTERNATIONAL OF WASHINGTON INC.
(“Borrower”) promises to pay to the order of WELLS FARGO BANK, NATIONAL
ASSOCIATION (“Bank”) at its office at Seattle RCBO, 999 Third Avenue 11th Floor,
Seattle, Washington, or at such other place as the holder hereof may designate,
in lawful money of the United States of America and in immediately available
funds, the principal sum of Fifty Million Dollars ($50,000,000.00), or so much
thereof as may be advanced and be outstanding, with interest thereon, to be
computed on each advance from the date of its disbursement as set forth herein.

 

DEFINITIONS:

 

As used herein, the following terms shall have the meanings set forth after
each, and any other term defined in this Note shall have the meaning set forth
at the place defined:

 

(a)           “Business Day” means any day except a Saturday, Sunday or any
other day on which commercial banks in Washington are authorized or required by
law to close.

 

(b)           “Fixed Rate Term” means a period commencing on a Business Day and
continuing for 1, 2, 3 or 6 months, as designated by Borrower, during which all
or a portion of the outstanding principal balance of this Note bears interest
determined in relation to LIBOR; provided however, that no Fixed Rate Term may
be selected for a principal amount less than One Million Dollars
($1,000,000.00); and provided further, that no Fixed Rate Term shall extend
beyond the scheduled maturity date hereof.  If any Fixed Rate Term would end on
a day which is not a Business Day, then such Fixed Rate Term shall be extended
to the next succeeding Business Day.

 

(c)           “LIBOR” means the rate per annum (rounded upward, if necessary, to
the nearest whole 1/8 of 1%) and determined pursuant to the following formula:

 

LIBOR =

Base LIBOR

 

100% - LIBOR Reserve Percentage

 

(i)            “Base LIBOR” means the rate per annum for United States dollar
deposits quoted by Bank as the Inter-Bank Market Offered Rate, with the
understanding that such rate is quoted by Bank for the purpose of calculating
effective rates of interest for loans making reference thereto, on the first day
of a Fixed Rate Term for delivery of funds on said date for a period of time
approximately equal to the number of days in such Fixed Rate Term and in an
amount approximately equal to the principal amount to which such Fixed Rate Term
applies.  Borrower understands and agrees that Bank may base its quotation of
the Inter-Bank Market Offered Rate upon such offers or other market indicators
of the Inter-Bank Market as Bank in its discretion deems appropriate including,
but not limited to, the rate offered for U.S. dollar deposits on the London
Inter-Bank Market.

 

(ii)           “LIBOR Reserve Percentage” means the reserve percentage
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for “Eurocurrency Liabilities” (as defined in Regulation D of the
Federal Reserve Board, as amended), adjusted by Bank for expected changes in
such reserve percentage during the applicable Fixed Rate Term.

 

(d)           “Prime Rate” means at any time the rate of interest most recently
announced within Bank at its principal office as its Prime Rate, with the
understanding that the Prime Rate is one of Bank’s base rates and serves as the
basis upon which effective rates of interest are calculated for those loans
making reference thereto, and is evidenced by the recording thereof after its
announcement in such internal publication or publications as Bank may designate.

 

INTEREST:

 

(a)           Interest.  The outstanding principal balance of this Note shall
bear interest (computed on the basis of a 360–day year, actual days elapsed)
either (i) at a fluctuating rate per annum equal to the Prime Rate in effect
from time to time, or (ii) at a fixed rate per annum determined by Bank to be
three-quarters percent (.75000%) above LIBOR in effect on the first day of the
applicable Fixed Rate Term.  When interest is determined in relation to the
Prime Rate, each change in the rate of interest hereunder shall become effective
on the date each Prime Rate change is announced within Bank.  With respect to
each LIBOR selection hereunder, Bank is

 

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hereby authorized to note the date, principal amount, interest rate and Fixed
Rate Term applicable thereto and any payments made thereon on Bank’s books and
records (either manually or by electronic entry) and/or on any schedule attached
to this Note, which notations shall be prima facie evidence of the accuracy of
the information noted.

