-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HIZUZWId5nMEhn9rojVmZ/nx0di39ogGeo8xRtfOcNEoPlhiBKDkKT1uRw4mzJYV NlItgbmt6D37mPtc/ptG+Q== 0000950130-99-004766.txt : 19990813 0000950130-99-004766.hdr.sgml : 19990813 ACCESSION NUMBER: 0000950130-99-004766 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 33 FILED AS OF DATE: 19990812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PACER INTERNATIONAL INC/TN CENTRAL INDEX KEY: 0001091735 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 620935669 STATE OF INCORPORATION: TN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-85041 FILM NUMBER: 99685808 BUSINESS ADDRESS: STREET 1: 1340 TREAT BOULEVARD STREET 2: SUITE 200 CITY: WALNUT CREEK STATE: CA ZIP: 94596 BUSINESS PHONE: 9259794440 MAIL ADDRESS: STREET 1: 1340 TREAT BOULEVARD STREET 2: SUITE 200 CITY: WALNUT CREEK STATE: CA ZIP: 94596 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PACER LOGISTICS INC CENTRAL INDEX KEY: 0001091716 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 943285040 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-85041-01 FILM NUMBER: 99685809 BUSINESS ADDRESS: STREET 1: 1340 TREAT BOULEVARD STREET 2: SUITE 200 CITY: WALNUT CREEK STATE: CA ZIP: 94596 BUSINESS PHONE: 9259794440 MAIL ADDRESS: STREET 1: 1340 TREAT BOULEVARD STREET 2: SUITE 200 CITY: WALNUT CREEK STATE: CA ZIP: 94596 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CROSS CON TRANSPORT INC CENTRAL INDEX KEY: 0001091718 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 363877617 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-85041-02 FILM NUMBER: 99685810 BUSINESS ADDRESS: STREET 1: 1340 TREAT BOULEVARD STREET 2: SUITE 200 CITY: WALNUT CREEK STATE: CA ZIP: 94596 BUSINESS PHONE: 9259794440 MAIL ADDRESS: STREET 1: 1340 TREAT BOULEVARD STREET 2: SUITE 200 CITY: WALNUT CREEK STATE: CA ZIP: 94596 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CROSS CON TERMINALS INC CENTRAL INDEX KEY: 0001091719 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 362924526 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-85041-03 FILM NUMBER: 99685811 BUSINESS ADDRESS: STREET 1: 1340 TREAT BOULEVARD STREET 2: SUITE 200 CITY: WALNUT CREEK STATE: CA ZIP: 94596 BUSINESS PHONE: 9259794440 MAIL ADDRESS: STREET 1: 1340 TREAT BOULEVARD STREET 2: SUITE 200 CITY: WALNUT CREEK STATE: CA ZIP: 94596 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PACER INTERNATIONAL RAIL SERVICES LLC CENTRAL INDEX KEY: 0001091720 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 841412110 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-85041-04 FILM NUMBER: 99685812 BUSINESS ADDRESS: STREET 1: 1340 TREAT BOULEVARD STREET 2: SUITE 200 CITY: WALNUT CREEK STATE: CA ZIP: 94596 BUSINESS PHONE: 9259794440 MAIL ADDRESS: STREET 1: 1340 TREAT BOULEVARD STREET 2: SUITE 200 CITY: WALNUT CREEK STATE: CA ZIP: 94596 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PACER INTERNATIONAL CONSULTING LLC CENTRAL INDEX KEY: 0001091721 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 943298068 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-85041-05 FILM NUMBER: 99685813 BUSINESS ADDRESS: STREET 1: 1340 TREAT BOULEVARD STREET 2: SUITE 200 CITY: WALNUT CREEK STATE: CA ZIP: 94596 BUSINESS PHONE: 9259794440 MAIL ADDRESS: STREET 1: 1340 TREAT BOULEVARD STREET 2: SUITE 200 CITY: WALNUT CREEK STATE: CA ZIP: 94596 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PACER RAIL SERVICES LLC CENTRAL INDEX KEY: 0001091722 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 841447539 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-85041-06 FILM NUMBER: 99685814 BUSINESS ADDRESS: STREET 1: 1340 TREAT BOULEVARD STREET 2: SUITE 200 CITY: WALNUT CREEK STATE: CA ZIP: 94596 BUSINESS PHONE: 9259794440 MAIL ADDRESS: STREET 1: 1340 TREAT BOULEVARD STREET 2: SUITE 200 CITY: WALNUT CREEK STATE: CA ZIP: 94596 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PACIFIC MOTOR TRANSPORT CO CENTRAL INDEX KEY: 0001091723 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 946001041 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-85041-07 FILM NUMBER: 99685815 BUSINESS ADDRESS: STREET 1: 1340 TREAT BOULEVARD STREET 2: SUITE 200 CITY: WALNUT CREEK STATE: CA ZIP: 94596 BUSINESS PHONE: 9259794440 MAIL ADDRESS: STREET 1: 1340 TREAT BOULEVARD STREET 2: SUITE 200 CITY: WALNUT CREEK STATE: CA ZIP: 94596 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PACER INTERGRATED LOGISTICS INC CENTRAL INDEX KEY: 0001091725 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 522090059 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-85041-08 FILM NUMBER: 99685816 BUSINESS ADDRESS: STREET 1: 1340 TREAT BOULEVARD STREET 2: SUITE 200 CITY: WALNUT CREEK STATE: CA ZIP: 94596 BUSINESS PHONE: 9259794440 MAIL ADDRESS: STREET 1: 1340 TREAT BOULEVARD STREET 2: SUITE 200 CITY: WALNUT CREEK STATE: CA ZIP: 94596 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLM ACQUISTITION CORP CENTRAL INDEX KEY: 0001091727 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 522108513 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-85041-09 FILM NUMBER: 99685817 BUSINESS ADDRESS: STREET 1: 1340 TREAT BOULEVARD STREET 2: SUITE 200 CITY: WALNUT CREEK STATE: CA ZIP: 94596 BUSINESS PHONE: 9259794440 MAIL ADDRESS: STREET 1: 1340 TREAT BOULEVARD STREET 2: SUITE 200 CITY: WALNUT CREEK STATE: CA ZIP: 94596 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MANUFACTURERS CONSOLIDATION SERVICE INC CENTRAL INDEX KEY: 0001091728 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 620790773 STATE OF INCORPORATION: TN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-85041-10 FILM NUMBER: 99685818 BUSINESS ADDRESS: STREET 1: 1340 TREAT BOULEVARD STREET 2: SUITE 200 CITY: WALNUT CREEK STATE: CA ZIP: 94596 BUSINESS PHONE: 9259794440 MAIL ADDRESS: STREET 1: 1340 TREAT BOULEVARD STREET 2: SUITE 200 CITY: WALNUT CREEK STATE: CA ZIP: 94596 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LEVCON INC CENTRAL INDEX KEY: 0001091729 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 621020808 STATE OF INCORPORATION: TN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-85041-11 FILM NUMBER: 99685819 BUSINESS ADDRESS: STREET 1: 1340 TREAT BOULEVARD STREET 2: SUITE 200 CITY: WALNUT CREEK STATE: CA ZIP: 94596 BUSINESS PHONE: 9259794440 MAIL ADDRESS: STREET 1: 1340 TREAT BOULEVARD STREET 2: SUITE 200 CITY: WALNUT CREEK STATE: CA ZIP: 94596 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MANUFACTURERS CONSOLIDATION SERVICE OF CANADA INC CENTRAL INDEX KEY: 0001091730 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 621602017 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-85041-12 FILM NUMBER: 99685820 BUSINESS ADDRESS: STREET 1: 1340 TREAT BOULEVARD STREET 2: SUITE 200 CITY: WALNUT CREEK STATE: CA ZIP: 94596 BUSINESS PHONE: 9259794440 MAIL ADDRESS: STREET 1: 1340 TREAT BOULEVARD STREET 2: SUITE 200 CITY: WALNUT CREEK STATE: CA ZIP: 94596 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERSTATE CONSOLIDATION SERVICE INC CENTRAL INDEX KEY: 0001091731 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 922756390 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-85041-13 FILM NUMBER: 99685821 BUSINESS ADDRESS: STREET 1: 1340 TREAT BOULEVARD STREET 2: SUITE 200 CITY: WALNUT CREEK STATE: CA ZIP: 94596 BUSINESS PHONE: 9259794440 MAIL ADDRESS: STREET 1: 1340 TREAT BOULEVARD STREET 2: SUITE 200 CITY: WALNUT CREEK STATE: CA ZIP: 94596 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERSTATE CONSOLIDATION INC CENTRAL INDEX KEY: 0001091732 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 922851463 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-85041-14 FILM NUMBER: 99685822 BUSINESS ADDRESS: STREET 1: 1340 TREAT BOULEVARD STREET 2: SUITE 200 CITY: WALNUT CREEK STATE: CA ZIP: 94596 BUSINESS PHONE: 9259794440 MAIL ADDRESS: STREET 1: 1340 TREAT BOULEVARD STREET 2: SUITE 200 CITY: WALNUT CREEK STATE: CA ZIP: 94596 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERMODAL CONTAINER SERVICE INC CENTRAL INDEX KEY: 0001091733 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 953608057 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-85041-15 FILM NUMBER: 99685823 BUSINESS ADDRESS: STREET 1: 1340 TREAT BOULEVARD STREET 2: SUITE 200 CITY: WALNUT CREEK STATE: CA ZIP: 94596 BUSINESS PHONE: 9259794440 MAIL ADDRESS: STREET 1: 1340 TREAT BOULEVARD STREET 2: SUITE 200 CITY: WALNUT CREEK STATE: CA ZIP: 94596 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KEYSTONE TERMINALS ACQUISITION CORP CENTRAL INDEX KEY: 0001091734 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 522159704 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-85041-16 FILM NUMBER: 99685824 BUSINESS ADDRESS: STREET 1: 1340 TREAT BOULEVARD STREET 2: SUITE 200 CITY: WALNUT CREEK STATE: CA ZIP: 94596 BUSINESS PHONE: 9259794440 MAIL ADDRESS: STREET 1: 1340 TREAT BOULEVARD STREET 2: SUITE 200 CITY: WALNUT CREEK STATE: CA ZIP: 94596 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PACER EXPRESS INC CENTRAL INDEX KEY: 0001092066 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 680419260 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-85041-17 FILM NUMBER: 99685825 BUSINESS ADDRESS: STREET 1: 1340 TREAT BOULEVARD STREET 2: SUITE 200 CITY: WALNUT CREEK STATE: CA ZIP: 94596 BUSINESS PHONE: 9259794440 MAIL ADDRESS: STREET 1: 1340 TREAT BOULEVARD STREET 2: SUITE 200 CITY: WALNUT CREEK STATE: CA ZIP: 94596 S-4 1 FORM S-4 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 12, 1999 Registration No. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------------- PACER INTERNATIONAL, INC. and the Guarantors identified in footnote (1) below (Exact name of registrant as specified in its charter)
DELAWARE 4731 62-0935669 (State of or other (Primary Standard Industrial (I.R.S. Employer jurisdiction Classification Code Number) Identification No.) of incorporation or organization)
1340 Treat Boulevard, Suite 200 Walnut Creek, California 94596 (925) 979-4440 (Address, including zip code, and telephone number,including area code, of registrant's principal executive offices) ---------------- Donald C. Orris Chairman, President and Chief Executive Officer 1675 Larimer Street, Suite 626 Denver, Colorado 80202 (303) 623-5310 ---------------- Copies to: Morton A. Pierce Douglas L. Getter Dewey Ballantine LLP 1301 Avenue of the Americas New York, New York 10019-6092 (212) 259-8000 ---------------- Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this Registration Statement becomes effective. - -------------------------------------------------------------------------------- If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [_] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] - -------- (1) The following domestic direct or indirect wholly owned subsidiaries of Pacer International, Inc. are Guarantors of the Notes and are Co-Registrants, each of which is incorporated in the jurisdiction and has the I.R.S. Employer Identification Number indicated: Pacer Logistics, Inc., a Delaware corporation (94-3285040); Cross Con Transport, Inc., an Illinois corporation (36-3877617); Cross Con Terminals, Inc., a Delaware corporation (36-2924526); Pacer International Rail Services LLC, a Colorado limited liability company(84- 1412110); Pacer International Consulting LLC, a Colorado limited liability company (94-3298068); Pacer Rail Services LLC, a Colorado limited liability company (84-1447539); Pacific Motor Transport Company, a California corporation (94-6001041); Pacer Express, Inc., a California corporation (68-0419260); Pacer Integrated Logistics, Inc., a Delaware corporation (52-2090059); PLM Acquisition Corporation, a Delaware corporation (52-2108513); Manufacturers Consolidation Service, Inc., a Tennessee corporation (62-0790773); Levcon, Inc., a Tennessee corporation (62-1020808); Manufacturers Consolidation Service of Canada, Inc., a Delaware corporation (62-1602017); Interstate Consolidation Service, Inc., a California corporation(92-2756390); Interstate Consolidation, Inc., a California corporation (95-2851463); Intermodal Container Service, Inc., a California corporation (95-3608057); and Keystone Terminals Acquisition Corp., a Delaware corporation (52-2159704). ---------------- CALCULATION OF REGISTRATION FEE - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Proposed Proposed maximum Title of each class of Amount maximum aggregate Amount of securities to be to be offering price offering registration registered registered per Note price(1) fee - ------------------------------------------------------------------------------ 11 3/4% Series B Senior Subordinated Notes due 2007.................. $150,000,000 100% $150,000,000 $41,700 - ------------------------------------------------------------------------------ Guarantee of 11 3/4% Series B Senior Subordinated Notes due 2007.................. $150,000,000 (2) (2) (2) - ------------------------------------------------------------------------------ Total.................. $150,000,000 100% $150,000,000 $41,700 - ------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- (1) Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(f)(2). (2) No additional consideration for the guarantees of the 11 3/4% Series B Senior Subordinated Notes due 2007 will be furnished. Pursuant to Rule 457(n), no separate fee is payable with respect to such guarantees. ---------------- The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective time until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SUBJECT TO COMPLETION, DATED AUGUST 12, 1999 PROSPECTUS [LOGO] PACER INTERNATIONAL, INC. Offer to Exchange 11 3/4% Series B Senior Subordinated Notes due 2007 which have been registered under the Securities Act for any and all outstanding 11 3/4% Senior Subordinated Notes due 2007 $150,000,000 aggregate principal amount outstanding ---------------- Material Terms of the Exchange Offer ---------------- . The exchange of notes should not be . Expires 5:00 p.m., New York City a taxable exchange for U.S. federal time, on , 1999, unless income tax purposes extended . We will not receive any proceeds . We will exchange your validity from the exchange offer tendered unregistered notes for an equal principal amount of registered notes with substantially identical terms . The terms of the notes to be issued are substantially identical to the outstanding notes, except for certain transfer restrictions and registration rights relating to the outstanding notes . Not subject to any condition other than that the exchange offer not violate applicable law or any applicable interpretation of the Staff of the Securities and Exchange Commission and certain other customary conditions . You may tender outstanding notes only in denominations of $1,000 and multiples of $1,000 . Affiliates of our company may not . You may withdraw your tender of participate in the exchange offer outstanding notes at any time prior to the expiration of the exchange offer Please refer to "Risk Factors" beginning on page 14 of this document for certain important information. The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the notes to be issued in the exchange offer or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. ---------------- Prospectus dated , 1999. TABLE OF CONTENTS
Page ---- Summary............................. 1 Risk Factors........................ 14 The Exchange Offer.................. 21 Use of Proceeds..................... 33 Unaudited Pro Forma Consolidated Financial Information.............. 34 Selected Historical and Pro Forma Consolidated Financial Information........................ 48 Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 54 Business............................ 70 Management.......................... 86
Page ---- Certain Agreements.................................................... 91 Stock Ownership of Certain Beneficial Owners and Management........... 96 Our Capital Stock..................................................... 98 Description of Our Credit Agreement................................... 100 Description of Notes.................................................. 103 Book-Entry; Delivery and Form......................................... 139 Material Federal Income Tax Considerations............................ 141 Plan of Distribution.................................................. 142 Legal Matters......................................................... 142 Change in Accountant.................................................. 142 Experts............................................................... 143 Index to Financial Statements......................................... F-1
PROSPECTUS SUMMARY The following summary highlights selected information from this prospectus and may not contain all of the information that is important to you. This prospectus includes the specific terms of the notes we are offering, as well as information regarding our business, certain recent transactions entered into by us and detailed financial data. In this prospectus, unless otherwise noted, the words "company," "issuer," "we," "us," "our" and "ours" refer to Pacer International, Inc. and our subsidiaries. However, the words "Pacer International" and "Pacer Logistics" refer to Pacer International, Inc. and Pacer Logistics, Inc., respectively, as separate, individual entities. We encourage you to read this prospectus in its entirety. The Exchange Offer On May 28, 1999, we completed the private offering of $150,000,000 principal amount of our 11 3/4% Senior Subordinated Notes due 2007. These notes were sold to certain initial purchasers identified in this prospectus. The notes are guaranteed by substantially all of our subsidiaries. We and our subsidiaries which are guarantors of the notes entered into a registration rights agreement with the initial purchasers in the private offering in which we agreed, among other things, to deliver to you this prospectus and to complete the exchange offer on or prior to December 24, 1999. As a holder of such outstanding notes, you are entitled to exchange in the exchange offer your unregistered notes for a new series of notes which we have registered under the Securities Act and have substantially identical terms. We believe that the notes issued in the exchange offer may be resold by you without compliance with the registration and prospectus delivery provisions of the Securities Act, subject to certain conditions. Following the exchange offer, any notes held by you that are not exchanged in the exchange offer will continue to be subject to the existing restrictions on transfer on the notes and, except in certain circumstances, we will have no further obligation to you to provide for registration under the Securities Act of transfers of outstanding notes held by you. You should read the discussion under the headings "Summary of the Exchange Offer" and "The Exchange Offer" for further information regarding the exchange offer and the resale of notes. Summary of The Exchange Offer Securities Offered.......... $150,000,000 aggregate principal amount of 11 3/4% Series B Senior Subordinated Notes due 2007 which we have registered under the Securities Act. Issuer ..................... Pacer International, Inc. Registration Rights Agreement................... You are entitled to exchange your unregistered notes for registered notes with substantially identical terms. The exchange offer is intended to satisfy this right. After the exchange offer is completed, you will no longer be entitled to any exchange or registration rights with respect to your notes. Under certain circumstances, holders of outstanding notes may require us to file a shelf registration statement under the Securities Act. The Exchange Offer.......... We are offering to exchange $1,000 principal amount of exchange notes of Pacer International for each $1,000 principal amount of outstanding 11 3/4% Senior Subordinated Notes due 2007 which we issued on May 28, 1999 in a private offering. In order to be 1 exchanged, an outstanding note must be properly tendered and accepted. All outstanding notes that are validly tendered and not validly withdrawn will be exchanged. As of this date, there is $150,000,000 principal amount of notes outstanding. We will issue the exchange notes on or promptly after the expiration of the exchange offer. Resale...................... We believe that the exchange notes issued in the exchange offer may be offered for resale, resold and otherwise transferred by you without compliance with the registration and prospectus delivery provisions of the Securities Act provided that: . the exchange notes issued in the exchange offer are being acquired in the ordinary course of your business; . you are not participating, do not intend to participate and have no arrangement or understanding with any person to participate, in the distribution of the notes issued to you in the exchange offer; and . you are not an "affiliate" of our company. If our belief is inaccurate and you transfer any note issued to you in the exchange offer without delivering a prospectus meeting the requirements of the Securities Act or without an exemption from registration of your notes from such requirements, you may incur liability under the Securities Act. We do not assume, or indemnify you against, such liability. Each broker-dealer that is issued exchange notes in the exchange offer for its own account in exchange for notes which were acquired by such broker-dealer as a result of market-making or other trading activities, must acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of the exchange notes issued in the exchange offer. A broker-dealer may use this prospectus for an offer to resell, resale or other retransfer of the exchange notes issued to it in the exchange offer. The exchange offer is not being made to, nor will we accept surrenders for exchange from, the following: . holders of notes in any jurisdiction in which this exchange offer or the acceptance thereof would not be in compliance with the applicable securities or "blue sky" laws of such jurisdiction; and . holders of notes who are affiliates of our company. Expiration Date............. The exchange offer~ will expire at 5:00 p.m., New York City time, on , 1999, unless extended, in which case the term "expiration date" shall mean the latest date and time to which we extend the exchange offer. 2 Conditions to the Exchange Offer....................... The exchange offer is subject to certain customary conditions, which may be waived by us. The exchange offer is not conditioned upon any minimum principal amount of notes being tendered. Procedures for Tendering Old Notes................... If you wish to tender your notes for exchange pursuant to the exchange offer you must transmit to the Wilmington Trust Company, as exchange agent, on or before the expiration date: either . a properly completed and duly executed letter of transmittal, which accompanies this prospectus, or a facsimile of the letter of transmittal, together with your notes and any other required documentation, to the exchange agent at the address set forth in this prospectus under the heading "The Exchange Offer--Exchange Agent," and on the front cover of the letter of transmittal; or . a computer generated message transmitted by means of The Depository Trust Company's Automated Tender Offer Program system and received by the exchange agent and forming a part of a confirmation of book-entry transfer in which you acknowledge and agree to be bound by the terms of the letter of transmittal. If either of these procedures cannot be satisfied on a timely basis, then you should comply with the guaranteed delivery procedures described below. By executing the letter of transmittal, each holder of notes will make certain representations to us described under "The Exchange Offer-- Procedures for Tendering." Special Procedures for Beneficial Owners........... If you are a beneficial owner whose notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and you wish to tender your notes in the exchange offer, you should contact such registered holder promptly and instruct such registered holder to tender on your behalf. If you wish to tender on your own behalf, you must, prior to completing and executing the letter of transmittal and delivering your notes, either make appropriate arrangements to register ownership of the notes in your name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time and may not be able to be completed prior to the expiration date. 3 Guaranteed Delivery Procedures.................. If you wish to tender your notes and time will not permit the documents required by the letter of transmittal to reach the exchange agent prior to the expiration date, or the procedure for book-entry transfer cannot be completed on a timely basis, you must tender your notes according to the guaranteed delivery procedures described in this prospectus under the heading "The Exchange Offer--Guaranteed Delivery Procedures." Acceptance of Notes and Delivery of Exchange Subject to the conditions described in "The Notes....................... Exchange Offer--Conditions to the Exchange Offer," we will accept for exchange any and all notes which are validly tendered in the exchange offer and not withdrawn, prior to 5:00 p.m., New York City time, on the expiration date. Withdrawal Rights........... You may withdraw the tender of your notes at any time prior to 5:00 p.m., New York City time, on the expiration date, subject to compliance with the procedures for withdrawal described in this prospectus under the heading "The Exchange Offer--Withdrawal of Tenders." Federal Income Tax Considerations.............. For a discussion of the material federal income tax considerations relating to the exchange of notes for exchange notes, see "Material Federal Income Tax Considerations." Exchange Agent.............. Wilmington Trust Company, the trustee under the indenture governing the notes, is serving as the exchange agent. The address, telephone number and facsimile number of the exchange agent are set forth in this prospectus under the heading "The Exchange Offer--Exchange Agent." Consequences of Failure to Exchange Old Notes.......... If you do not exchange your notes for exchange notes pursuant to the exchange offer, you will continue to be subject to the restrictions on transfer provided in the notes and in the indenture governing the notes. In general, the notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. We do not currently plan to register the notes under the Securities Act. Summary of Terms of the Exchange Notes The exchange offer relates to the exchange of up to $150,000,000 aggregate principal amount of exchange notes for up to an equal principal amount of outstanding notes. The form and terms of the exchange notes are the same as the form and terms of the outstanding notes, except that the exchange notes will be registered under the Securities Act, and, therefore, the exchange notes will not be subject to certain transfer restrictions, registration rights and certain provisions providing for an increase in the interest rate of the outstanding notes under certain circumstances relating to the registration of the exchange notes. The exchange notes issued in the exchange offer will evidence the same debt as the outstanding notes, which they replace, and both the outstanding notes and the exchange notes are governed by the same indenture. 