 

(b)           Selection of Interest Rate Options.  At any time any portion of
this Note bears interest determined in relation to LIBOR, it may be continued by
Borrower at the end of the Fixed Rate Term applicable thereto so that all or a
portion thereof bears interest determined in relation to the Prime Rate or to
LIBOR for a new Fixed Rate Term designated by Borrower.  At any time any portion
of this Note bears interest determined in relation to the Prime Rate, Borrower
may convert all or a portion thereof so that it bears interest determined in
relation to LIBOR for a Fixed Rate Term designated by Borrower.  At such time as
Borrower requests an advance hereunder or wishes to select a LIBOR option for
all or a portion of the outstanding principal balance hereof, and at the end of
each Fixed Rate Term, Borrower shall give Bank notice specifying: (i) the
interest rate option selected by Borrower; (ii) the principal amount subject
thereto; and (iii) for each LIBOR selection, the length of the applicable Fixed
Rate Term. Any such notice may be given by telephone (or such other electronic
method as Bank may permit) so long as, with respect to each LIBOR selection, (A)
if requested by Bank, Borrower provides to Bank written confirmation thereof not
later than three (3) Business Days after such notice is given, and (B) such
notice is given to Bank prior to 10:00 a.m. on the first day of the Fixed Rate
Term, or at a later time during any Business Day if Bank, at it’s sole option
but without obligation to do so, accepts Borrower’s notice and quotes a fixed
rate to Borrower.  If Borrower does not immediately accept a fixed rate when
quoted by Bank, the quoted rate shall expire and any subsequent LIBOR request
from Borrower shall be subject to a redetermination by Bank of the applicable
fixed rate.  If no specific designation of interest is made at the time any
advance is requested hereunder or at the end of any Fixed Rate Term, Borrower
shall be deemed to have made a Prime Rate interest selection for such advance or
the principal amount to which such Fixed Rate Term applied.

 

(c)           Taxes and Regulatory Costs.  Borrower shall pay to Bank
immediately upon demand, in addition to any other amounts due or to become due
hereunder, any and all (i) withholdings, interest equalization taxes, stamp
taxes or other taxes (except income and franchise taxes) imposed by any domestic
or foreign governmental authority and related in any manner to LIBOR, and (ii)
future, supplemental, emergency or other changes in the LIBOR Reserve
Percentage, assessment rates imposed by the Federal Deposit Insurance
Corporation, or similar requirements or costs imposed by any domestic or foreign
governmental authority or resulting from compliance by Bank with any request or
directive (whether or not having the force of law) from any central bank or
other governmental authority and related in any manner to LIBOR to the extent
they are not included in the calculation of LIBOR.  In determining which of the
foregoing are attributable to any LIBOR option available to Borrower hereunder,
any reasonable allocation made by Bank among its operations shall be conclusive
and binding upon Borrower.

 

(d)           Payment of Interest.  Interest accrued on this Note shall be
payable on the 1st day of each month, commencing August 1, 2002.

 

(e)           Default Interest.  From and after the maturity date of this Note,
or such earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, the outstanding principal balance of this Note shall
bear interest until paid in full at an increased rate per annum (computed on the
basis of a 360–day year, actual days elapsed) equal to four percent (4%) above
the rate of interest from time to time applicable to this Note.

 

BORROWING AND REPAYMENT:

 

(a)           Borrowing and Repayment.  Borrower may from time to time during
the term of this Note borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions of this Note and of any document executed in connection with or
governing this Note; provided however, that the total outstanding borrowings
under this Note shall not at any time exceed the principal amount stated above. 
The unpaid principal balance of this obligation at any time shall be the total
amounts advanced hereunder by the holder hereof less the amount of principal
payments made hereon by or for any Borrower, which balance may be endorsed
hereon from time to time by the holder.  The outstanding principal balance of
this Note shall be due and payable in full on July 1, 2003.

 

(b)           Advances.  Advances hereunder, to the total amount of the
principal sum stated above, may be made by the holder at the written request of
Jordan Gates and Charles Lynch, acting together, who are authorized to request
advances and direct the disposition of any advances to any deposit account of
the Borrower until written notice of the revocation of such authority is
received by the holder at the office designated above, which advances, when so
deposited, shall be conclusively presumed to have been made to or for the
benefit of Borrower regardless of the fact that persons other than those
authorized to request advances may have authority to draw against such account.

 

(c)           Application of Payments.  Each payment made on this Note shall be
credited first, to any interest then due and second, to the outstanding
principal balance hereof.  All payments credited to principal shall be applied
first, to the outstanding principal balance of this Note which bears interest
determined in relation to the Prime Rate, if any, and second, to the outstanding

 

30

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principal balance of this Note which bears interest determined in relation to
LIBOR, with such payments applied to the oldest Fixed Rate Term first.

 

PREPAYMENT:

 

(a)           Prime Rate.  Borrower may prepay principal on any portion of this
Note which bears interest determined in relation to the Prime Rate at any time,
in any amount and without penalty.