4 $150,000,000 aggregate principal amount of 11 Notes Offered................. 3/4% Series B Senior Subordinated Notes due 2007. Maturity...................... June 1, 2007. Interest...................... Interest on the exchange notes will accrue from the last interest payment date on which interest was paid on the notes surrendered in exchange for exchange notes or, if no interest has been paid on the notes, from May 28, 1999, the date of original issuance of the notes. Interest on the exchange notes will be payable in cash on June 1 and December 1 of each year, beginning December 1, 1999. The exchange notes will bear interest at a fixed rate of 11 3/4% per annum. Optional Redemption........... We may redeem any of the notes beginning on June 1, 2003 at an initial redemption price of 105.875% of their principal amount, plus accrued interest. The redemption price will decline each year after 2003 and will be 100% of the principal amount, plus accrued interest, beginning on June 1, 2005. In addition, we may redeem up to 35% of the principal amount of the notes at any time prior to June 1, 2002 at a redemption price equal to 111.750% of their principal amount, plus accrued interest, using the proceeds from certain sales of our capital stock. Change of Control............. Upon a change of control, as defined under "Description of Notes", we will be required to make an offer to purchase the notes. The purchase price will equal 101% of the principal amount of the notes on the date of purchase, plus accrued interest. We may not have sufficient funds available at the time of any change of control to make any required debt repayment, including repurchases of the notes, and the terms of our credit facilities may block any such payments. In addition, upon a change of control prior to June 1, 2003, we may redeem the notes, in whole but not in part, at a redemption price equal to the principal amount thereof plus an applicable premium, plus accrued interest. Ranking....................... The notes will rank behind all of our existing and future senior debt and secured debt. On a pro forma basis as of April 2, 1999, the notes would have been subordinated to approximately $135.0 million of senior debt, excluding unused commitments of approximately $100.0 million under our revolving credit facility. Certain Covenants............. The terms of the notes restrict our ability and the ability of our subsidiaries to: . incur additional indebtedness; . pay dividends or make distributions in respect of capital stock; . repurchase or redeem capital stock; 5 . make certain investments and other restricted payments; . create liens; . enter into transactions with stockholders or affiliates; . sell assets; and . merge or consolidate with other companies. The indenture governing the rates provides that these limitations are subject to a number of important qualifications and exceptions. Subsidiary Guarantees......... Substantially all of our subsidiaries guarantee our obligations under the notes. These guarantees are subordinated to all senior debt and secured debt of such subsidiaries. Form of Exchange Notes........ The exchange notes issued in the exchange offer will be represented by one or more permanent global certificates, in fully registered form, deposited with a custodian for, and registered in the name of a nominee of, The Depository Trust Company, as depositary. You will not receive notes in certificated form unless one of the events set forth under "Book Entry; Delivery and Form" occurs. Instead, beneficial interests in the exchange notes will be shown on, and transfers of these notes will be effected through, records maintained in book- entry form by The Depository Trust Company and its participants. Use of Proceeds............... We will not receive any proceeds from the exchange offer. About Our Company Who We Are We are a leading freight transportation and logistics provider, offering a broad array of services to facilitate the movement of freight from origin to destination. We believe, as one of the largest transporters of intermodal freight in North America, we controlled approximately 23.0% of all domestic intermodal containers in 1998. We are also the third largest intermodal marketing company in the United States, as measured by intermodal rail revenues. Intermodal transportation is the movement of freight via trailer or container using two or more transportation modes. Intermodal transportation nearly always includes a rail and truck segment. An intermodal marketing company arranges intermodal transportation for global, national and regional retailers and manufacturers. Our pro forma gross revenues and adjusted EBITDA were $987.4 million and $72.2 million, respectively, for the twelve month period ended April 2, 1999. Through our stacktrain business, we are the largest provider of intermodal rail service in North America that is not affiliated with an individual railroad company. Stacktrain service is the movement of freight in containers stacked two high on railcars. Through this business, we provide our customers with rail capacity, equipment and shipment tracking and control on a nationwide basis. We operate one of the industry's largest fleets of stacktrain equipment, including railcars, containers and chassis. Through contracts with major rail carriers and our access to sophisticated proprietary information systems, we operate our equipment over a 50,000 mile rail network. 6 Complementing our stacktrain business, we offer a broad range of additional transportation services, including trucking, intermodal marketing and logistics services, to a broad range of shippers such as Sony, Ford Motor Company and Wal-Mart Stores. A significant portion of our intermodal trucking, logistics and freight handling services is provided through a network of agents and independent contractors. These relationships allow us to control a large fleet of specialized equipment and provide our customers with a broad range of transportation services without committing significant capital to the acquisition and maintenance of an extensive asset base. Our relatively low capital and working capital requirements and variable cost structure enable us to generate strong free cash flow in a variety of market conditions. Growth Strategy We have developed a strategy designed to increase revenues, cash flow and profitability while maximizing returns on invested capital. The primary components of our growth strategy include: Capitalize on Stacktrain Growth Opportunities We believe that the stacktrain market, which has grown at a compound annual rate of approximately 15.0% over the last decade, provides a significant opportunity for continued growth. We expect our stacktrain business to benefit from economic and operational efficiencies offered by the stacktrain technology, improved rail service and our experienced senior management team. Expand Service Offerings to Capitalize on Strong Logistics Industry Trends We believe it is important to meet the diverse needs of our customers who are increasingly looking to outsource their transportation requirements. We intend to capitalize on the continuing trend of vendor consolidation and outsourcing by maintaining a broad range of service offerings and introducing new services to handle our customers' diverse transportation and logistics requirements. Increase Sales to Existing Customers We believe that by offering a broad menu of services, we will be able to expand our relationships with our existing customers. Our strategy involves a continued focus on capturing additional freight volume from existing customers which is currently being shipped by long-haul trucking companies or intermodal competitors as well as providing logistics services. Expand Our Customer Base We believe our national presence, large size and broad scope of services make us well-positioned to capture an increasing number of customers seeking a single-source freight transportation and logistics provider. We intend to expand our customer base by leveraging our operating infrastructure and adding sales agents and independent contractors. In addition, we believe our stacktrain business is strategically-positioned to acquire new business from international shipping companies who were historically reluctant to utilize our stacktrain services when the business was owned by APL Limited, a direct competitor of such international shipping companies. Pursue Strategic Acquisitions As an additional component of our growth strategy, we intend to continue our disciplined acquisition program. Due to the fragmented nature of the industry and the general industry trend toward consolidation, we 7 believe there is increased pressure on smaller transportation and logistics companies to consolidate. We intend to seek acquisition candidates with complementary management and operating philosophies and service capabilities that we can add to and integrate with our current menu of services. ---------------- Our principal executive offices are located at 1340 Treat Boulevard, Suite 200, Walnut Creek, CA 94596 and our telephone number is (925) 979-4440. 8 OUR RECAPITALIZATION In connection with the private offering of the notes, we were recapitalized through (1) the purchase by entities formed by certain affiliates of Apollo Management, L.P. and by certain affiliates of Deutsche Bank Securities Inc. and Credit Suisse First Boston Corporation of shares of our outstanding common stock from APL Limited and (2) our redemption of certain shares of our common stock held by APL Limited. Our recapitalization was financed by: . the private offering of the notes; . borrowings under our credit agreement; . the sale and leaseback of certain of our assets; and . equity investments by certain affiliates of Apollo Management, Deutsche Bank Securities Inc. and Credit Suisse First Boston Corporation and by APL Limited. Immediately following our recapitalization, we formed a transitory subsidiary which was merged with and into Pacer Logistics, Inc. As a result of such transaction, Pacer Logistics became a wholly-owned subsidiary of our company. In connection the Pacer Logistics transaction, certain members of Pacer Logistics management received shares of a series of Pacer Logistics preferred stock exchangeable for our common stock. In connection with the Pacer Logistics transaction, we used cash to refinance the existing debt of Pacer Logistics, redeem outstanding Pacer Logistics preferred stock and make payments in connection with certain other Pacer Logistics transactions. The sources of funds used to complete the Pacer Logistics transaction were the same as those set forth above. Apollo Management beneficially owns approximately 89.9% of our outstanding common stock, APL Limited owns approximately 7.2% of our outstanding common stock and certain affiliates of Deutsche Bank Securities Inc. and Credit Suisse First Boston Corporation together beneficially own approximately 2.9% of our outstanding common stock. The Pacer Logistics exchangeable preferred stock is exchangeable, under certain circumstances, for a number of shares of our common stock, currently representing approximately 18.9% of the outstanding Pacer International common stock as of the date hereof. Pacer International conducts business under the name Pacer Stacktrain. The following chart sets forth our structure: ------------- ----------- Affiliates of APL Limited Apollo Management ------------- ----------- 89.9% \ / 7.2% \ / \ / \ ------------------- / \ Pacer International / (Issuer) ------------------- 100% | --------------- | Pacer Logistics | Management | --------------- | / --------------- / Pacer Logistics / (Guarantor) _____| --------------- | | Pacer Logistics Preferred | Stock exchangeable for | Pacer International | Common Stock | | --------------- Pacer Logistics Subsidiaries (Guarantors) --------------- 9 The net proceeds from the private offering were used to consummate our recapitalization and to fund the Pacer Logistics transaction. The following table is intended to show you the sources, including the net proceeds from the private offering, and uses of funds for our recapitalization and for the Pacer Logistics transaction:
Amount ------------- (in millions) Sources of Funds Senior Credit Facilities:(1) Borrowings under the Revolving Credit Facility............... $ -- Borrowings under the Term Loan.............. 135.0 Issuance of Senior Subordinated Notes....... 150.0 Exchange of Pacer Logistics common stock for Pacer Logistics Exchangeable Preferred Stock(2)............... 24.3 Rollover of common stock options from Pacer Logistics(2)........... 4.3 Rollover of common stock from APL Limited(2).... 7.5 Proceeds from the issuance of common stock(3)............... 96.9 ---- Issued, rolled and exchanged equity......... 133.0 ------ Total sources........... $418.0 ======
Amount ------------- (in millions) Uses of Funds Purchase and rollover of APL Limited common equity...... $300.0 Purchase and rollover of Pacer Logistics common equity.. 71.9 Purchase of Pacer Logistics preferred stock............. 3.4 Repayment of existing debt.............................. 58.6 Proceeds from sale and leaseback transaction(4)......... (40.0) Fees and expenses....................................... 24.1 ------ Total uses.............................................. $418.0 ======
- -------- (1) The Senior Credit Facilities consist of a seven-year $135.0 million Term Loan and a five-year $100.0 million Revolving Credit Facility. See "Description of Our Credit Agreement." (2) Represents non-cash consideration. (3) Includes (a) an aggregate $93.9 million cash equity investment by certain affiliates of Apollo Management and (b) an aggregate $3.0 million cash equity investment by certain affiliates of Deutsche Bank Securities Inc. and Credit Suisse First Boston Corporation. (4) We executed a sale and leaseback transaction for certain railcars purchased in 1998. 10 SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION The following table sets forth summary unaudited pro forma consolidated financial information and other data for the fiscal year ended December 25, 1998 and the twelve and three month periods ended April 2, 1999. It is important that you read this information along with the unaudited pro forma consolidated financial information and the related notes included elsewhere in this prospectus. The summary unaudited pro forma consolidated statement of operations data gives effect to our recapitalization and the Pacer Logistics transaction as if they had occurred at the beginning of the period presented. The unaudited pro forma consolidated balance sheet data reflects the financial position of our business as if our recapitalization and the Pacer Logistics transaction had occurred on April 2, 1999. Pacer International's fiscal year ends on the last Friday in December and its fiscal first quarter consists of the first fourteen weeks of the fiscal year. As a result, Pacer International's 1998 and 1999 fiscal year end is December 25 and December 31, respectively, and Pacer International's first fiscal quarter of 1999 ended on April 2. Pacer Logistics' fiscal year ends on December 31 and its fiscal first quarter ends on March 31, and has been presented in the unaudited pro forma consolidated financial statements without any adjustment for the difference in fiscal year ends between Pacer International and Pacer Logistics. The pro forma consolidated financial information reflects our recapitalization and the Pacer Logistics transaction using the purchase method of accounting for the Pacer Logistics transaction. We do not claim or represent that the summary unaudited pro forma consolidated financial information set forth below is indicative of the results that would have been reported had our recapitalization and the Pacer Logistics transaction actually occurred on the dates indicated above, nor is it indicative of our future results. There can be no assurance that the assumptions used by management, which they believe are reasonable, in the preparation of the summary unaudited pro forma consolidated financial information will prove to be correct. Additionally, pro forma consolidated operating results for the three months ended April 2, 1999 and for the last twelve months ended April 2, 1999 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 1999. 11 SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
For the For the Three For the Twelve Fiscal Year Ended Months Ended Months Ended December 25, 1998 April 2, 1999 April 2, 1999 ----------------- ------------- -------------- (in millions, except ratios and statistical data) Statement of Operations Data: Gross revenues................. $981.6 $253.9 $987.4 Cost of purchased transportation and services... 780.4 201.0 783.0 Net revenues................... 201.2 52.9 204.4 Direct operating expenses...... 65.3 18.7 65.9 Selling, general and administrative expenses....... 75.8 19.4 75.9 Income from operations......... 55.0 14.0 57.4 Interest expense............... 30.1 7.5 30.1 Income before extraordinary loss.......................... 13.3 3.5 14.8 Other Financial Data: (a) EBITDA (b)..................... $ 64.8 $ 16.5 $ 67.1 EBITDA margin.................. 32.2% 31.2% 32.8% Adjusted EBITDA (c)............ $ 69.9 $ 17.4 $ 72.2 Adjusted EBITDA margin......... 34.7% 32.9% 35.3% Depreciation................... $ 6.1 $ 1.6 $ 5.9 Amortization................... 3.7 0.9 3.7 Capital expenditures (d)....... 1.7 0.4 1.7 Cash interest expense (e)...... 28.5 7.1 28.4 Ratio of earnings to fixed charges(f).................... 1.5x 1.5x 1.5x Debt to Adjusted EBITDA........ 3.9x Adjusted EBITDA to cash interest expense.............. 2.5x 2.5x 2.5x Balance Sheet Data (at period end): Total assets................... $398.2 $398.2 Total debt..................... 285.0 285.0 Exchangeable preferred stock... 24.3 24.3
- -------- (a) Pro forma EBITDA and pro forma Adjusted EBITDA margins are calculated as a percentage of net revenues. (b) EBITDA represents income before income taxes, interest expense, depreciation and amortization and minority interest (payment-in-kind dividends on Pacer Logistics 7.5% Exchangeable Preferred Stock). EBITDA is presented because it is commonly used by certain investors to analyze and compare operating performance and to determine a company's ability to service and/or incur debt. However, EBITDA should not be considered in isolation or as a substitute for net income, cash flows or other income or cash flow data prepared in accordance with generally accepted accounting principles or as a measure of a company's profitability or liquidity. (c) Adjusted EBITDA represents pro forma EBITDA adjusted as follows:
Fiscal Year Ended Three Months Twelve Months December 25, 1998 Ended April 2, 1999 Ended April 2, 1999 ----------------- ------------------- ------------------- Pro forma EBITDA....... $64.8 $16.5 $67.1 Adjustments to pro forma EBITDA: Elimination of allocated corporate costs, less estimated stand-alone costs (1).................. 3.0 0.9 3.0 Elimination of historical Pacer Logistics initial public offering costs (2)............ 1.5 -- 1.5 Elimination of historical Manufacturers Consolidation Service, Inc. initial public offering costs (3).................. 0.6 -- 0.6 ----- ----- ----- Adjusted EBITDA........ $69.9 $17.4 $72.2 ===== ===== =====
12 - -------- (1) Reflects the elimination of historical corporate overhead costs allocated to Pacer International by APL Limited, less $2.8 million of estimated annual costs expected to be incurred by Pacer International to perform the services as a stand-alone entity. The estimated annual stand-alone costs consist of salaries and benefits of $1.7 million, outside services and consulting fees of $0.6 million and additional rent of $0.5 million. (2) Pacer Logistics incurred $1.5 million of non-recurring costs related to an expected initial public offering in 1998. (3) Manufacturers Consolidation Service is a wholly owned subsidiary of Pacer Logistics. Manufacturers Consolidation Service incurred $0.6 million of non-recurring costs related to an expected initial public offering prior to its acquisition by Pacer Logistics in 1998. (d) In 1998, Pacer International purchased $39.7 million of railroad cars of which $23.4 million of expenditures were included in the twelve months ended April 2, 1999. In connection with our recapitalization and the Pacer Logistics transaction, we completed a sale and leaseback transaction for these railcars. Therefore, on a pro forma basis, the capital expenditures related to these railcars has been eliminated and direct operating expenses has been increased by $2.5 million and $2.2 million for the year ended December 25, 1998 and the twelve months ended April 2, 1999, respectively, to reflect the net impact on operating results of the additional lease expense less the historical depreciation on these railcars. (e) Cash interest expense represents interest expense less amortization of debt issuance costs. (f) For the purposes of the computation, the ratio of earnings to fixed charges has been calculated by dividing (i) income before income taxes plus fixed charges by (ii) fixed charges. Fixed charges are defined as interest expense plus the estimated interest portion of rent expense (assumed to be one-third of rent expense). RECENT DEVELOPMENTS We recently completed the calculation of certain financial information for our second quarter ended June 25, 1999 for the 1999 fiscal year. For this period, we reported revenue of $195.0 million and operating income of $11.3 million. For the prior year period, we reported revenue and operating income of $136.7 million and $8.3 million, respectively. 13 RISK FACTORS In evaluating an investment in the notes, you should carefully consider the following factors in addition to all other information contained in this prospectus. Our High Level Of Debt Creates A Risk Of Default In order to complete our recapitalization and the Pacer Logistics transaction, we incurred a high level of debt. As of April 2, 1999, on a pro forma basis giving effect to our recapitalization and the Pacer Logistics transaction, our long-term debt was approximately $285.0 million, excluding unused commitments of $100.0 million under our revolving credit facility, while our total capitalization was $262.3 million. We also have the ability to incur new debt, subject to limitations in our credit agreement and the indenture governing the notes. Our level of indebtedness could have important consequences to you because it: . limits our ability to obtain additional financing to fund our growth strategy, working capital requirements, capital expenditures, debt service requirements or other needs; . limits our ability to use operating cash flow in other areas of our business because we must dedicate a substantial portion of these funds to make principal payments and fund debt service; . increases our vulnerability to interest rate fluctuations because most of our debt may be at variable interest rates; . limits our ability to compete with others who are not as highly leveraged; and . limits our ability to react to changing market conditions, changes in our industry and economic downturns. Our ability to pay principal and interest on the notes and to satisfy our other debt obligations will depend upon our future operating performance. Our future operating performance may be subject to factors beyond our control which will affect our ability to make these payments. We cannot assure you that our business will generate cash flow, or that we will be able to refinance or obtain additional financing, sufficient to satisfy our debt service requirements. The Notes And The Guarantees Are Subordinate To Senior Indebtedness The notes and the guarantees are subordinate to all of our and the guarantors' senior indebtedness including, without limitation, our credit facilities. At April 2, 1999, on a pro forma basis giving effect to our recapitalization and the Pacer Logistics transaction, we had approximately $135.0 million of senior indebtedness, excluding unused commitments of $100.0 million under our revolving credit facility. We also may incur additional senior indebtedness consistent with the terms of our debt agreements. In the event of our bankruptcy, liquidation or dissolution, our assets would be available to pay obligations on the notes only after all payments had been made on our senior indebtedness. We cannot assure you that sufficient assets would remain to make any payments on the notes. In addition, certain events of default under our senior indebtedness would prohibit us from making any payments on the notes, including interest payments. Our Debt Agreements Contain Operating And Financial Restrictions Which May Restrict Our Business And Financing Activities The operating and financial restrictions and covenants in our credit agreement and the indenture governing the notes and any future financing agreements may adversely affect our ability to finance future operations or capital needs or to engage in other business activities. In addition, our debt agreements may restrict our ability to: . declare dividends, redeem or repurchase capital stock; . prepay, redeem or purchase debt, including the notes; 14 . incur liens and engage in sale and leaseback transactions; . make loans and investments; . incur additional indebtedness; . amend or otherwise change debt and other material agreements; . make capital expenditures; . engage in mergers, acquisitions and asset sales; . enter into transactions with affiliates; and . change our primary business. A breach of any of the restrictions or covenants in our debt agreements could cause a default under our credit agreement or the indenture governing the notes. A significant portion of our indebtedness then may become immediately due and payable. We are not certain whether we would have, or be able to obtain, sufficient funds to make these accelerated payments, including payments on the notes. The Interests Of Apollo Management, L.P. May Conflict With Your Interests Certain affiliates of Apollo Management, L.P. beneficially own approximately 89.9% of our outstanding common stock and voting power. As a result of its voting power and a stockholders agreement among the holders of our common stock, Apollo Management is in a position to elect a majority of our board of directors and control all matters affecting our company, including any determination with respect to: . the direction and policies of our company; . the acquisition and disposition of assets; . future issuances of common and preferred stock or other securities; . future incurrence of debt; and . any dividends on our common or preferred stock. Some decisions concerning the operations or financial structure of our company may present conflicts of interest between Apollo Management and the holders of the notes. If we encounter financial difficulties, or we are unable to pay our debts as they mature, the interests of our equity holders might conflict with those of the holders of the notes. In addition, our equity holders may have an interest in pursuing acquisitions, divestitures, financings or other transactions, that, in their judgment, could enhance their equity investment, even though such transactions might involve risks to the holders of the notes. We Rely On Key Personnel Who Have Unique Experience and Expertise Our operations and prospects depend in large part on the performance of our senior management team. We cannot be sure that we would be able to find qualified replacements for any of these individuals if their services were no longer available. The loss of the services of one or more members of our senior management team, particularly Donald C. Orris, our chairman, president and chief executive officer, could have a material adverse effect on our business, financial condition and results of operations. Because Mr. Orris has unique experience with our company and within the transportation industry, it would be difficult to replace him without adversely affecting our business operations. We are currently in the process of obtaining key person life insurance on Mr. Orris. We Are Dependent Upon The Availability Of Equipment And Services To Operate Our Business We are dependent upon transportation equipment and services such as chassis, containers and rail service provided by independent third parties. There have historically been periods of equipment shortages in the transportation industry, particularly in a strong economy. If we received insufficient transportation equipment or services from these third parties to meet our customers' needs, our business, results of operations and financial position could be materially adversely affected. 15 Our Reliance On Agents And Independent Contractors Could Adversely Affect Our Operations And Profitability We rely on the services of agents and independent contractors in certain of our transportation services. The employment of agents and the use of independent contractors may cause certain disadvantages such as reduced operating control and potential difficulties attracting such agents or independent contractors during times of constrained capacity. Contracts with agents and independent contractors are, in most cases, terminable upon short notice by either party. We believe our relationships with our agents and independent contractors are good. However, there can be no assurance that we will continue to be successful in retaining our agents and independent contractors or that agents or independent contractors who terminate their contracts with us can be replaced by equally qualified persons. Furthermore, if an agent terminates its relationship with us, some customers and independent contractors with whom such agent has a direct relationship might terminate their relationship with us. In addition, from time to time, tax and other regulatory authorities and certain others have sought to assert that independent contractors in the trucking industry are employees, rather than independent contractors. No such claim has been successfully made with respect to our independent contractors, and management is confident that our independent contractors are not employees under existing interpretations of federal and state tax or other laws. There can be no assurance, however, that tax authorities or others will not successfully challenge this position, or that such interpretations will not change, or that tax laws will not change. If our independent contractors were determined to be employees, such determination could materially increase our exposure under a variety of federal and state tax, worker's compensation, unemployment benefits, labor and employment and tort laws, as well as our potential liability for employee benefits. There Are Risks Associated With Our Acquisitions Strategy Identifying, acquiring and integrating businesses requires substantial management, financial and other resources and may pose risks with respect to customer service and market share. Further, acquisitions involve a number of special risks, including failure of the acquired business to achieve expected results, diversion of management's attention, failure to retain key personnel of the acquired business and risks associated with unanticipated events or liabilities, some or all of which could have a material adverse effect on our business, financial condition and results of operations. We have acquired certain businesses in the past and may consider acquiring businesses in the future that provide complementary services to those we currently provide. There can be no assurance that the businesses which we have acquired in the past and may acquire in the future can be successfully integrated. While we believe that we have sufficient financial and management resources to successfully conduct our acquisition activities, there can be no assurance in this regard or that we will not experience difficulties with customers, personnel or others. In addition, although we believe that our acquisitions will enhance our competitive position, business and financial prospects, there can be no assurance that such benefits will be realized or that any combination will be successful. Integration of Pacer International and Pacer Logistics May Not Succeed The integration of Pacer International and Pacer Logistics will require substantial management, financial and other resources which may otherwise be devoted to improving sales, customer service and productivity. A failure to implement a new management structure without difficulty or at all, could have a material adverse effect on our operations. In addition, the cost savings, revenue enhancements and margin improvements anticipated as a result of our recapitalization and the Pacer Logistics transaction may not be realized, and the combination of Pacer International and Pacer Logistics may not be successful. The Transportation Industry Is Highly Competitive The transportation services industry is highly competitive. Our intermodal marketing, trucking and logistics business competes primarily against other domestic non-asset based transportation and logistics companies, asset-based transportation and logistics companies, third-party freight brokers, private shipping 16 departments and freight forwarders. Our stacktrain business competes primarily with over-the-road full truckload carriers, conventional intermodal movement of trailers on flatcars, and containerized intermodal rail services offered directly by railroads. We also compete with transportation service companies for the services of independent commission agents and with trucklines for the services of independent contractors and drivers. Some of our competitors have substantially greater financial and other resources than we do. Historically, competition has created downward pressure on freight rates, and continuation of this rate pressure may materially adversely affect our net revenues and income from operations. In addition, we buy and sell transportation services from and to many companies with which we compete. It is possible that certain of such customers could transfer their business away from us to other companies with which they do not compete. For example, certain competitors of Pacer Logistics are customers of our stacktrain operations and the loss of any one of these customers could have a material adverse effect on our stacktrain operations. Disruptions In Railroad Service Could Adversely Affect The Services We Provide We depend on the major railroads in the United States for substantially all of the intermodal transportation services we provide. In many markets, rail service is limited to a few railroads or even a single railroad. Any reduction in service by the railroads with whom we have relationships is likely to materially adversely affect the services we provide. For example, from 1997 to 1998, service disruptions related to consolidation and restructuring in the railroad industry interrupted intermodal service throughout the United States. Service problems arising from prior mergers in the railroad industry are currently being resolved. However, consolidation and restructuring continues to occur in the railroad industry and it is possible that future service disruptions could result, which would have a material adverse affect on our stacktrain business. The division of Conrail between CSX and Norfolk Southern, occurred in June 1999. The Conrail/CSX/Norfolk Southern transaction has resulted in service disruptions in markets formerly served by Conrail. Although we have not been materially adversely affected by these service disruptions, we could be materially adversely affected by continued or more serious service disruptions in the future. In addition, the railroads' workforce is generally subject to collective bargaining agreements. Our business could be materially adversely affected by labor disputes between the railroads and their union employees. Our business would also be materially adversely affected by a work stoppage at one or more railroads or by adverse weather conditions that hinder the railroads' ability to provide transportation services. In addition, the railroads are relatively free to adjust shipping rates up or down as market conditions permit. Although the application of rate increases to our stacktrain business is limited by our long-term contracts with the railroads, such increases could result in higher costs to our customers which could result in decreased demand for our services. We Depend On APL Limited For Essential Services And We Could Be Adversely Affected By APL Limited's Failure Or Refusal To Provide Such Services Pursuant to long-term contracts, we transport APL Limited's international cargo on our stacktrain network to locations in the United States using containers and chassis which are supplied by APL Limited. Certain of APL Limited's employees are subject to collective bargaining agreements. Our business could be materially adversely affected by labor disputes between APL Limited and its union employees. APL Limited also supplies us with chassis from its equipment fleet for the transport of international freight on behalf of international shippers other than APL Limited. Additionally, APL Limited pays us a fee for the repositioning of its empty containers within North America so that the containers can be reused by APL Limited in its trans-Pacific shipping operations. The additional stacktrain volume attributable to the transport of APL Limited's international cargo contributes to our ability to obtain certain favorable provisions in our rail contracts. In addition, we are in the process of negotiating with APL Limited a long-term contract, pursuant to which APL Limited would provide us with certain computer, software and other information technology necessary for the operation of our stacktrain business. If APL Limited were unwilling or unable to fulfill its obligations to us under the terms of these contracts, or if we were unable to negotiate an information technology agreement, our business, results of operations and financial position could be materially adversely affected. 17 We Do Not Have An Independent Operating History Since 1984, our stacktrain business has been conducted by various entities owned directly or indirectly by APL Limited and has not had an independent operating history. While owned by APL Limited, our stacktrain business was able to use some of the financial and administrative resources and infrastructure of APL Limited in such areas as treasury, legal, information systems and benefits administration. As a result of our recapitalization, we will be required to independently provide the infrastructure, resources and services necessary to operate our stacktrain business independently. We cannot assure you that we have correctly estimated the difficulties and costs of replacing the infrastructure, resources and services necessary to successfully operate our stacktrain business independently. In addition, the historical financial information for Pacer International included herein may not necessarily reflect the results of operations, financial position and cash flows in the future or what our results of operations, financial position and cash flows would have been had Pacer International been a separate, independent entity during the periods presented. Also, due to a lack of historical financial information regarding the stacktrain business on a stand-alone basis, the information regarding the results of operations, cash flows and financial condition of Pacer International for 1994 and 1995 is unavailable. We Could Be Affected By The Year 2000 Problem Some computers, software and other equipment include a computer code in which calendar year data is abbreviated to only two digits. As a result, some of these systems could fail to operate or fail to produce correct results because they may misinterpret "00" to mean 1900 rather than 2000. The Year 2000 problem affects some of our computers, software and equipment. In addition, the Year 2000 problem affects some of the computers, software and equipment of APL Limited which we use in the operation of our stacktrain business pursuant to a contractual arrangement between us and APL Limited. If we fail to properly recognize and address the Year 2000 problem in our systems, or if APL Limited fails to properly recognize and address the Year 2000 problem in its systems, our business, financial condition and results of operations could be materially adversely affected. We are engaged in an ongoing process of assessing our exposure to the Year 2000 problem through our computers, software and equipment. In addition, APL Limited has made representations to us that it will use commercially reasonable efforts to implement a plan to resolve the Year 2000 problem as it affects their computer systems. APL Limited has agreed to bear any costs which we might incur due to its failure to resolve the Year 2000 problem in their computer systems. We currently expect that we will incur incremental costs through the end of 1999 to resolve any Year 2000 problems that relate to our information technology systems. We are not able to estimate with certainty the amount of these incremental costs, but we do not expect them to have a significant effect on our financial condition or results of operations. While we expect to identify and resolve all Year 2000 problems that could materially adversely affect our business operations, there can be no assurance we will be successful. However, the Year 2000 problem also affects many of our major suppliers (including railroads) and customers, and our business could be disrupted or otherwise materially adversely affected if any of them fail to resolve their Year 2000 problems. We believe that it is not possible to determine with complete certainty all Year 2000 problems affecting us, our customers and our suppliers. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." We Have Risks Related To A Downturn In The Business Cycle Historically, certain sectors of the transportation industry have been cyclical as a result of economic recession, customers' business cycles, increases in prices charged by third-party carriers, interest rate fluctuations and other economic factors over which we have no control. Increased operating expenses incurred by third-party carriers can be expected to result in higher costs to us, and our net revenues and income from operations could be materially adversely affected if we were unable to pass through to our customers the full amount of increased transportation costs. Economic recession or a downturn in our customers' business cycles 18 also could have a material adverse effect on our operating results if the volume of freight shipped by those customers were reduced. In addition, our stacktrain business is seasonal and our quarterly revenues and profits historically have been lower during the first and second quarters of the year and higher during the third and fourth quarters due primarily to the retail industry's shipping requirements. We, Our Suppliers And Our Customers Are Subject To Government Regulation Which Could Affect Our Results Of Operations Or Financial Condition Pacer Logistics is licensed by the Department of Transportation as a broker in arranging for the transportation of general commodities by motor vehicle. The Department of Transportation has established certain requirements for acting in this capacity, including certain insurance and surety bond requirements. Pacer Logistics' failure to comply with these laws and regulations, and any resultant suspension or loss of Pacer Logistics' license, could have a material adverse effect on our results of operations or financial condition. In addition, the transportation industry is subject to legislative or regulatory changes that can affect the economics of the industry. Pacer International operates in the intermodal segment of the transportation industry, which has been essentially deregulated. Changes in the levels of regulatory activity in the intermodal segment of the industry could potentially affect us and our suppliers and customers. In addition, we have a substantial number of stacktrain customers who provide ocean carriage of intermodal shipments. The regulatory regime applicable to ocean shipping was revised by the Ocean Shipping Reform Act of 1998, which took effect on May 1, 1999. It is unclear at this time to what extent implementation of the Ocean Shipping Reform Act will affect our various ocean carrier customers and impact our stacktrain business. Fraudulent Transfer Considerations Our payment of consideration in our recapitalization and the Pacer Logistics transaction and the related financings, including our private offering of the notes and the guarantee of the notes by substantially all of our subsidiaries, may be subject to review under federal or state fraudulent transfer laws. While the relevant laws may vary from state to state, under such laws, the payment of consideration or the issuance of a guarantee will be a fraudulent conveyance if (1) we paid the consideration or any of our subsidiaries issued guarantees with the intent of hindering, delaying or defrauding creditors, or (2) we or any of our subsidiaries received less than reasonably equivalent value or fair consideration in return for paying the consideration or issuing their respective guarantees, and, in the case of (2) only, one of the following is also true: . we were insolvent or became insolvent, or any of our subsidiaries were insolvent or became insolvent, when we or they paid the consideration or issued the guarantees, respectively; . paying the consideration or issuing the guarantees left us or any of our subsidiaries, as the case may be, with an unreasonably small amount of capital; or . we or any of our subsidiaries, as the case may be, intended to, or believed that we or they would, be unable to pay debts as they matured. If the payment of the consideration or the issuance of any guarantee were a fraudulent conveyance, a court could, among other things, void our obligations regarding the payment of the consideration or void any of our subsidiaries' obligations under their respective guarantees, as the case may be, and require the repayment of any amounts paid thereunder. Generally, an entity will be considered insolvent if: . the sum of its debts is greater than the fair value of its property; . the present fair value of its assets is less than the amount that it will be required to pay on its existing debts as they become due; or . it cannot pay its debts as they became due. We believe, however, that immediately after issuance of the notes and the guarantees, we and each of our subsidiaries were solvent, had sufficient capital to carry on our businesses and were able to pay our respective 19 debts as they matured. We cannot be sure, however, as to what standard a court would apply in making such determinations or that a court would reach the same conclusions with regard to these issues. You May Not Receive A Change In Control Payment In the event of a change of control, we are required to make an offer for cash to repurchase the notes at 101% of the principal amount thereof, plus accrued and unpaid interest, if any, thereon to the repurchase date. However, our credit agreement prohibits the purchase of outstanding notes prior to repayment of the borrowings under our credit agreement and any exercise by the holders of the notes of their right to require us to repurchase the notes may cause an event of default under our credit agreement. In addition, we may not have the financial resources necessary to repurchase the notes upon a change of control. You May Not Be Able To Sell Your Notes There is no existing trading market for the exchange notes and no such market may develop. The absence of such market adversely affects the liquidity of an investment in the notes. If a market for the exchange notes does develop, future trading prices will depend on many factors, including among other things, prevailing interest rates and the market for similar securities, general economic conditions and the financial condition and performance of, and prospects for, our company. We do not intend to apply for listing of the exchange notes on any securities exchange or for quotation through any over- the-counter market. 