 

(b)           LIBOR.  Borrower may prepay principal on any portion of this Note
which bears interest determined in relation to LIBOR at any time and in the
minimum amount of One Hundred Thousand Dollars ($100,000.00); provided however,
that if the outstanding principal balance of such portion of this Note is less
than said amount, the minimum prepayment amount shall be the entire outstanding
principal balance thereof.  In consideration of Bank providing this prepayment
option to Borrower, or if any such portion of this Note shall become due and
payable at any time prior to the last day of the Fixed Rate Term applicable
thereto by acceleration or otherwise, Borrower shall pay to Bank immediately
upon demand a fee which is the sum of the discounted monthly differences for
each month from the month of prepayment through the month in which such Fixed
Rate Term matures, calculated as follows for each such month:

 

(i)   Determine the amount of interest which would have accrued each month on
the amount prepaid at the interest rate applicable to such amount had it
remained outstanding until the last day of the Fixed Rate Term applicable
thereto.

 

(ii)   Subtract from the amount determined in (i) above the amount of interest
which would have accrued for the same month on the amount prepaid for the
remaining term of such Fixed Rate Term at LIBOR in effect on the date of
prepayment for new loans made for such term and in a principal amount equal to
the amount prepaid.

 

(iii)   If the result obtained in (ii) for any month is greater than zero,
discount that difference by LIBOR used in (ii) above.

 

Each Borrower acknowledges that prepayment of such amount may result in Bank
incurring additional costs, expenses and/or liabilities, and that it is
difficult to ascertain the full extent of such costs, expenses and/or
liabilities.  Each Borrower, therefore, agrees to pay the above–described
prepayment fee and agrees that said amount represents a reasonable estimate of
the prepayment costs, expenses and/or liabilities of Bank.  If Borrower fails to
pay any prepayment fee when due, the amount of such prepayment fee shall
thereafter bear interest until paid at a rate per annum two percent (2.00%)
above the Prime Rate in effect from time to time (computed on the basis of a
360–day year, actual days elapsed).  Each change in the rate of interest on any
such past due prepayment fee shall become effective on the date each Prime Rate
change is announced within Bank.

 

EVENTS OF DEFAULT:

 

This Note is made pursuant to and is subject to the terms and conditions of that
certain Credit Agreement between Borrower and Bank dated as of July 1, 2002, as
amended from time to time (the “Credit Agreement”).  Any default in the payment
or performance of any obligation under this Note, or any defined event of
default under the Credit Agreement, shall constitute an “Event of Default” under
this Note.

 

MISCELLANEOUS:

 

(a)           Remedies.  Upon the occurrence of any Event of Default, the holder
of this Note, at the holder’s option, may declare all sums of principal and
interest outstanding hereunder to be immediately due and payable without
presentment, demand, notice of nonperformance, notice of protest, protest or
notice of dishonor, all of which are expressly waived by each Borrower, and the
obligation, if any, of the holder to extend any further credit hereunder shall
immediately cease and terminate.  Subject to the last sentence of this paragraph
(which provides that the prevailing party in an action to enforce this Note is
entitled to recover certain fees and costs in connection therewith), each
Borrower shall pay to the holder immediately upon demand the full amount of all
payments, advances, charges, costs and expenses, including reasonable attorneys’
fees (to include outside counsel fees), expended or incurred by the holder in
connection with the enforcement of the holder’s rights and/or the collection of
any amounts which become due to the holder under this Note, and the prosecution
or defense of any action in any way related to this Note, including without
limitation, any action for declaratory relief, whether incurred at the trial or
appellate level, in an arbitration proceeding or otherwise, and including any of
the foregoing incurred in connection with any bankruptcy proceeding (including
without limitation, any adversary proceeding, contested matter or motion brought
by Bank or any other person) relating to any Borrower or any other person or
entity.  Notwithstanding anything herein to the contrary, the prevailing party
in any action to enforce this Note shall be entitled to recover its reasonable
outside attorneys’ fees and costs incurred in connection with such action from
the non-prevailing party in such action.

 

(b)           Governing Law.  This Note shall be governed by and construed in
accordance with the laws of the State of Washington.

 

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ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR
ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.

 

IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first
written above.

 

EXPEDITORS INTERNATIONAL
OF WASHINGTON INC.

 

By:

/s/ Jordan Gates

 

 

Jordan Gates, Executive Vice President
and Chief Financial Officer

 

 

 

 

By:

/s/ Charles Lynch

 

 

Charles Lynch, Vice President-Corporate
Controller

 

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