20 THE EXCHANGE OFFER Purpose and Effect of the Exchange Offer The old notes were originally sold by Pacer International on May 24, 1999 (the "Issue Date"), to Morgan Stanley & Co. Incorporated, BT Alex. Brown Incorporated which has since been renamed Deutsche Bank Securities Inc., Credit Suisse First Boston Corporation and Credit Lyonnais Securities (USA) Inc., as initial purchasers, pursuant to a purchase agreement, dated May 24, 1999, between Pacer International, the subsidiaries of Pacer International listed therein as guarantors, and the initial purchasers. The initial purchasers subsequently resold the old notes to qualified institutional buyers in reliance on, and subject to the restrictions imposed pursuant to Rule 144A under the Securities Act and outside the United States in accordance with the provisions of Regulation S under the Securities Act. Pacer International, the guarantors and the initial purchasers also entered into the registration rights agreement with the initial purchasers, which requires, among other things, that following the issuance and sale of the old notes, Pacer International and the guarantors: (1) file with the Commission within 120 days after the Issue Date, a registration statement with respect to the exchange notes, (2) use their commercially reasonable efforts to cause the registration statement to become effective under the Securities Act within 180 days after the Issue Date, and (3) upon the effectiveness of the registration statement, offer to the holders of the old notes the opportunity to exchange their old notes for a like principal amount of exchange notes. Such exchange notes will be issued without a restrictive legend and may be reoffered and resold by the holder without restrictions or limitations under the Securities Act subject to certain exceptions described below. Pacer International has agreed to keep such exchange offer open for 20 business days, or longer if required by applicable law, after the date that notice of the exchange offer is mailed to holders. For each old note surrendered to Pacer International pursuant to the exchange offer, the holder of such old note will receive an exchange note having a principal amount equal to that of the surrendered old note. The exchange offer being made hereby is intended to satisfy Pacer International's exchange offer obligations under the registration rights agreement. The term "holder" with respect to the exchange offer means any person in whose name old notes are registered on Pacer International's books or any other person who has obtained a properly completed bond power from the registered holder or any person whose old notes are held of record by The Depository Trust Company ("DTC") who desires to deliver such old notes by book-entry transfer of DTC. Under existing interpretations of the staff of the Commission contained in several no action letters to third parties, the exchange notes, including the related guarantees, would in general be freely transferable by holders thereof after the exchange offer without further registration under the Securities Act. However, any purchaser of old notes who is an "affiliate" of Pacer International or who intends to participate in the exchange offer for the purpose of distributing the exchange notes: (1) will not be able to tender its old notes in the exchange offer, (2) will not be able to rely on the interpretation of the staff of the Commission, and (3) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or transfer of the old notes, unless such sale or transfer is made pursuant to an exemption from such requirements. Each holder that wishes to exchange the old notes for exchange notes will be required to represent in the letter of transmittal that: . any exchange notes to be received by it will be acquired in the ordinary course of its business, . it has no arrangement or understanding with any person to participate in the distribution, within the meaning of the Securities Act, of the exchange notes in violation of the Securities Act, 21 . it is not an "affiliate", as defined in Rule 405 promulgated under the Securities Act, of Pacer International, . if such holder is not a broker-dealer, that it is not engaged in, and does not intend to engage in, the distribution of exchange notes, and . if such holder is a broker-dealer (a "Participating Broker-Dealer") that will receive exchange notes for its own account in exchange for old notes that are acquired as a result of market-making or other trading activities, that it will deliver a prospectus in connection with any resale of such exchange notes. The Commission has taken the position that Participating Broker-Dealers may fulfill their prospectus delivery requirements with respect to the exchange notes received with the prospectus contained in the registration statement. Each of Pacer International and the guarantors has agreed that it will make available, during the period required by the Securities Act, a prospectus meeting the requirements of the Securities Act for use by Participating Broker-Dealers and other persons, if any, with similar prospectus delivery requirements for use in connection with any resale of exchange notes. If, (1) because of any change in law or in currently prevailing interpretations of the staff of the Commission, Pacer International and the guarantors are not permitted to effect the exchange offer, (2) the exchange offer is not consummated within 210 days of the Issue Date, (3) in certain circumstances, certain holders of unregistered exchange notes so request, or (4) in the case of any holder that participates in the exchange offer, such holder does not receive exchange notes on the date of the exchange that may be sold without restriction under state and federal securities laws, other than due solely to the status of such holder as an affiliate of Pacer International within the meaning of the Securities Act, then in each case, Pacer International will: . promptly upon becoming aware of any of the matters contemplated by clauses (1)-(4) above, deliver to the holders and the trustee written notice thereof, and . at their sole expense, Pacer International and the guarantors will (a) as promptly as practicable, file a shelf registration statement covering resales of the old notes, (b) use their commercially reasonable efforts to cause the shelf registration statement to be declared effective under the Securities Act, and (c) use their commercially reasonable efforts to keep effective the shelf registration statement until the earlier of two years after the Issue Date or such time as all of the applicable old notes have been sold thereunder. Pacer International will, in the event that a shelf registration statement is filed, (1) provide to each holder copies of the prospectus that is a part of the shelf registration statement, (2) notify each such holder when the shelf registration statement for the old notes has become effective, and (3) take certain other actions as are required to permit unrestricted resales of the old notes. 22 A holder that sells old notes pursuant to the shelf registration statement: (1) will be required to be named as a selling security holder in the related prospectus and to deliver a prospectus to purchasers, (2) will be subject to certain of the civil liability provisions under the Securities Act in connection with such sales, and (3) will be bound by the provisions of the registration rights agreement that are applicable to such a holder, including certain indemnification rights and obligations. The old notes provide, among other things, that if: (1) the exchange offer has not been consummated on or prior to 210 days after the Issue Date or (2) if applicable, a shelf registration statement has been declared effective, but ceases to be effective at any time prior to the second anniversary of the Issue Date, then, from the 211th day or the date the shelf registration statement ceases to be effective, through but excluding the date the exchange offer is consummated or the shelf registration statement becomes effective, the interest rate on the old notes will: (1) increase by .25% per annum for the first 90 days immediately following such date, and (2) thereafter increase by an additional .25% per annum, at the beginning of each subsequent 90-day period. The additional interest on any affected old notes may not exceed 1.0% in the aggregate. The summary herein highlights the material provisions of the registration rights agreement, but does not restate that agreement in its entirety. Pacer International urges you to review all of the provisions of the registration rights agreement, because it, and not this description, defines your rights as holders to exchange your old notes for registered notes. A copy of the registration rights agreement has been filed as an exhibit to the registration statement of which this prospectus forms a part. Following the consummation of the exchange offer, holders of old notes who were eligible to participate in the exchange offer but who did not tender their old notes will not have any further registration rights, and the old notes will continue to be subject to certain restrictions on transfer. Accordingly, the liquidity of the market for the old notes could be adversely affected. Terms of the Exchange Offer Upon the terms and subject to the conditions set forth in this prospectus and in the accompanying letter of transmittal, Pacer International will accept all old notes validly tendered and not withdrawn prior to 5:00 p.m. New York City time, on the expiration date. After authentication of the exchange notes by the trustee or an authenticating agent, Pacer International will issue and deliver $1,000 principal amount of exchange notes in exchange for each $1,000 principal amount of outstanding old notes accepted in the exchange offer. Holders may tender some or all of their old notes pursuant to the exchange offer in denominations of $1,000 and integral multiples thereof. By tendering old notes in exchange for exchange notes and by executing the letter of transmittal, each holder of old notes will be required to represent that: (1) it is not an affiliate of Pacer International, (2) any exchange notes to be received by it were acquired in the ordinary course of its business, and (3) it has no arrangement or understanding with any person to participate in the distribution, within the meaning of the Securities Act, of the exchange notes. 23 Each Participating Broker-Dealer that receives exchange notes for its own account in exchange for old notes, where such old notes were acquired by such Participating Broker-Dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. See "Plan of Distribution" for a more detailed description of these procedures. The form and terms of the exchange notes are identical in all material respects to the form and terms of the old notes, except that: (1) the offering of the exchange notes has been registered under the Securities Act, (2) the exchange notes will not be subject to transfer restrictions, and (3) certain provisions relating to an increase in the stated interest rate on the old notes provided for under certain circumstances will be eliminated. The exchange notes will evidence the same debt as the old notes. The exchange notes will be issued under and entitled to the benefits of the indenture. As of the date of this prospectus, $150,000,000 aggregate principal amount of the old notes is outstanding. In connection with the issuance of the old notes, Pacer International arranged for the old notes to be issued and transferable in book-entry form through the facilities of DTC, acting as a depositary. The exchange notes will also be issuable and transferable in book- entry form through DTC. This prospectus, together with the accompanying letter of transmittal, is initially being sent to all registered holders of the old notes as of the close of business on , 1999. The exchange offer is not conditioned upon any minimum aggregate principal amount of old notes being tendered. However, the exchange offer is subject to certain customary conditions which may be waived by Pacer International, and to the terms and provisions of the registration rights agreement. See "--Conditions to the Exchange Offer" for a detailed description of such conditions. Pacer International shall be deemed to have accepted validly tendered old notes when, as and if Pacer International has given oral or written notice thereof to the exchange agent. The exchange agent will act as agent for the tendering holders for the purpose of receiving exchange notes from Pacer International and delivering exchange notes to such holders. If any tendered old notes are not accepted for exchange because of an invalid tender or the occurrence of certain other events set forth herein, certificates for any such unaccepted old notes will be returned, at Pacer International's cost, to the tendering holder thereof as promptly as practicable after the expiration date. Holders who tender old notes in the exchange offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the letter of transmittal, transfer taxes with respect to the exchange of old notes pursuant to the exchange offer. Pacer International will pay all charges and expenses, other than certain applicable taxes, in connection with the exchange offer. See "--Solicitation of Tenders; Fees and Expenses" for more detailed information regarding the expenses of the exchange offer. Expiration Date; Extensions; Amendments The term "expiration date" shall mean 5:00 p.m., New York City time, on , 1999, unless Pacer International, in its sole discretion, extends the exchange offer, in which case the term "expiration date" shall mean the latest date to which the exchange offer is extended. Pacer International may extend the exchange offer at any time and from time to time by giving oral or written notice to the exchange agent and by timely public announcement. Pacer International expressly reserves the right, in its sole discretion: 24 (1) to delay acceptance of any old notes, to extend the exchange offer or to terminate the exchange offer and to refuse to accept old notes not previously accepted, if any of the conditions set forth herein under "-- Conditions to the Exchange Offer" shall have occurred and shall not have been waived by Pacer International, if such conditions are permitted to be waived by Pacer International, by giving oral or written notice of such delay, extension or termination to the exchange agent, and (2) to amend the terms of the exchange offer in any manner. Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by oral or written notice thereof by Pacer International to the registered holders of the old notes. If the exchange offer is amended in a manner determined by Pacer International to constitute a material change, Pacer International will promptly disclose such amendment in a manner reasonably calculated to inform the holders of such amendment and Pacer International will extend the exchange offer to the extent required by law. Without limiting the manner in which Pacer International may choose to make public announcements of any delay in acceptance, extension, termination or amendment of the exchange offer, Pacer International shall have no obligation to publish, advise, or otherwise communicate any such public announcement, other than by making a timely release thereof to the Dow Jones News Service. Interest on the Exchange Notes Interest on the exchange notes will accrue from the last interest payment date on which interest was paid on the old notes surrendered in exchange therefor or, if no interest has been paid on the old notes, from the Issue Date. The exchange notes will bear interest at a fixed rate of 11 3/4% per annum. Interest on the exchange notes will be payable semi-annually on June 1 and December 1 of each year commencing on December 1, 1999. Procedures for Tendering Each holder of old notes wishing to accept the exchange offer must complete, sign and date the letter of transmittal, or a facsimile thereof, in accordance with the instructions contained herein and therein. Each holder shall then mail or otherwise deliver such letter of transmittal, or such facsimile, together with the old notes to be exchanged and any other required documentation, to Wilmington Trust Company, as exchange agent, at the address set forth herein and therein. A holder may also effect a tender of old notes pursuant to the procedures for book-entry transfer as provided for herein and therein. By executing the letter of transmittal, each holder will represent to Pacer International that, among other things, (1) the exchange notes acquired pursuant to the exchange offer are being acquired in the ordinary course of business of the person receiving such exchange notes, whether or not such person is the holder, (2) that neither the holder nor any such other person has any arrangement or understanding with any person to participate in the distribution of such exchange notes, and (3) that neither the holder nor any such other person is an "affiliate," as defined in Rule 405 under the Securities Act, of Pacer International. Any financial institution that is a participant in DTC's Book-Entry Transfer Facility system may make book-entry delivery of the old notes by causing DTC to transfer such old notes into the exchange agent's account in accordance with DTC's procedure for such transfer. Although delivery of old notes may be effected through book-entry transfer into the exchange agent's account at DTC, the letter of transmittal, or facsimile thereof, with any required signature guarantees and any other required documents, must, in any case, be transmitted to and received by the exchange agent at its address set forth herein under "-- Exchange Agent" 25 prior to 5:00 p.m., New York City time, on the expiration date. Delivery of documents to DTC in accordance with its procedures does not constitute delivery to the exchange agent. Only a holder may tender its old notes in the exchange offer. To tender in the exchange offer, a holder must: (1) complete, sign and date the letter of transmittal or a facsimile thereof, (2) have the signatures thereof guaranteed if required by the letter of transmittal, and (3) unless such tender is being effected pursuant to the procedure for bookentry transfer, mail or otherwise deliver such letter of transmittal or such facsimile, together with the old notes and other required documents, to the exchange agent, prior to 5:00 p.m., New York City time, on the expiration date. The tender by a holder will constitute an agreement between such holder, Pacer International and the exchange agent in accordance with the terms and subject to the conditions set forth herein and in the letter of transmittal. If less than all of the old notes are tendered, a tendering holder should fill in the amount of old notes being tendered in the appropriate box on the letter of transmittal. The entire amount of old notes delivered to the exchange agent will be deemed to have been tendered unless otherwise indicated. The letter of transmittal will include representations to Pacer International that, among other things, (1) the exchange notes acquired pursuant to the exchange offer are being acquired in the ordinary course of business of the person receiving such exchange notes, whether or not such person is the holder, (2) neither the holder nor any such other person is engaged in, intends to engage in or has any arrangement or understanding with any person to participate in the distribution of such exchange notes, (3) neither the holder nor any such other person is an "affiliate," as defined in Rule 405 under the Securities Act, of Pacer International, and (4) if the tendering holder is a broker or dealer as defined in the Exchange Act, then: (a) it acquired the old notes for its own account as a result of market-making activities or other trading activities, and (b) it has not entered into any arrangement or understanding with Pacer International or any "affiliate" thereof within the meaning of Rule 405 under the Securities Act to distribute the exchange notes to be received in the exchange offer. In the case of a broker-dealer that receives exchange notes for its own account in exchange for old notes which were acquired by it as a result of market-making or other trading activities, the letter of transmittal will also include an acknowledgement that the broker-dealer will deliver a copy of this prospectus in connection with the resale by it of exchange notes received pursuant to the exchange offer; however, by so acknowledging and by delivering a prospectus, such holder will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. See "Plan of Distribution." The method of delivery of old notes and the letter of transmittal and all other required documents to the exchange agent is at the election and risk of the holders. Instead of delivery by mail, it is recommended that holders use an overnight or hand delivery service. In all cases, sufficient time should be allowed to ensure delivery to the exchange agent prior to the expiration date. No letter of transmittal or old notes should be sent to Pacer International. Holders may also request that their respective brokers, dealers, commercial banks, trust companies or nominees effect such tender for holders, in each case as set forth herein and in the letter of transmittal. 26 Any beneficial owner whose old notes are registered in the name of his broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact such registered holder promptly and instruct such registered holder to tender on his behalf. If such beneficial owner wishes to tender on his own behalf, such beneficial owner must, prior to completing and executing the letter of transmittal and delivering his old notes, either make appropriate arrangements to register ownership of the old notes in such owner's name or obtain a properly completed bond power from the registered holder. The transfer of record ownership may take considerable time. Signatures on a letter of transmittal or a notice of withdrawal, as the case may be, must be guaranteed by a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act (each an "Eligible Institution"), unless the old notes tendered pursuant thereto are tendered by a registered holder who has not completed the box entitled "Special Registration Instructions" or "Special Delivery Instruction" of the letter of transmittal or for the account of an Eligible Institution. If the letter of transmittal is signed by a person other than the registered holder listed therein, such old notes must be endorsed or accompanied by appropriate bond powers which authorize such person to tender the old notes on behalf of the registered holder, in either case signed as the name of the registered holder or holders appears on the old notes. If the letter of transmittal or any old notes or bond powers are signed or endorsed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and unless waived by Pacer International, evidence satisfactory to Pacer International of their authority to so act must be submitted with such letter of transmittal. All questions as to the validity, form, eligibility, including time of receipt, acceptance and withdrawal of the tendered old notes will be determined by Pacer International in its sole discretion, which determination will be final and binding. Pacer International reserves the absolute right to reject any and all old notes not properly tendered or any old notes Pacer International's acceptance of which would, in the opinion of counsel for Pacer International, be unlawful. Pacer International also reserves the absolute right to waive any irregularities or conditions of tender as to particular old notes. Pacer International's interpretation of the terms and conditions of the exchange offer including the instructions in the letter of transmittal will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of old notes must be cured within such time as Pacer International shall determine. Although Pacer International intends to notify holders of defects or irregularities with respect to tender of old notes, neither Pacer International, the exchange agent nor any other person shall be under any duty to give notification of defects or irregularities with respect to tenders of old notes, nor shall any of them incur any liability for failure to give such notification. Tenders of old notes will not be deemed to have been made until such irregularities have been cured or waived. Any old notes received by the exchange agent that Pacer International determines are not properly tendered or the tender of which is otherwise rejected by Pacer International and as to which the defects or irregularities have not been cured or waived by Pacer International will be returned by the exchange agent to the tendering holder unless otherwise provided in the letter of transmittal, as soon as practicable following the expiration date. In addition, Pacer International reserves the right in its sole discretion: (1) to purchase or make offers for any old notes that remain outstanding subsequent to the expiration date, or, as set forth under "--Conditions to the Exchange Offer," terminate the exchange offer, and (2) to the extent permitted by applicable law, to purchase old notes in the open market, in privately negotiated transactions or otherwise. The terms of any such purchases or offers may differ from the terms of the exchange offer. 27 Book-Entry Transfer Pacer International understands that the exchange agent will make a request promptly after the date of this prospectus to establish accounts with respect to the old notes at DTC, the book-entry transfer facility, for the purpose of facilitating the exchange offer. Subject to the establishment thereof, any financial institution that is a participant in the book-entry transfer facility's system may make book-entry delivery of old notes by causing such book-entry transfer facility to transfer such old notes into the exchange agent's account with respect to the old notes in accordance with the book-entry transfer facility's Automated Tender Offer Program procedures for such transfer. However, the exchange for the old notes so tendered will only be made after a timely confirmation of a book-entry transfer of such old notes into the exchange agent's account, and timely receipt by the exchange agent of an agents message and any other documents required by the letter of transmittal. The term "agent's message" means a message, transmitted by the book-entry transfer facility and received by the exchange agent and forming part of the confirmation of a book-entry transfer, which states that the book-entry transfer facility has received an express acknowledgment from a participant tendering old notes and that such participant has received the letter of transmittal and agrees to be bound by the terms of the letter of transmittal, and Pacer International may enforce such agreement against the participant. Although delivery of old notes may be effected through book-entry transfer into the exchange agents account at the book-entry transfer facility, an appropriate letter of transmittal properly completed and duly executed with any required signature guarantee and all other required documents must in each case be transmitted to and received or confirmed by the exchange agent at its address set forth below on or prior to the expiration date, or, if the guaranteed delivery procedures described below are complied with within the time period provided under such procedures. Delivery of documents to the book-entry transfer facility does not constitute delivery to the exchange agent. Guaranteed Delivery Procedures Holders who wish to tender their old notes and whose old notes are not immediately available, or who cannot deliver their old notes, the letter of transmittal or any other required documents to the exchange agent prior to the expiration date, or who cannot complete the procedure for book-entry transfer on a timely basis, may effect a tender if: (1) the tender is made through an Eligible Institution; (2) prior to the expiration date, the exchange agent receives from such Eligible Institution a properly completed and duly executed notice of guaranteed delivery, by facsimile transmittal, mail or hand delivery (a) setting forth the name and address of the holder, the certificate number or numbers of such holder's old notes and the principal amount of such old notes tendered, (b) stating that the tender is being made thereby, (c) and guaranteeing that, within three New York Stock Exchange trading days after the expiration date, the letter of transmittal or facsimile thereof, together with the certificate(s) representing the old notes to be tendered in proper form for transfer, or confirmation of a book-entry transfer into the exchange agent's account at DTC of old notes delivered electronically, and any other documents required by the letter of transmittal, will be deposited by the Eligible Institution with the exchange agent; and (3) such properly completed and executed letter of transmittal, or facsimile thereof, together with the certificate(s) representing all tendered old notes in proper form for transfer, or confirmation of a book-entry transfer into the exchange agent's account at DTC of old notes delivered electronically and all other documents required by the letter of transmittal are received by the exchange agent within three NYSE trading days after the expiration date. 28 Upon request to the exchange agent, a notice of guaranteed delivery will be sent to holders who wish to tender their old notes according to the guaranteed delivery procedures set forth above. Withdrawal of Tenders Except as otherwise provided herein, tenders of old notes may be withdrawn at any time prior to 5:00 p.m. New York City time, on the expiration date. For a withdrawal to be effective, a written or facsimile transmission notice of withdrawal must be received by the exchange agent at its address set forth herein prior to 5:00 p.m., New York City time, on the expiration date. Any such notice of withdrawal must: (1) specify the name of the person having deposited the old notes to be withdrawn (the "Depositor"), (2) identify the old notes to be withdrawn, including the certificate number or numbers and principal amount of such old notes or, in the case of old notes transferred by book-entry transfer, the name and number of the account at DTC to be credited, (3) be signed by the Depositor in the same manner as the original signature on the letter of transmittal by which such old notes were tendered, including any required signature guarantee or be accompanied by documents of transfer sufficient to permit the trustee with respect to the old notes to register the transfer of such old notes into the name of the Depositor withdrawing the tender, and (4) specify the name in which any such old notes are to be registered, if different from that of the Depositor. All questions as to the validity, form and eligibility, including time of receipt of such withdrawal notices will be determined by Pacer International, whose determination shall be final and binding on all parties. Any old notes so withdrawn will be deemed not to have been validly tendered for purposes of the exchange offer, and no exchange notes will be issued with respect thereto unless the old notes so withdrawn are validly retendered. Any old notes that have been tendered but are not accepted for exchange will be returned to the holder thereof without cost to such holder as soon as practicable after withdrawal, rejection of tender or termination of the exchange offer. Properly withdrawn old notes may be retendered by following one of the procedures described above under "--Procedures for Tendering" at any time prior to the expiration date. Conditions to the Exchange Offer Notwithstanding any other term of the exchange offer, Pacer International will not be required to accept for exchange, or to exchange exchange notes for, any old notes, and may terminate or amend the exchange offer as provided herein before the acceptance of such old notes if, in Pacer International's judgment, any of the following conditions has occurred or exists or has not been satisfied: (1) that the exchange offer, or the making of any exchange by a holder, violates applicable interpretation of the staff of the Commission, (2) that any action or proceeding shall have been instituted or threatened in any court or by or before any governmental agency or body with respect to the exchange offer, or (3) that there has been adopted or enacted any law, statute, rule or regulation that can reasonably be expected to impair the ability of Pacer International to proceed with the exchange offer. If Pacer International determines that it may terminate the exchange offer for any of the reasons set forth above, Pacer International may: (1) refuse to accept any old notes and return any old notes that have been tendered to the holders thereof, 29 (2) extend the exchange offer and retain all old notes tendered prior to the expiration date of the exchange offer, subject to the rights of such holders of tendered old notes to withdraw their tendered old notes, or (3) waive such termination event with respect to the exchange offer and accept all properly tendered old notes that have not been withdrawn. If such waiver constitutes a material change in the exchange offer, Pacer International will disclose such change by means of a supplement to this prospectus that will be distributed to each registered holder, and Pacer International will extend the exchange offer for a period of five to ten business days, depending upon the significance of the waiver and the manner of disclosure to the registered holders, if the exchange offer would otherwise expire during such period. Exchange Agent Wilmington Trust Company, the trustee under the indenture, has been appointed as exchange agent for the exchange offer. In such capacity, the exchange agent has no fiduciary duties and will be acting solely on the basis of directions of Pacer International. Requests for assistance and requests for additional copies of this prospectus or of the letter of transmittal should be directed to the exchange agent addressed as follows: By Registered or Certified Mail: Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, DE 19890 Attn: Corporate Trust Administration, Ann Roberts By Hand Delivery before 4:30 p.m.: Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, DE 19890 Attn: Corporate Trust Administration, Ann Roberts By Overnight Courier and by Hand Wilmington Trust Company Rodney Delivery after 4:30 p.m. on the Square North Expiration Date: 1100 North Market Street Wilmington, DE 19890 Attn: Corporate Trust Administration, Ann Roberts Facsimile Transmission: (302) 651-8882 Information or Confirmation by Telephone: (302) 651-8681
Delivery to an address or facsimile number other than those listed above will not constitute a valid delivery. Solicitation of Tenders; Fees and Expenses The expenses of soliciting tenders pursuant to the exchange offer will be borne by Pacer International. The principal solicitation pursuant to the exchange offer is being made by mail. Additional solicitations may be made by officers and regular employees of Pacer International and its affiliates in person, by telegraph, telephone or telecopier. Pacer International has not retained any dealer-manager in connection with the exchange offer and will not make any payments to broker, dealers or other persons soliciting acceptances of the exchange offer. Pacer 30 International will, however, pay the exchange agent reasonable and customary fees for its services and will reimburse the exchange agent for its reasonable out-of-pocket costs and expenses in connection therewith and will indemnify the exchange agent for all losses and claims incurred by it as a result of the exchange offer. Pacer International may also pay brokerage houses and other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding copies of this prospectus, letters of transmittal and related documents to the beneficial owners of the old notes and in handling or forwarding tenders for exchange. The expenses to be incurred in connection with the exchange offer, including fees and expenses of the exchange agent and trustee and accounting and legal fees and printing costs, will be paid by Pacer International. Pacer International will pay all transfer taxes, if any, applicable to the exchange of old notes pursuant to the exchange offer. If, however, certificates representing exchange notes or old notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be registered or issued in the name of, any person other than the registered holder of the old notes tendered, or if tendered old notes are registered in the name of any person other than the person signing the letter of transmittal, or if the transfer tax is imposed for any reason other than the exchange of old notes pursuant to the exchange offer, then the amount of any such transfer taxes, whether imposed on the registered holder or any other persons, will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the letter of transmittal, the amount of such transfer taxes will be billed by Pacer International directly to such tendering holder. Accounting Treatment The exchange notes will be recorded at the same carrying value as the old notes, as reflected in Pacer International's accounting records on the date of the exchange. Accordingly, no gain or loss for accounting purposes will be recognized by Pacer International as a result of the consummation of the exchange offer. The expenses of the exchange offer will be deferred and amortized by Pacer International over the term of the exchange notes using the effective interest method. Consequences of Failure to Exchange As a result of the making of, and upon acceptance for exchange of all validly tendered old notes pursuant to the terms of, this exchange offer, Pacer International will have fulfilled a covenant contained in the registration rights agreement. Holders of the old notes who do not tender their old notes in the exchange offer will continue to hold such old notes and will be entitled to all the rights, and subject to the limitations applicable thereto, under the indenture and the registration rights agreement, except for any such rights under the registration rights agreement that by their terms terminate or cease to have further effect as a result of making of this exchange offer. All untendered old notes will continue to be subject to the restrictions on transfer set forth in the indenture. Accordingly, such old notes may be resold only (1) to Pacer International, (2) pursuant to a registration statement which has been declared effective under the Securities Act, (3) in the United States to qualified institutional buyers within the meaning of Rule 144A in reliance upon the exemption from the registration requirements of the Securities Act provided by Rule 144A, (4) in the United States to Institutional Accredited Investors, as defined in Rule 501(a)(1), (2), (3) or (7) promulgated under the Securities Act, in transactions exempt from the registration requirements of the Securities Act, 31 (5) outside the United States to foreign persons in transactions complying with the provisions of Regulation S under the Securities Act, or (6) pursuant to any available exemption from the registration requirements under the Securities Act, in each case in accordance with any applicable securities laws of any state of the United States. To the extent that old notes are tendered and accepted in the exchange offer, the liquidity of the trading market for untendered old notes could be adversely affected. 32 USE OF PROCEEDS The exchange offer is intended to satisfy certain of our obligations under the registration rights agreement. We will not receive any cash proceeds from the exchange offer. 33 UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION Set forth below is certain unaudited pro forma consolidated financial information for our company. The Unaudited Pro Forma Consolidated Balance Sheet as of April 2, 1999 gives effect to our recapitalization and the Pacer Logistics transaction as if they had occurred at April 2, 1999. The Unaudited Pro Forma Consolidated Statements of Operations for the year ended December 25, 1998, the three months ended April 2, 1999, and the twelve months ended April 2, 1999 give effect to our recapitalization and the Pacer Logistics transaction using the purchase method of accounting for the Pacer Logistics transaction, as if our recapitalization and the Pacer Logistics transaction had occurred at the beginning of the first period presented. The unaudited pro forma adjustments, as described in the notes to the unaudited pro forma consolidated financial information are based on available information and upon certain assumptions that we believe are reasonable. The purchase of Pacer Logistics has been reflected based on preliminary estimates of fair values, which may be updated based on final appraisals and other estimates of fair value. We do not claim or represent that the unaudited pro forma consolidated statement of operations information set forth below is indicative of the results that would have been reported had the transactions actually occurred at the beginning of the period presented nor is it indicative of our future results. There can be no assurance that the assumptions used in the preparation of the unaudited pro forma consolidated financial information, which we believe to be appropriate in the circumstances, will prove to be correct. The unaudited pro forma consolidated information should be read in conjunction with the historical consolidated financial statements of our company and notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus. See also "Our Recapitalization." 34 UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET April 2, 1999 (in thousands)
Pacer Logistics Pacer Pacer Completed 1999 Pro Forma International(a) Logistics(b) Acquisition Adjustments Pro Forma ---------------- ------------ --------------- ----------- --------- ASSETS Current assets: Cash and cash equivalents........... $ -- $ 10 $ -- $ -- $ 10 Accounts receivable, net................... 60,700 41,492 -- -- 102,192 Prepaid expenses and other................. 1,000 1,926 -- -- 2,926 Deferred income taxes.. -- 597 -- -- 597 -------- -------- ------ --------- --------- Total current assets.... 61,700 44,025 -- -- 105,725 Property and equipment: Property and equipment at cost............... 95,500 5,323 32(c) (40,000)(d) 60,855 Accumulated depreciation.......... (8,400) (1,170) -- -- (9,570) -------- -------- ------ --------- --------- Property and equipment, net.................... 87,100 4,153 32 (40,000) 51,285 Other assets: Intangible assets, net................... 19,100 60,932 8,218(c) 54,998 (e) 143,248 Deferred income taxes.. -- 73 -- 85,000 (f) 85,073 Other assets........... 2,800 1,885 -- 8,200 (g) 12,885 -------- -------- ------ --------- --------- Total other assets...... 21,900 62,890 8,218 148,198 241,206 -------- -------- ------ --------- --------- Total assets............ $170,700 $111,068 $8,250 $ 108,198 $ 398,216 ======== ======== ====== ========= ========= LIABILITIES AND EQUITY Current liabilities: Current maturities of long-term debt and capital leases........ $ -- $ 3,294 $ -- $ (3,294)(h) $ -- Accounts payable and accrued expenses...... 95,500 39,198 -- -- 134,698 -------- -------- ------ --------- --------- Total current liabilities............ 95,500 42,492 -- (3,294) 134,698 Long-term liabilities: Revolver............... -- -- -- -- -- Employee benefits...... 500 710 -- -- 1,210 Deferred income taxes.. 15,700 -- -- (15,700)(f) -- Long-term debt and capital leases........ -- 47,064 8,250(c) 229,686 (i) 285,000 -------- -------- ------ --------- --------- Total long-term liabilities............ 16,200 47,774 8,250 213,986 286,210 -------- -------- ------ --------- --------- Total liabilities....... 111,700 90,266 8,250 210,692 420,908 Minority interest-- exchangeable preferred stock.................. -- -- -- 24,300 (j) 24,300 Stockholders' equity (divisional control account): Preferred stock........ -- 4 -- (4)(k) -- Common stock........... -- 1 -- 104,399 (l) 104,400 Paid in capital........ -- 14,254 -- (14,254)(m) -- Retained earnings (deficit) (divisional control account)...... 59,000 6,543 -- (216,935)(n) (151,392) -------- -------- ------ --------- --------- Equity (deficit)........ 59,000 20,802 -- (126,794) (46,992) -------- -------- ------ --------- --------- Total liabilities and equity................. $170,700 $111,068 $8,250 $ 108,198 $ 398,216 ======== ======== ====== ========= =========
See Accompanying Notes to the Unaudited Pro Forma Consolidated Balance Sheet 35 PACER INTERNATIONAL, INC. NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET APRIL 2, 1999 (in thousands) (a) Represents the historical unaudited balance sheet of Pacer International, Inc. as of April 2, 1999 (prior to the consummation of our recapitalization, Pacer International was known as APL Land Transport Services, Inc.). Prior to November 1998, Pacer International operated as the American President Lines Stacktrain Services division of APL Land Transport Services, Inc. (b) Represents the historical unaudited balance sheet of Pacer Logistics, Inc. as of March 31, 1999 (prior to the consummation of the Pacer Logistics transaction, Pacer Logistics, Inc. was known as Pacer International, Inc.). (c) On April 20, 1999, Pacer Logistics completed an acquisition of certain of the assets of Keystone Terminals, Inc. Pacer Logistics financed the purchase with long-term debt of $8,250 and acquired property and equipment of $32. This acquisition resulted in goodwill of $8,218 which is being amortized over 40 years. (d) In connection with our recapitalization, we completed a sale and leaseback transaction for certain railcars purchased in 1998, resulting in the elimination of $40,000 of property and equipment at cost. (e) The acquisition of Pacer Logistics will be accounted for as a purchase in accordance with Accounting Principles Board Opinion No. 16 and the preliminary purchase price of $133,908 plus fees of $500 results in a total purchase price of $134,408 and will be allocated to the assets and liabilities based upon fair market values at the date of acquisition. The purchase allocation, preliminary in nature and subject to change, is as follows: Existing book value of Pacer Logistics.................. $ 20,802 Elimination of historical intangible assets of Pacer Logistics.............................................. (60,932) Elimination of Keystone Terminals acquisition goodwill.. (8,218) Goodwill created in the Pacer Logistics acquisition..... 124,148 ------- Net adjustment to intangible assets.................... 54,998 Assumption of Pacer Logistics debt and capital lease, current portion........................................ 3,294 Assumption of Pacer Logistics debt and capital lease, long-term (including debt incurred with Keystone Terminals acquisition)................................. 55,314 -------- Total purchase price................................... $134,408 ========
(f) In connection with our recapitalization, a Section 338(h)(10) election was made to allow the recapitalization of Pacer International to be treated as an acquisition of assets for tax purposes. The recapitalization gave rise to the reversal of the existing deferred tax balances in the amount of $15,700 and created a deferred tax asset in the amount of approximately $85,000, associated with the step up for tax purposes. We believe that it is more likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax asset and accordingly, no valuation allowance was recorded. (g) Represents the estimated costs and fees associated with our recapitalization and the Pacer Logistics transaction:
Total ------- Debt issuance costs.................................................. $ 8,200 Acquisition fees..................................................... 500 Recapitalization fees................................................ 15,392 ------- Total.............................................................. $24,092 =======
36 (h) Reflects the repayment of the current portion of the Pacer Logistics long- term debt and capital leases. (i) Reflects the debt incurred in connection with our recapitalization and the Pacer Logistics transaction and the repayment of existing long-term debt, including debt incurred in Pacer Logistics' Keystone Terminals acquisition. We have entered into the Senior Credit Facilities which consists of a seven-year $135,000 Term Loan and a five year $100,000 Revolving Credit Facility. Borrowings under Term Loan....................................... $135,000 Issuance of Senior Subordinated Notes ........................... 150,000 Repayment of Pacer Logistics long-term debt and capital leases... (55,314) -------- $229,686 ========
(j) Reflects the issuance of Pacer Logistics 7.5% Exchangeable Preferred Stock with an aggregate stated value of $24,300 to certain members of management in exchange for Pacer Logistics common stock held by them. (k) Reflects the purchase of Pacer Logistics historical preferred stock in connection with the Pacer Logistics transaction. (l) Reflects our recapitalization and the Pacer Logistics transaction adjustments for common stock: Issuance of common stock to affiliates of Apollo Management...... $ 93,900 Issuance of common stock to affiliates of Deutsche Bank Securities Inc. and Credit Suisse First Boston Corporation...... 3,000 Rollover of common stock from APL Limited........................ 7,500 Elimination of Pacer Logistics historical common stock........... (1) -------- $104,399 ========
(m) Reflects the elimination of Pacer Logistics historical paid-in capital in connection with the Pacer Logistics transaction in accordance with purchase accounting. (n) Reflects our recapitalization and the Pacer Logistics transaction adjustments for retained earnings: Elimination of Pacer International historical divisional control account............................................... $ (59,000) Elimination of Pacer Logistics historical retained earnings.... (6,543) Transaction fees associated with the issuance of common stock(g)...................................................... (15,392) Rollover of common stock from Pacer International.............. (7,500) Adjustment to record acquisition of Pacer International equity from APL Limited.............................................. (204,900) Exchange of Pacer Logistics common stock for Pacer Logistics 7.5% Exchangeable Preferred Stock............................. (24,300) Elimination of Pacer International historical deferred tax liability..................................................... 15,700 Recognition of deferred tax asset associated with our recapitalization(f)........................................... 85,000 --------- $(216,935) =========
37 PACER INTERNATIONAL, INC. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS Fiscal Year Ended December 25, 1998 (in thousands)
Pacer Pacer Pacer Logistics Pacer International Logistics Completed 1998 & Pacer Logistics Pro Forma International Historical (a) Historical (b)(q) 1999 Acquisitions (c) Pro Forma Adjustments Pro Forma -------------- ----------------- --------------------- --------------- ----------- ------------- Gross revenues.......... $590,800 $252,762 $155,844 $408,606 $(17,776)(d) $981,630 Cost of purchased transportation and services............... 466,300 211,222 135,269 346,491 (32,376)(e) 780,415 -------- -------- -------- -------- -------- -------- Net revenues........... 124,500 41,540 20,575 62,115 14,600 201,215 Operating expenses: Direct operating expenses.............. 62,400 329 35 364 2,527 (f) 65,291 Selling, general and administrative expenses.............. 29,000 28,054 15,625 43,679 3,075 (g)(h) 75,754 Amortization........... 600 1,334 746 2,080 1,016 (i) 3,696 Other (income) / expense............... (700) -- 16 16 -- (684) Transaction costs...... -- 1,500 625 2,125 -- 2,125 -------- -------- -------- -------- -------- -------- Total operating expenses.............. 91,300 31,217 17,047 48,264 6,618 146,182 -------- -------- -------- -------- -------- -------- Income from operations............ 33,200 10,323 3,528 13,851 7,982 55,033 Interest income / (expense).............. -- (2,867) (1,907) (4,774) (25,329)(j) (30,103) -------- -------- -------- -------- -------- -------- Income before income taxes, minority interest and extraordinary loss.... 33,200 7,456 1,621 9,077 (17,347) 24,930 Income taxes............ 12,600 3,182 766 3,948 (6,696)(k) 9,852 Minority interest....... -- -- -- -- 1,823 (l) 1,823 -------- -------- -------- -------- -------- -------- Income before extraordinary loss.... $ 20,600 $ 4,274 $ 855 $ 5,129 $(12,474) $ 13,255 ======== ======== ======== ======== ======== ======== Other Financial Data(m)(n): Depreciation........... $ 6,000 $ 699 $ 387 $ 1,086 $ (973) $ 6,113
See Accompanying Notes to the Unaudited Pro Forma Consolidated Statement of Operations 38 PACER INTERNATIONAL, INC. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS Three Months Ended April 2, 1999 (in thousands)
Pacer Logistics Pacer Pacer Completed Pacer Pacer International Logistics 1998 & 1999 Logistics Pro Forma International Historical Historical(q) Acquisitions(o) Pro Forma Adjustments Pro Forma ------------- ------------- --------------- --------- ----------- ------------- Gross revenues.......... $163,600 $89,892 $5,297 $95,189 $(4,894)(d) $253,895 Cost of purchased transportation and services............... 129,800 75,164 4,556 79,720 (8,544)(e) 200,976 -------- ------- ------ ------- ------- -------- Net revenues........... 33,800 14,728 741 15,469 3,650 52,919 Operating expenses: Direct operating expenses.............. 18,100 103 -- 103 517 (f) 18,720 Selling, general and administrative expenses.............. 8,000 10,455 302 10,757 594 (g)(h) 19,351 Amortization........... 100 474 54 528 246 (i) 874 Other (income)/expense...... -- -- -- -- -- -- Transaction costs...... -- -- -- -- -- -- -------- ------- ------ ------- ------- -------- Total operating expenses.............. 26,200 11,032 356 11,388 1,357 38,945 -------- ------- ------ ------- ------- -------- Income from operations............ 7,600 3,696 385 4,081 2,293 13,974 Interest income/(expense)....... -- (1,126) (124) (1,250) (6,225)(j) (7,475) -------- ------- ------ ------- ------- -------- Income before income taxes, minority interest and extraordinary loss.... 7,600 2,570 261 2,831 (3,932) 6,499 Income taxes............ 2,800 1,100 107 1,207 (1,511)(k) 2,496 Minority interest....... -- -- -- -- 456 (l) 456 -------- ------- ------ ------- ------- -------- Income before extraordinary loss.... $ 4,800 $ 1,470 $ 154 $ 1,624 $(2,877) $ 3,547 ======== ======= ====== ======= ======= ======== Other Financial Data(m)(n): Depreciation........... $ 1,700 $ 290 $ 5 $ 295 $ (358) $ 1,637
See Accompanying Notes to the Unaudited Pro Forma Consolidated Statement of Operations 39 PACER INTERNATIONAL, INC. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS Twelve Months Ended April 2, 1999 (in thousands)
Pacer Logistics Pro Pacer Pacer Completed Pacer Forma Pacer International Logistics 1998 & 1999 Logistics Adjust- International Historical Historical(q) Acquisitions(p) Pro Forma ments Pro Forma ------------- ------------- --------------- --------- -------- ------------- Gross revenues.......... $604,200 $292,292 $110,909 $403,201 $(20,009)(d) $987,392 Cost of purchased transportation and services............... 476,500 244,383 96,765 341,148 (34,609)(e) 783,039 -------- -------- -------- -------- -------- -------- Net revenues........... 127,700 47,909 14,144 62,053 14,600 204,353 Operating expenses: Direct operating costs................. 63,300 385 -- 385 2,231 (f) 65,916 Selling, general and administrative expenses.............. 29,200 32,799 10,817 43,616 3,075 (g)(h) 75,891 Amortization........... 600 1,590 493 2,083 1,013 (i) 3,696 Other (income)/expense...... (700) -- -- -- -- (700) Transaction costs...... -- 1,500 625 2,125 -- 2,125 -------- -------- -------- -------- -------- -------- Total operating expenses.............. 92,400 36,274 11,935 48,209 6,319 146,928 -------- -------- -------- -------- -------- -------- Income from operations............ 35,300 11,635 2,209 13,844 8,281 57,425 Interest income/(expense)....... -- (3,439) (1,407) (4,846) (25,236)(j) (30,082) -------- -------- -------- -------- -------- -------- Income before income taxes, minority interest and extraordinary loss ... 35,300 8,196 802 8,998 (16,955) 27,343 Income taxes............ 13,400 3,517 386 3,903 (6,536)(k) 10,767 Minority interest....... -- -- -- -- 1,823 (l) 1,823 -------- -------- -------- -------- -------- -------- Income before extraordinary loss.... $ 21,900 $ 4,679 $ 416 $ 5,095 $(12,242) $ 14,753 ======== ======== ======== ======== ======== ======== Other Financial Data(m)(n): Depreciation........... $ 6,100 $ 866 $ 235 $ 1,101 $ (1,269) $ 5,932
See Accompanying Notes to the Unaudited Pro Forma Consolidated Statement of Operations 40 PACER INTERNATIONAL, INC. NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (in thousands) (a) Represents amounts derived from the historical audited statement of operations of Pacer International, Inc. for the year ended December 25, 1998 (prior to the consummation of our recapitalization, Pacer International was known as APL Land Transport Services, Inc.). Prior to November 1998, Pacer International operated as the American President Lines Stacktrain Services division of APL Land Transport Services, Inc. (b) Represents amounts derived from the historical audited consolidated statement of operations of Pacer Logistics, Inc. for the year ended December 31, 1998 (prior to the consummation of the Pacer Logistics transaction, Pacer Logistics, Inc. was known as Pacer International, Inc.). (c) Pacer Logistics acquired Intraco Inc. April 3, 1998, Cross Con Transport, Inc. and Cross Con Terminals, Inc. on June 6, 1998, Professional Logistics Management Co., Inc. and 3PL Corporation on July 26, 1998, Manufacturers Consolidation Service, Inc. and its subsidiaries Levcon, Inc., MCS of Kansas, Inc. and Manufacturers Consolidation Service of Canada Inc. on December 10, 1998 and Keystone Terminals, Inc. (DE) and Keystone Terminals, Inc. (NJ) on April 20, 1999. The schedule below presents the unaudited historical combined results of operations of the acquired businesses for the periods from January 1, 1998 until their respective acquisitions by Pacer Logistics, except for the Keystone companies, which were acquired in 1999 and are included for the full year.
Completed Cross Professional Pro Forma 1998 & 1999 Intraco Con Logistics MCS(1) Keystone Adjustments Acquisitions ------- ------- ------------ ------- -------- ----------- ------------ Gross revenues.......... $1,245 $23,661 $11,152 $95,969 $24,281 $ (464)(2) $155,844 Cost of purchased transportation and services............... 845 20,971 8,512 84,725 20,680 (464)(2) 135,269 ------ ------- ------- ------- ------- ------- -------- Net revenues........... 400 2,690 2,640 11,244 3,601 -- 20,575 Operating expenses: Direct operating expenses.............. 35 -- -- -- -- -- 35 Selling general and administrative expenses.............. 123 1,664 2,356 11,745 2,341 (2,604)(3)(4) 15,625 Other (income)/expense...... -- -- -- 16 -- -- 16 Amortization........... -- -- -- 80 -- 666 (5) 746 Transaction costs...... -- -- -- 625 -- -- 625 ------ ------- ------- ------- ------- ------- -------- Total operating expenses............... 158 1,664 2,356 12,466 2,341 (1,938) 17,047 ------ ------- ------- ------- ------- ------- -------- Income from operations............ 242 1,026 284 (1,222) 1,260 1,938 3,528 Interest income/(expense)....... (3) 41 (138) (649) 145 (1,303)(6) (1,907) ------ ------- ------- ------- ------- ------- -------- Income before income taxes.................. 239 1,067 146 (1,871) 1,405 635 1,621 Income taxes............ -- 10 4 (214) 15 951 (7) 766 ------ ------- ------- ------- ------- ------- -------- Income before extraordinary loss ... $ 239 $ 1,057 $ 142 $(1,657) $ 1,390 $ (316) $ 855 ====== ======= ======= ======= ======= ======= ======== EBITDA.................. $ 288 $ 1,043 $ 319 $ (443) $ 1,296 $ 2,158 $ 4,661
-------- (1) As part of the acquisition of the Manufacturers Consolidation Service companies in December 1998, Pacer Logistics elected to exit such companies' over the road trucking business. The divestiture of this business was completed in February 1999. Over the road trucking gross revenues, cost of purchased transportation and services, selling, general and administrative expenses, interest expense, income taxes and EBITDA of $8,365, $7,644, $1,249, $105, $247 and $82, respectively, have been appropriately excluded from the Manufacturers Consolidation Service companies results of operations presented. (2) Reflects the elimination of $464 in intercompany revenues and costs between Pacer Logistics and Intraco. (3) As part of the acquisition of the Manufacturers Consolidation Service companies in December 1998, Pacer Logistics initiated a plan of employee reductions which were made in February, 1999, resulting 41 in the elimination of salaries and benefits of $900 annually in connection with the employees subject to the reductions. (4) As part of the acquisitions of Intraco, the Cross Con companies, the Manufacturers Consolidation Service companies and the Keystone companies in April, June and December 1998 and April 1999, respectively, the former owners' annual salaries and benefits were contractually reduced by $7, $18, $786 and $893, respectively, aggregating $1,704. (5) Reflects the elimination of historical goodwill amortization for completed 1998 and 1999 acquisitions of $80 and recognition of goodwill amortization, as if the completed 1998 and 1999 acquisitions had occurred on January 1, 1998, of $746, resulting in a net adjustment of $666. (6) Reflects the elimination of historical interest expense relating to assumed debt paid off at the closing of the acquisition of $576 and recognition of interest expense that Pacer Logistics would have incurred had the completed 1998 and 1999 acquisitions occurred on January 1, 1998, based on Pacer Logistics' historical average interest rate of 8.04% of $1,879, resulting in a net adjustment of $1,303. (7) Reflects the adjustment to the provision for income taxes which Pacer Logistics would have recorded (based on Pacer Logistics' tax rate) had the completed 1998 and 1999 acquisitions occurred on January 1, 1998. This adjustment includes an increase in the tax provision for Intraco, the Cross Con companies and the Keystone companies, which were previously taxed as Subchapter S corporations. (d) Reflects the following:
Fiscal Year Ended Three Months Twelve Months December 25, Ended April 2, Ended April 2, 1998 1999 1999 ----------------- -------------- -------------- Intercompany revenues and cost elimination on net sales between Pacer In- ternational and Pacer Logistics............... $(24,376) $(6,544) $(26,609) Management fee to be charged to APL Limited for services rendered in connection with the Stacktrain Services Agreement............... 6,600 1,650 6,600 -------- ------- -------- $(17,776) $(4,894) $(20,009) ======== ======= ========
(e) As an integral part of the Pacer International acquisition of Pacer Logistics, Pacer International has reached an agreement with a third-party transportation provider, which effectively provides Pacer International with $8,000 in annual rate reductions or a $2,000 quarterly reduction. These amounts, together with the elimination of intercompany costs discussed in Note (d) above, results in adjustments to cost of purchased transportation and services of $32,376, $8,544 and $34,609 for the fiscal year ended December 25, 1998, the three months ended April 2, 1999 and the twelve months ended April 2, 1999, respectively. (f) Reflects the adjustment to lease expense and depreciation as a result of the sale and leaseback transaction completed in connection with our recapitalization and the Pacer Logistics transaction:
Twelve Months Fiscal Year Ended Three Months Ended December 25, Ended April 2, April 2, 1998 1999 1999 ----------------- -------------- ------------- Elimination of historical railcar depreciation expense.................... $ (973) $(358) $(1,269) Lease expense associated with the sale and leaseback transaction................ 3,500 875 3,500 ------ ----- ------- $2,527 $ 517 $ 2,231 ====== ===== =======
42 (g) Reflects the following:
Fiscal Year Ended Three Months Twelve Months December 25, Ended April 2, Ended April 2, 1998 1999 1999 ----------------- -------------- -------------- Elimination of historical information technology expenses allocated to Pacer International by APL Limited................... $(7,300) $(2,000) $(7,300) Cost to outsource information technology services in accordance with the Information Technology Outsourcing and License Agreement......... 10,000 2,500 10,000 ------- ------- ------- $ 2,700 $ 500 $ 2,700 ======= ======= ======= Incremental management fee charged to Pacer International by Apollo Management in accordance with the new management agreement................. $ 375 $ 94 $ 375 ======= ======= ======= (h) Reflects the following: Elimination of Pacer Logistics historical goodwill amortization..... $(1,334) $ (474) $(1,590) Elimination of Pacer Logistics 1998 and 1999 completed acquisition goodwill amortization..... (746) (54) (493) Estimated goodwill amortization as if the Pacer Logistics acquisition had occurred on January 1, 1998, amortized over forty years .......................... 3,096 774 3,096 ------- ------- ------- $ 1,016 $ 246 $ 1,013 ======= ======= ======= (i) Reflects the following: Elimination of historical Pacer Logistics interest expense and the amortization of debt issuance costs related to debt to be repaid in connection with the Pacer Logistics transaction..... $(2,867) $(1,126) $(3,427) Elimination of pro forma Pacer Logistics interest expense................... (1,879) (168) (1,412) Interest expense resulting from our $135 million term loan at an assumed interest rate of 8%....... 10,800 2,700 10,800 Interest expense resulting from the $150 million notes at an interest rate of 11 3/4%................ 17,625 4,406 17,625 Amortization of debt issuance costs of $8.2 million associated with our senior credit facilities and the notes over the life of the related debt.............. 1,650 413 1,650 ------- ------- ------- $25,329 $ 6,225 $25,236 ======= ======= =======
(j) Reflects the following: (k) Reflects the adjustment to the provision for income taxes which Pacer International would have recorded (based on Pacer International's tax rate) had the transactions occurred on January 1, 1998. Note that Pacer International's income taxes payable will be offset by the $85,000 deferred tax asset arising as a result of the Section 338(h)(10) election. This will reduce cash payments for income taxes over the next fifteen years. 43 (l) In connection with our recapitalization and the Pacer Logistics transaction, certain members of management received Pacer Logistics Exchangeable Preferred Stock calling for an annual 7.5% paid-in-kind dividend. The amount represents the annual dividend, based on preferred stock value of Pacer Logistics of $24,300 at 7.5%. Amount for the three months ended April 2, 1999 represents one fourth of the annual charge. (m) EBITDA represents income before income taxes, interest expense, depreciation and amortization and minority interest (payment-in-kind dividends on Pacer Logistics 7.5% Exchangeable Preferred Stock). EBITDA is presented because it is commonly used by certain investors to analyze and compare operating performance and to determine a company's ability to service and/or incur debt. However, EBITDA should not be considered in isolation or as a substitute for net income, cash flows or other income or cash flow data prepared in accordance with generally accepted accounting principles or as a measure of a company's profitability or liquidity. Pro forma EBITDA is calculated as follows:
Fiscal Year Ended Three Months Twelve Months December 25, Ended April 2, Ended April 2, 1998 1999 1999 ----------------- -------------- -------------- Pacer International historical EBITDA......... $39,800 $ 9,400 $42,000 Pacer Logistics historical EBITDA.................... 12,356 4,460 14,091 Pacer Logistics completed 1998 and 1999 acquisitions EBITDA.................... 4,661 444 2,937 EBITDA associated with Pro forma Adjustments......... 8,025 2,181 8,025 ------- ------- ------- Pacer International Pro forma EBITDA.............. $64,842 $16,485 $67,053 ======= ======= ======= (n) Adjusted EBITDA represents pro forma EBITDA, adjusted as follows: Fiscal Year Ended Three Months Twelve Months December 25, Ended April 2, Ended April 2, 1998 1999 1999 ----------------- -------------- -------------- Pro forma EBITDA........... $64,842 $16,485 $67,053 Adjustments to pro forma EBITDA: Elimination of allocated corporate costs, less estimated stand alone costs (1)............... 2,915 904 3,015 Elimination of historical Pacer Logistics initial public offering costs (2)............... 1,500 -- 1,500 Elimination of historical Manufacturers Consolidation Service, Inc. initial public offering costs (3)...... 625 -- 625 ------- ------- ------- Adjusted EBITDA............ $69,882 $17,389 $72,193 ======= ======= =======
-------- (1) Reflects the elimination of historical corporate overhead costs allocated to Pacer International by APL Limited, less $2,785 of estimated annual actual costs expected to be incurred by Pacer International to perform the services as a stand alone entity. The estimated annual stand alone costs consists of salaries and benefits of $1,650, outside services and consulting of $650 and additional rent of $485. (2) Pacer Logistics incurred non-recurring costs related to an expected initial public offering in 1998. (3) Manufacturers Consolidation Service is a wholly owned subsidiary of Pacer Logistics. Manufacturers Consolidation Service incurred $625 of non-recurring costs related to an expected initial public offering prior to its acquisition by Pacer Logistics in 1998. 44 (o) On April 20, 1999, Pacer Logistics acquired certain assets of the Keystone companies and as part of the acquisition of the Manufacturers Consolidation Service companies in December 1998, Pacer Logistics initiated a plan of employee reductions resulting in annual cost savings of $900. To reflect the pro forma effect of this acquisition and cost reductions on Pacer Logistics' operations, the schedule below presents the unaudited historical statement of operations of the Keystone companies, for the three month period ended April 2, 1999, along with applicable pro forma adjustments for the Keystone Terminals acquisition and the impact of cost savings from the Manufacturers Consolidation Service companies' employee reductions.
Completed Pro Forma 1999 Keystone Adjustments Acquisition -------- ----------- ----------- Gross revenues........................ $5,297 $5,297 Cost of revenues...................... 4,556 4,556 ------ ----- ------ Net revenues........................ 741 -- 741 Operating expenses: Selling, general and administrative expenses........................... 455 $(153)(1)(2) 302 Amortization........................ -- 54 (3) 54 ------ ----- ------ Total operating expenses.............. 455 (99) 356 ------ ----- ------ Income from operations.............. 286 99 385 Interest income/(expense)............. 44 (168)(4) (124) ------ ----- ------ Income before income taxes.......... 330 (69) 261 Income taxes.......................... -- 107 (5) 107 ------ ----- ------ Income before extraordinary loss.... $ 330 $(176) $ 154 ====== ===== ====== EBITDA................................ $ 291 $ 444
-------- (1) As part of the Keystone Terminals acquisition in April 1999 the former owners' salaries and benefits of $78 were eliminated. The adjustment represents the elimination of the former owners' salary and benefits. (2) The adjustment represents the elimination of Manufacturers Consolidation Service salaries and benefits of $75 representing one month of the $900 annual cost savings not included in historical results, as the reductions were made in February 1999. (3) Reflects the following:
Three Months Ended April 2, 1999 -------------- Goodwill amortization if the Keystone Terminals acquisition occurred on January 1, 1999............................... $ 54 (4) Reflects the following: Interest expense that Pacer Logistics would have incurred had the Keystone Terminals acquisition occurred on January 1, 1999, based on Pacer Logistics' historical average interest rate of 8.16% for the three month period ending April 2, 1999............................................. $168
(5) Reflects the adjustment to the provision for income taxes which Pacer Logistics would have recorded (based on Pacer Logistics' tax rate) had the completed 1998 and 1999 acquisitions occurred on January 1, 1998 and includes an increase in tax provision for the Keystone companies, which were previously taxed as Subchapter S corporations. 45 (p) During 1998, Pacer Logistics acquired Intraco, the Cross Con companies, Professional Logistics and the Manufacturers Consolidation Service companies and during 1999, Pacer Logistics acquired the Keystone companies. The schedule below presents the unaudited historical combined results of operations of the acquired businesses for the periods from April 1, 1998 until their respective acquisitions by Pacer Logistics. Specifically, Intraco, the Cross Con companies, Professional Logistics, the Manufacturers Consolidation Service companies were acquired on April 3, 1998, June 6, 1998, July 26, 1998, December 10, 1998, respectively, and the Keystone companies on April 20, 1999. (The pro forma results of Intraco for the first two days of April were not included in the schedule below as they were not deemed material for presentation.)
Completed Cross Professional Pro Forma 1998 & 1999 Con Logistics MCS(1) Keystone Adjustments Acquisitions ------- ------------ -------- -------- ----------- ------------ Gross revenues.......... $10,258 $5,986 $ 70,674 $23,991 $ -- $110,909 Cost of purchased transportation and services........... 9,105 4,352 62,904 20,404 96,765 ------- ------ -------- ------- ------- -------- Net revenues........... 1,153 1,634 7,770 3,587 -- 14,144 Operating expenses: Direct operating expenses.............. -- -- -- -- -- -- Selling, general and administrative expenses.............. 720 1,408 8,479 2,294 (2,084)(2)(3) 10,817 Amortization........... -- -- 65 -- 428 (4) 493 Other income expenses.. -- -- -- -- -- -- Transaction costs...... -- -- 625 -- -- 625 ------- ------ -------- ------- ------- -------- Total operating expenses............... 720 1,408 9,169 2,294 (1,656) 11,935 ------- ------ -------- ------- ------- -------- Income from operations............ 433 226 (1,399) 1,293 1,656 2,209 Interest income/(expense)....... 13 (93) (549) 160 (938)(5) (1,407) ------- ------ -------- ------- ------- -------- Income before income taxes................. 446 133 (1,948) 1,453 718 802 Income taxes ........... -- 2 (732) -- 1,116 (6) 386 ------- ------ -------- ------- ------- -------- Income before extraordinary loss.... $ 446 $ 131 $ (1,216) $ 1,453 $ (398) $ 416 ======= ====== ======== ======= ======= ======== EBITDA.................. $ 442 $ 245 $ (805) $ 1,329 $ 1,726 $ 2,937
-------- (1) As part of the acquisition of the Manufacturers Consolidation Service companies in December 1998, Pacer Logistics elected to exit such Manufacturers Consolidation Service companies' over the road trucking business. The divestiture of this business segment was completed in February 1999. Over the road trucking gross revenues, cost of purchased transportation and services, selling, general and administrative expenses, interest expense, income taxes and EBITDA of $6,082, $5,434, $882, $84, $124 and $124, respectively, have been appropriately excluded from the Manufacturers Consolidation Services companies' results of operations presented. (2) As part of the acquisition of the Manufacturers Consolidation Service companies' in December 1998, Pacer Logistics initiated a plan of employee reductions, resulting in annual cost savings of $900. The reductions were made effective February 1999 and the $744 adjustment reflects the 10 months of cost savings not recognized in the historical statement of operations. (3) As part of the acquisitions of the Cross Con companies, the Manufacturers Consolidation Service companies' and the Keystone companies acquisitions in June and December 1998 and April 1999, respectively, the former owners' annual salaries and benefits were reduced by $7, $596 and $737, respectively, aggregating $1,340. (4) Reflects the elimination of historical goodwill amortization included in completed 1998 and 1999 acquisition financial statements of $65 and goodwill amortization, as if the completed 1998 and 1999 acquisitions had occurred on April 1, 1998, of $493. This results in a net adjustment of $428. (5) Reflects the elimination of historical interest expense relating to assumed debt paid off at the closing of the acquisitions of $474 and interest expense that Pacer Logistics would have incurred had the completed 1998 and 1999 acquisitions occurred on April 1, 1998 based on Pacer Logistics' historical average interest rate of 8.07% for the twelve month period ended March 31, 1999 of $1,412. This results in a net adjustment of $938. (6) Reflects the adjustment to the provision for income taxes which Pacer Logistics would have recorded (based on Pacer Logistics' tax rate) had the completed 1998 and 1999 acquisitions occurred on April 1, 1998. The adjustment includes an increase in the tax provision for the Cross Con companies and the Keystone companies, which were previously taxed as Subchapter S Corporations. 46 (q) For uniformity of presentation, certain financial statement captions have been retitled and certain amounts reclassified to conform with retitled financial statement captions.
Pacer Logistics, Inc. ------------------------------ Three Twelve Fiscal Months Months Year Ended Ended Ended December March 31, March 31, 25, 1998 1999 1999 ---------- --------- --------- Direct operating expenses: Reclassified depreciation from depreciation and amortization............................. $ 329 $ 103 $ 385 ======= ======= ======= Selling, general and administrative expenses: Selling, general and administrative expenses from historical information.................. $27,684 $10,268 $32,318 Reclassified depreciation from depreciation and amortization............................. 370 187 481 ------- ------- ------- $28,054 $10,455 $32,799 ======= ======= ======= Amortization: Depreciation and amortization from historical financial information........................ $ 2,033 $ 764 $ 2,456 Less: Reclassified depreciation to direct operating expenses........................... (329) (103) (385) Less: Reclassified depreciation to selling, general and administrative expenses.......... (370) (187) (481) ------- ------- ------- $ 1,334 $ 474 $ 1,590 ======= ======= =======
47 SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL INFORMATION Pacer International, Inc. The following table presents, as of the dates and for the periods indicated, (1) selected historical financial information and (2) selected pro forma consolidated financial information, in each case after giving effect to our recapitalization and the Pacer Logistics transaction. The selected historical data for the fiscal years ended December 25, 1998 and December 27, 1996 and the periods from December 28, 1996 to November 12, 1997 and November 13, 1997 to December 26, 1997 have been derived from, and should be read in conjunction with, the audited financial statements (including the notes thereto) of Pacer International appearing elsewhere in this prospectus. Prior to November 1998, Pacer International operated as the American President Lines Stacktrain Services division of APL Land Transport Services, Inc. (See Note 1 to the audited financial statements referred to above.) These historical financial statements subsequent to November 13, 1997 include the push down effect of the purchase price allocation resulting from the purchase of APL Limited by Neptune Orient Lines Limited. The results of operations of the predecessor period are not comparable to the successor period as a result of the acquisition of APL Limited by Neptune Orient Lines Limited. The selected historical financial data as of April 2, 1999 and for the three months ended April 3, 1998 and April 2, 1999 have been derived from Pacer International's unaudited financial statements and include, in the opinion of our management, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the data for such periods. The unaudited pro forma balance sheet data reflects the financial position of our business as if our recapitalization and the Pacer Logistics transaction, using the purchase method of accounting for the Pacer Logistics transaction, had occurred as of April 2, 1999. The unaudited pro forma statement of operations and related information reflects our recapitalization and the Pacer Logistics transaction as if they had occurred at the beginning of the relevant period. The pro forma adjustments were applied to the historical financial statements to reflect and account for our recapitalization and the Pacer Logistics transaction as such and, accordingly, do not affect the historical basis of our assets and liabilities. The pro forma financial information does not purport to represent what our financial position or results of operations would have actually been had our recapitalization and the Pacer Logistics transaction in fact occurred on the assumed dates or to project our financial position or results of operations for any future date or period. The following table should also be read in conjunction with "Unaudited Pro Forma Consolidated Financial Information" and the related notes thereto and "Management's Discussion and Analysis of Financial Conditions and Results of Operations." 48
The Predecessor (a) ------------------------- For the Fiscal Year For the Ended PerThe Companyiod Pro Forma Pacer International ------------------------------------------------- ------------------------------------ (in millions, except ratios and statistical data) For the For the For the Fiscal For the Three Twelve For the Year For The Three Fiscal Year Months Months Period Ended Months Ended Ended Ended Ended ------------ ------------ ----------------------- ------------ ----------- ----------- December 28, 1996 to December 27, November 12, 1996 1997(b) ------------ ------------ Statement of Operations Data(c): Gross revenues.. $548.0 $517.1 Cost of purchased transportation and services... 423.7 407.5 Net revenues.... 124.3 109.6 Direct operating expenses....... 37.4 49.4 Selling, general and administrative expenses....... 25.6 24.0 Income from operations..... 61.5 38.8 Income before extraordinary loss........... 38.1 22.9 Other Financial Data: EBITDA(d)....... $ 65.6 $ 41.8 EBITDA margin(e)...... 52.8% 38.1% Adjusted EBITDA(f)...... Adjusted EBITDA margin(e)...... Depreciation ... $ 4.1 $ 3.0 Amortization.... -- -- Capital Expenditures(g).. 0.2 -- Cash interest expense(h)..... -- 2.0 Debt to Adjusted EBITDA......... Adjusted EBITDA to cash interest expense........ Ratio of earnings to fixed charges(i)..... 6.2x 3.6x Balance Sheet Data (at period end): Total assets(j)...... $ 71.4 -- Total debt including capital leases......... -- -- Minority interest- exchangeable preferred stock.......... -- -- November 13, 1997 to December 26, December 25, April 3, April 2, December 25, April 2, April 2, 1997(b) 1998 1998 1999 1998 1999 1999 ------------ ------------ ----------- ----------- ------------ ----------- ----------- (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) Statement of Operations Data(c): Gross revenues.. $ 60.0 $590.8 $150.2 $163.6 $981.6 $253.9 $987.4 Cost of purchased transportation and services... 47.4 466.3 119.6 129.8 780.4 201.0 783.0 Net revenues.... 12.6 124.5 30.6 33.8 201.2 52.9 204.4 Direct operating expenses....... 7.4 62.4 17.2 18.1 65.3 18.7 65.9 Selling, general and administrative expenses....... 3.2 29.0 7.8 8.0 75.8 19.4 75.9 Income from operations..... 2.0 33.2 5.5 7.6 55.0 14.0 57.4 Income before extraordinary loss........... 1.0 20.6 3.5 4.8 13.3 3.5 14.8 Other Financial Data: EBITDA(d)....... $ 2.7 $ 39.8 $ 7.2 $ 9.4 $ 64.8 $ 16.5 $ 67.1 EBITDA margin(e)...... 21.4% 32.0% 23.5% 27.8% 32.2% 31.2% 32.8% Adjusted EBITDA(f)...... $ 69.9 $ 17.4 $ 72.2 Adjusted EBITDA margin(e)...... 34.7% 32.9% 35.3% Depreciation ... $ 0.7 $ 6.0 $ 1.7 $ 1.7 $ 6.1 $ 1.6 $ 5.9 Amortization.... -- 0.6 0.1 0.1 3.7 0.9 3.7 Capital Expenditures(g).. -- 39.7 16.3 -- 1.7 0.4 1.7 Cash interest expense(h)..... 0.3 -- -- -- 28.5 7.1 28.4 Debt to Adjusted EBITDA......... 3.9x Adjusted EBITDA to cash interest expense........ 2.5x 2.5x 2.5x Ratio of earnings to fixed charges(i)..... 1.8x 3.0x 2.3x 2.7x 1.5x 1.5x 1.5x Balance Sheet Data (at period end): Total assets(j)...... $111.9 $156.1 $206.7 $170.7 $398.2 $398.2 Total debt including capital leases......... -- -- -- -- 285.0 285.0 Minority interest- exchangeable preferred stock.......... -- -- -- -- 24.3 24.3
- -------- (a) The financial statements subsequent to November 13, 1997 include the accounts of Pacer International and include the "push down" effect of the purchase price allocation. Prior to November 12, 1997, the financial statements include the accounts of the Stacktrain Services division of APL Land Transport Services. The results of operations of the predecessor period are not comparable to the successor period as a result of the acquisition of APL Limited by Neptune Orient Lines Limited. 49 (b) The following information for the full year ended December 26, 1997 has been presented for comparative purposes only and is the combination of the December 28, 1996 to November 12, 1997 period (set forth below as the Predecessor) and the November 13, 1997 to December 26, 1997 period (set forth below as the Company). As a result of the change in ownership of Pacer International, these numbers are not indicative of what the full year 1997 was or would have been if the change in ownership had not occurred.
1997 ------ Gross revenues.................................................... $577.1 Cost of purchased transportation and services..................... 454.9 Net revenues...................................................... 122.2 Income from operations............................................ 40.8 Net income........................................................ 23.9 EBITDA(d)......................................................... 44.5 EBITDA margin(e).................................................. 36.4%
(c) For uniformity of presentation, certain financial statement captions have been retitled and certain amounts reclassified to conform with retitled financial statement captions. Set forth below is a reconciliation of the information in the selected historical consolidated financial information to the amounts in the historical financial statements.
The Predecessor The Company ------------------------- ---------------------------------------------------------- For the For the Fiscal Fiscal Year For the For the Year For the Three Ended Period Period Ended Months Ended ------------ ------------ ------------ --------------------- ----------------------- December 28, November 13, 1996 to 1997 to December 27, November 12, December 26, December 25, April 3, April 2, 1996 1997 1997 1997(b) 1998 1998 1999 ------------ ------------ ------------ ------- ------------ ----------- ----------- (unaudited) (unaudited) (in millions) Gross revenues: Freight revenue........ $526.6 $498.4 $57.7 $556.1 $566.1 $143.9 $156.9 Avoided repositioning.. 15.7 15.8 1.9 17.7 20.0 5.0 5.5 Other revenue.......... 5.7 2.9 0.4 3.3 4.7 1.3 1.2 ------ ------ ----- ------ ------ ------ ------ 548.0 517.1 60.0 577.1 590.8 150.2 163.6 Cost of purchased transportation and services: Rail linehaul.......... 401.3 383.7 43.8 427.5 438.1 113.5 122.1 Trucks & other......... 7.2 10.1 1.2 11.3 11.0 2.7 3.1 Empty repositioning.... 13.2 11.0 2.0 13.0 13.2 2.3 3.6 Terminal and cargo handling, variable.... 2.0 2.7 0.4 3.1 4.0 1.1 1.0 ------ ------ ----- ------ ------ ------ ------ 423.7 407.5 47.4 454.9 466.3 119.6 129.8 ------ ------ ----- ------ ------ ------ ------ Net revenues............ 124.3 109.6 12.6 122.2 124.5 30.6 33.8 Direct operating expenses: Terminal and cargo handling, fixed....... 0.6 1.5 0.3 1.8 1.7 0.4 0.5 Equipment maintenance and repair............ 15.1 14.6 1.8 16.4 18.3 4.8 5.2 Other variable (income)/expense...... (16.7) (6.7) (0.7) (7.4) (13.1) (2.9) (2.6) Fixed equipment Rail cars.............. 3.4 3.3 0.5 3.8 6.5 2.0 1.4 Containers/chassis..... 31.6 33.5 4.9 38.4 44.9 11.6 12.7 Other.................. 3.4 3.2 0.6 3.8 4.1 1.3 0.9 ------ ------ ----- ------ ------ ------ ------ 37.4 49.4 7.4 56.8 62.4 17.2 18.1 Selling, general and administrative expenses: Direct expenses........ 15.2 13.0 1.8 14.8 15.7 4.2 4.3 Other overhead......... 0.1 0.1 -- 0.1 0.9 0.2 0.2 Corporate headquarters.......... 6.1 4.2 0.5 4.7 5.7 1.5 1.6 IT systems............. 4.2 6.7 0.9 7.6 7.3 2.0 2.0 Less reclassification to amortization....... -- -- -- -- (0.6) (0.1) (0.1) ------ ------ ----- ------ ------ ------ ------ 25.6 24.0 3.2 27.2 29.0 7.8 8.0 Amortization............ -- -- -- -- 0.6 0.1 0.1 Other (income)/expense.. (0.2) (2.6) -- (2.6) (0.7) -- -- ------ ------ ----- ------ ------ ------ ------ Income from operations........... 61.5 38.8 2.0 40.8 33.2 5.5 7.6 Interest income/(expense)....... -- (2.0) (0.3) (2.3) -- -- -- ------ ------ ----- ------ ------ ------ ------ Income before income taxes................ 61.5 36.8 1.7 38.5 33.2 5.5 7.6 Income taxes(1)......... (23.4) (13.9) (0.7) (14.6) (12.6) (2.0) (2.8) ------ ------ ----- ------ ------ ------ ------ Net income............ $ 38.1 $ 22.9 $ 1.0 $ 23.9 $ 20.6 $ 3.5 $ 4.8 ====== ====== ===== ====== ====== ====== ======
50 - -------- (1) Historically, Pacer International's operating results were included in the consolidated incomes tax returns of APL Limited. A charge in lieu of income taxes has been provided as if Pacer International were a separate taxpayer. (d) EBITDA represents income before income taxes, interest expense, depreciation and amortization and minority interest (payment-in-kind dividends on Pacer Logistics 7.5% Exchangeable Preferred Stock). EBITDA is presented because it is commonly used by certain investors to analyze and compare operating performance and to determine a company's ability to service and/or incur debt. However, EBITDA should not be considered in isolation or as a substitute for net income, cash flows or other income or cash flow data prepared in accordance with generally accepted accounting principles or as a measure of a company's profitability or liquidity. (e) EBITDA and Adjusted EBITDA margins are calculated as a percentage of net revenues. (f) Adjusted EBITDA represents pro forma EBITDA, adjusted as follows:
Year Ended Three Months Twelve Months December 31, Ended April 2, Ended April 2, 1998 1999 1999 ------------ -------------- -------------- Pro forma EBITDA................ $64,842 $16,485 $67,053 Adjustments to pro forma EBITDA: Elimination of allocated corporate costs, less estimated stand alone costs(1)...................... 2,915 904 3,015 Elimination of historical Pacer Logistics initial public offering costs(2)............. 1,500 -- 1,500 Elimination of historical Manufacturers Consolidation Service, Inc. initial public offering costs(3)............. 625 -- 625 ------- ------- ------- Adjusted EBITDA................. $69,882 $17,389 $72,193 ======= ======= =======
-------- (1) Reflects the elimination of historical corporate overhead costs allocated to Pacer International by APL Limited, less $2,785 of estimated actual costs expected to be incurred by Pacer International to perform the services as a stand alone entity. The estimated annual stand alone costs consists of salaries and benefits of $1,650, outside services and consulting fees of $650 and additional rent of $485. (2) Pacer Logistics incurred $1,500 of non-recurring costs related to an expected initial public offering in 1998. (3) Manufacturers Consolidation Service is a wholly owned subsidiary of Pacer Logistics. Manufacturers Consolidation Service, incurred $625 of non-recurring costs related to an expected initial public offering prior to its acquisition by Pacer Logistics in 1998. (g) In 1998, Pacer International purchased $39.7 million of railroad cars of which $23.4 million of expenditures were included in the twelve months ended April 2, 1999. In connection with our recapitalization and the Pacer Logistics transaction, we completed a sale and leaseback transaction for these railcars. Therefore, on a pro forma basis, the capital expenditure related to these railcars has been eliminated and direct operating expenses has been increased by $2.5 million and $2.2 million for the year ended December 25, 1998 and the twelve months ended April 2, 1999, respectively, to reflect the net impact on operating results of the additional lease expense less historical depreciation on these railcars. (h) Cash interest expense represents interest expense less amortization of debt issuance costs. (i) For purposes of the computation, the ratio of earnings to fixed charges has been calculated by dividing (i) income before income taxes plus fixed charges by (ii) fixed charges. Fixed charges are defined as interest expense plus the estimated interest portion of rent expense (assumed to be one-third of rent expense). (j) Total assets at April 3, 1998 were significantly higher as compared to December 25, 1998 and April 2, 1999 due to the timing of settlement of an intercompany receivable with APL Limited. 51 Pacer Logistics, Inc. The following table presents as of the dates and for the periods indicated (i) selected historical consolidated financial information and (ii) summary pro forma consolidated financial information, in each case after giving effect to our recapitalization and the Pacer Logistics transaction. The selected historical data for the years ended December 31, 1998, 1996, 1995 and the periods January 1, 1997 to March 31, 1997 and March 31, 1997 to December 31, 1997 have been derived from and should be read in conjunction with, the audited financial statements (including the notes thereto) of Pacer Logistics appearing in this prospectus. The financial data as of December 31, 1995 and 1994 and March 31, 1999 and for the year ended December 31, 1994 and for the three months ended March 31, 1999 and 1998 have been derived from Pacer Logistics' unaudited financial statements and include, in the opinion of our management, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the data for such periods. The results of operations for the three months ended March 31, 1999 are not necessarily indicative of the results that can be expected for the entire year. Prior to March 31, 1997, Pacer Logistics was an operating division of the Union Pacific Railroad Company, and therefore is not comparable in all respects to the periods subsequent to March 31, 1997. The unaudited pro forma statement of operations and related information reflects our recapitalization and the Pacer Logistics transaction as if they had occurred at the beginning of the relevant period and excludes certain nonrecurring items directly attributable to our recapitalization and the Pacer Logistics transaction. The pro forma adjustments were applied to the historical financial statements to reflect and account for our recapitalization and the Pacer Logistics transaction. The pro forma financial information does not purport to represent what Pacer Logistics' financial position or results of operations would have actually been had our recapitalization and the Pacer Logistics transaction in fact occurred on the assumed dates or to project Pacer Logistics' financial position or results of operations for any future date or period. The following table should also be read in conjunction with "Unaudited Pro Forma Consolidated Financial Statements" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."
Pacer Logistics Historical ---------------------------------------------------------------------------------- The Predecessor (a) The Company (a) ------------------------------------ --------------------------------------------- Pro Forma (b) ------------------------------------ For the For the For the Fiscal Years Period Period For the For the Three Ended January 1, March 31, Fiscal Months Ended ------------------------ 1997 to 1997 to Year ----------------------- March 31, December 31, Ended March 31, March 31, 1994 1995 1996 1997 1997 1998 1998 1999 ----------- ----- ----- ---------- ------------ ------- ----------- ----------- (unaudited) (unaudited) (unaudited) (in millions, except ratios and statistical data) Statement of Operations Data (c): Gross revenues.. $75.9 $78.3 $86.8 $19.5 $81.1 $252.8 $50.4 $ 89.9 Cost of purchased transportation and services... 64.8 65.9 73.1 16.5 68.7 211.2 42.0 75.2 Net revenues.... 11.1 12.4 13.7 3.0 12.4 41.5 8.4 14.7 Income from operations..... 3.7 3.6 3.5 0.2 3.2 10.3 2.4 3.7 Income before extraordinary loss........... 2.7 3.0 3.0 0.1 1.5 4.3 1.1 1.5 Other Financial Data: EBITDA (d)...... $ 3.9 $ 3.7 $ 3.6 $ 0.2 $ 3.6 $ 12.4 $ 2.7 $ 4.5 EBITDA margin (e)............ 35.1% 29.8% 26.3% 6.7% 29.0% 29.9% 32.1% 30.6% Adjusted EBITDA (f)............ Adjusted EBITDA margin (e)..... Depreciation.... $ 0.2 $ 0.1 $ 0.1 -- $ 0.1 $ 0.7 $ 0.1 $ 0.3 Amortization.... -- -- -- -- 0.3 1.3 0.2 0.5 Capital expenditures... -- -- 0.2 0.1 0.4 1.7 0.4 0.4 Interest expense........ -- -- -- -- 0.7 2.9 0.6 1.1 Adjusted EBITDA to interest expense........ Balance Sheet Data (at period end): Total assets (g)............ $31.6 $32.3 $37.6 $11.4 $57.1 $113.9 $56.1 $111.1 Total debt and capital leases......... -- -- -- -- 26.9 53.3 24.6 50.4 For the For the For the Three Twelve Fiscal Year Months Months Ended Ended Ended ------------ ----------- ----------- December 31, March 31, March 31, 1998 1999 1999 ------------ ----------- ----------- (unaudited) (unaudited) (unaudited) Statement of Operations Data (c): Gross revenues.. $408.6 $95.2 $403.2 Cost of purchased transportation and services... 346.5 79.7 341.1 Net revenues.... 62.1 15.5 62.1 Income from operations..... 13.9 4.1 13.8 Income before extraordinary loss........... 5.1 1.6 5.1 Other Financial Data: EBITDA (d)...... $ 17.0 $ 4.9 $ 17.0 EBITDA margin (e)............ 27.4% 31.6% 27.4% Adjusted EBITDA (f)............ $ 19.1 $ 4.9 $ 19.1 Adjusted EBITDA margin (e)..... 30.8% 31.6% 30.8% Depreciation.... $ 1.1 $ 0.3 $ 1.1 Amortization.... 2.1 0.5 2.1 Capital expenditures... Interest expense........ 4.8 1.3 4.8 Adjusted EBITDA to interest expense........ 4.0x 3.8x 4.0x Balance Sheet Data (at period end): Total assets (g)............ Total debt and capital leases.........
52 - ------- (a) The information set forth above as the Predecessor includes the accounts of Pacific Motor Transport Company prior to the management buyout on March 31, 1997. Pacer Logistics includes the accounts of Pacific Motor Transport Company acquired in the management buyout, after purchase accounting adjustments, and the accounts of all acquisitions Pacer Logistics has made subsequent to their acquisition date. (b) The pro forma information gives effect to the acquisitions as if they were completed on the first day of the periods presented. See "Unaudited Consolidated Pro Forma Financial Information." (c) The following information for the full year 1997 has been presented for comparative purposes only and is the combination of the January 1, 1997 to March 31, 1997 period and the March 31, 1997 to December 31, 1997 period. As a result of the change in ownership of Pacer Logistics, these numbers are not indicative of what the full year 1997 was or would have been, if the changes in ownership had not occurred.
1997 ------ Gross revenues........................ $100.6 Cost of purchased transportation and services............................. 85.2 Net revenues.......................... 15.4 Income from operations................ 3.4 Income before extraordinary loss...... 1.6 EBITDA (d)............................ 3.8 EBITDA margin (e)..................... 24.7%
(d) EBITDA represents income before income taxes, interest expense, depreciation and amortization and minority interest (payment-in-kind dividends on Pacer Logistics 7.5% Exchangeable Preferred Stock). EBITDA is presented because it is commonly used by certain investors to analyze and compare operating performance and to determine a company's ability to service and/or incur debt. However, EBITDA should not be considered in isolation or as a substitute for net income, cash flows or other income or cash flow data prepared in accordance with generally accepted accounting principles or as a measure of a company's profitability or liquidity. (e) EBITDA and Adjusted EBITDA margins are calculated as a percentage of net revenues. (f) Adjusted EBITDA represents pro forma EBITDA, adjusted as follows:
Three Twelve Fiscal Year Months Months Ended Ended Ended December 31, March 31, March 31, 1998 1999 1999 ------------ --------- --------- Pro forma EBITDA.......................... $17.0 $4.9 $17.0 Adjustments to pro forma EBITDA: Elimination of historical Pacer Logistics initial public offering costs (1)....... 1.5 -- 1.5 Elimination of historical Manufacturers Consolidation Service, Inc. initial public offering costs (2)............... 0.6 -- 0.6 ----- ---- ----- Adjusted EBITDA........................... $19.1 $4.9 $19.1 ===== ==== =====
(1) Pacer Logistics incurred $1.5 million of non-recurring costs related to an expected initial public offering in 1998. (2) Manufacturers Consolidation Service is a wholly owned subsidiary of Pacer Logistics. Manufacturers Consolidation Service incurred $0.6 million of non-recurring costs related to an expected initial public offering prior to its acquisition by Pacer Logistics in 1998. (g) The total assets of Pacer Logistics for the fiscal years ended 1994 and 1995 (prior to the change in ownership of Pacer Logistics) have been derived from Pacer Logistics' unaudited consolidated financial statements. 53 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of financial condition and results of operations covers periods before the completion of our recapitalization and the Pacer Logistics transaction. In connection with the recapitalization and the Pacer Logistics transaction, we entered into financing arrangements and altered our capital structure. The results of operations and financial condition for the periods subsequent to the consummation of our recapitalization and the Pacer Logistics transaction will not necessarily be comparable to prior periods. The following should be read in conjunction with the "Unaudited Pro Forma Consolidated Financial Information," "Selected Historical and Pro Forma Consolidated Financial Information" and the audited financial statements and notes thereto included elsewhere in this prospectus. PACER INTERNATIONAL, INC. Overview Until November, 1998, APL Land Transport Services, Inc. was comprised of two operating divisions: the Stacktrain Services Division and the Automotive Division. Prior to May 1996, APL Land Transport Services, Inc. had a third operating division, Distribution Services. Effective November 20, 1998, the Automotive Division and remaining assets related to the 1996 sale of Distribution Services were transferred to APL Limited. On November 12, 1997 APL Limited was acquired by Neptune U.S.A., Inc., a Delaware corporation and an indirect, wholly-owned subsidiary of Neptune Orient Lines Limited, a Singapore corporation. In the acquisition, Neptune U.S.A., Inc. merged with and into APL Limited. The resulting company, APL Limited, is a subsidiary of Neptune Orient Lines Limited. The financial statements subsequent to November 12, 1997 include the "push down' effect of the purchase price allocation. Prior to November 13, 1997, the financial statements include the accounts of the Stacktrain Services division of APL Land Transport Services, Inc. We are the largest provider of intermodal rail service in North America that is not affiliated with a railroad company. We offer rail freight services by selling intermodal service to shippers while buying space on intermodal rail trains. Through long-term contracts and other operating arrangements with major rail carriers and using our large fleet of leased and owned equipment, we have access to a 50,000 mile North American rail network serving most major population and commercial centers in the United States, Canada and Mexico. The long-term operating arrangements with the rail carriers provide, among other things, for favorable rates, guaranteed minimum service levels, priority handling and the utilization of certain terminal facilities. We directly market our stacktrain services primarily to intermodal marketers which serve customers in various industries, including the automotive industry and shippers of refrigerated freight. We also directly serve customers in the ocean carrier industry. We provide rail transportation services to over 5,000 beneficial cargo owners. In addition, we have historically provided, and will continue to provide, stacktrain and equipment repositioning services for companies and operations that are affiliated with APL Limited. The size of our equipment fleet, among other things, provides a significant advantage in customer responsiveness and service reliability, which distinguishes us from our competitors. We maintain an extensive fleet of owned and leased railcars, containers and chassis, as follows:
December 27, 1996 December 26, 1997 December 25, 1998 ----------------- ----------------- ----------------- Railcars.................. 372 364 559 Containers................ 13,270 17,917 19,737 Chassis................... 13,968 16,807 18,497
54 The fleet of containers presented above represent the 48 and 53 foot containers and chassis intended specifically for the domestic market, which are either owned or otherwise available to us through a combination of long- and short-term leases. In addition, we have access to an extensive inventory of 20, 40 and 45 foot containers through a long-term container supply agreement with APL Limited. In connection with our recapitalization, we entered into a long- term sublet agreement with APL Limited giving us access to certain chassis to be used in our ocean carrier market segment. We provide APL Limited with equipment repositioning services through which we transport APL Limited's empty containers from destinations within North America to their West Coast points of origin. To the extent we are able to fill these empty containers with the westbound freight of other stacktrain customers, we receive compensation from both APL Limited for our repositioning service and from the other customers for shipment of their freight. Reposition payments from APL Limited totaled $15.7 million, $17.7 million and $20.0 million in 1996, 1997 and 1998, respectively. We expect to continue to increase the size of our domestic container fleet through a mix of long- and short-term leases. In 1998, we purchased 200 railcars for $39.7 million. In connection with our recapitalization, we completed a sale and leaseback transaction for all of the recently purchased railcars. The pro forma impact from the additional lease expense resulting from the sale and leaseback transaction is $3.5 million for the fiscal year ended December 25, 1998, however, elimination of historical railcar depreciation expense of $1.0 million for the same period partially offsets the additional lease expense. The overall freight rate environment in the rail and long haul truck industry influences the freight rates we are able to charge customers. As a user of the railroads' networks and facilities, our operating results and quality of customer service are directly impacted by the service provided by the railroads. The disruption of service in the U.S. railroad network beginning in 1997 adversely impacted the levels of service we were able to provide to our customers, as evidenced by the increase in average trip days of 16.0, 16.4 and 17.9 in 1996, 1997 and 1998, respectively. These operating issues resulted in (1) the loss of certain premium business, (2) price reductions on certain shipments to satisfy customer frustrations, and (3) less efficient utilization of our container fleet. The loss of certain premium business, such as our expedited services and refrigerated services negatively impacted both gross and net revenue as certain shipments were shifted by customers to more costly, yet more reliable over-the- road carriers. Despite the service disruption and delays, we were able to continue to grow our volumes through this period. To minimize the disruption to our customers, we added to our container fleet to ensure availability to support increased volumes. Although volumes increased in 1997 by 41,680 or 9.1% and in 1998 by 21,438 or 4.3%, the longer trip days negatively impacted operating results as average revenue per container declined while lease expense increased with the container fleet additions. The railroad service problems are being resolved by the railroads and our management believes that the intermodal industry will return to historical service levels, pricing and growth rates. Prior to our recapitalization, we participated in APL Limited's cash management plan through which our excess cash was advanced to APL Limited and our cash needs were funded by APL Limited. In addition, APL Limited provided us with information technology services for which we were allocated $4.2 million, $7.6 million and $7.3 million of APL Limited's costs in 1996, 1997 and 1998, respectively. We are in the process of negotiating a long-term agreement with APL Limited to continue to provide similar information technology services to us. According to a term sheet upon which such negotiations are based, the information technology services would be provided to us for an annual fee of $10.0 million. APL Limited also provided certain corporate administrative services to us for which we were allocated $6.1 million, $4.7 million and $5.7 million of APL Limited's total corporate costs in 1996, 1997 and 1998, respectively. We anticipate that the cost for similar administrative services as a stand-alone entity will be approximately $2.8 million per year. We also entered into an agreement with APL Limited to receive a $6.6 million management fee for services in 55 connection with the Stracktrain Services Agreement. We have also agreed with APL Limited that certain administrative services will continue to be provided by APL Limited on a per transaction basis for a transition period, expiring one year from the closing of our recapitalization or earlier as determined by us. As part of our recapitalization and the Pacer Logistics transaction, we reached an agreement with a supplier, which effectively provides us with $8.0 million in annual rate reductions. The cost savings and additional cost and income items discussed in the paragraph above, excluding the savings achieved from the elimination of allocated corporate overhead costs, net of estimated stand-alone costs, have been reflected in the unaudited pro forma consolidated statement of operations. Gross Revenues Our gross revenues are generated substantially through fees charged to customers for the transportation of freight. The growth of these revenues is primarily driven by increases in volume of freight shipped, as overall rates have historically remained relatively constant. The average rate is impacted by product mix, rail lanes utilized and market conditions. Also included in gross revenues are incentives paid by APL Limited for the repositioning of empty containers with domestic westbound loads. Reposition incentives growth is driven by the increase in APL Limited's shipping volumes from Asia to key population centers in North America, as well as our ability to fill APL Limited's empty containers with the westbound freight of other stacktrain customers. In addition, we will receive an annual management fee of $6.6 million for services in connection the Stacktrain Services Agreement. Cost of Purchased Transportation and Services/Net Revenues Our net revenues are the gross revenues less the costs of purchased transportation and services. The cost of purchased transportation and services consists primarily of the amounts charged by railroads and local trucking companies. In addition, terminal and cargo handling services represent the variable expenses directly associated with handling freight at a terminal location. The cost of these services is variable in nature and is based on the volume of freight shipped. Direct Operating Expenses Direct operating expenses are both fixed and variable expenses directly relating to the stacktrain operations and consist of equipment lease and depreciation expense, equipment maintenance and repair, fixed terminal and cargo handling expenses and other direct variable expenses. Our fleet of leased equipment is maintained through a variety of short- and long-term leases, many of which can be terminated without penalty in an economic downturn. Increases to our equipment fleet will primarily be through additional leases as the growth of our business dictates. Equipment maintenance and repair consist of the costs related to the upkeep of the equipment fleet, which can be considered semi-variable in nature, as a certain amount relates to the annual preventative maintenance costs in addition to amounts driven by fleet usage. Fixed terminal and cargo handling costs primarily relate to the fixed rent and storage expense charged to us by terminal operators and is expected to remain relatively fixed. Other variable expenses primarily include income received from users of our railcars in their operations, which has historically remained relatively constant. Historically, also included in other variable expenses are service credits from for-hire transportation providers, which effectively reduce our transportation costs. Selling, General and Administrative Expenses Selling, general and administrative expenses consist of allocated APL Limited's corporate and information technology expenses and direct administrative expenses, which primarily include payroll and fringe benefits and other overhead expenses. We estimate that our recurring annual cost for similar corporate administrative services, historically provided by APL Limited, will be $2.8 million on a stand-alone basis. In addition, we are in the process of negotiating a twenty-year agreement requiring APL Limited to continue to provide information technology services. See "Certain Agreements." 56 Results of Operations The following table sets forth certain condensed historical financial data for Pacer International, expressed as a percentage of net revenues for each of the most recent fiscal years and for the two most recent fiscal first quarters.
Fiscal Year Fiscal Year Fiscal Year 3 Months 3 Months Ended Ended Ended Ended Ended December 27, December 26, December 25, April 3, April 2, 1996 1997(2) 1998 1998 1999 ------------ ------------ ------------ ------------ ------------ (in millions, except statistical data) Gross revenues.......... $548.0 $577.1 $590.8 $150.2 $163.6 Cost of purchased transportation and services............... 423.7 454.9 466.3 119.6 129.8 ------ ------ ------ ------ ------ Net revenues............ 124.3 100.0% 122.2 100.0% 124.5 100.0% 30.6 100.0% 33.8 100.0% Expenses: Direct operating expenses.............. 37.4 30.1 56.8 46.5 62.4 50.1 17.2 56.2 18.1 53.6 Selling, general & administrative expenses.............. 25.6 20.6 27.2 22.3 29.0 23.3 7.8 25.5 8.0 23.7 Income from operations.. 61.5 49.5 40.8 33.4 33.2 26.7 5.5 18.0 7.6 22.5 Net income.............. 38.1 30.7 23.9 19.6 20.6 16.5 3.5 11.4 4.8 14.2 EBITDA(1)............... $ 65.6 52.8% $ 44.5 36.4% $ 39.8 32.0% $ 7.2 23.5% $ 9.4 27.8%
- -------- (1) See Note (b) in "Summary Unaudited Pro Forma Consolidated Financial Information" for the definition of EBITDA. (2) The fiscal year ended December 26, 1997 presented in the table above represents the combination of the accounts of the Stacktrain Services division of APL Land Transport Services, Inc. for the period from December 28, 1996 through November 12, 1997 and Pacer International from November 13, 1997 though December 26, 1997 and is presented only for comparative purposes. The results of operations of the predecessor period are not comparable to successor period as a result of the acquisition of APL Limited by Neptune Orient Lines Limited. This combination of the two fiscal periods is not necessarily indicative of what the results of Pacer International's operations would have been for the year. Three Months Ended April 2, 1999 Compared to the Three Months Ended April 3, 1998 Gross Revenues. Gross revenues increased $13.4 million, or 8.9%, from $150.2 million in first quarter 1998 to $163.6 million in first quarter 1999. Freight revenues accounted for $13.0 million of this growth with a 14,997, or 11.4%, increase in year over year volumes, partially offset by a slight decrease in the average rate per container primarily resulting from mix changes. Third- party domestic and third-party international business contributed to the growth with revenue increases of $8.4 million and $3.5 million, respectively, as a result of increased volumes of 10.9% and 20.4%, respectively. The increase in third party domestic volume is attributable to increased customer demand and to the improvement in the average trip days in February and March 1999 of 17.2 days and 17.1 days, respectively, compared to 17.5 days and 18.4 days for the same periods in 1998. Refrigerated Services business revenues declined by $1.0 million, or 49.6%, as a result of the loss of a large customer to over-the-road carriers. Reposition incentive revenues increased $0.5 million quarter over quarter as a result of increased APL Limited shipping volume and the continued trade imbalance. Net Revenues. Net revenues increased $3.2 million, or 10.5%, to $33.8 million or 20.7% of gross revenues in the first quarter 1999 from $30.6 million or 20.4% of gross revenues in first quarter 1998. The increase is primarily a result of the increased volumes discussed above. The increase in net revenues as a percentage of gross revenues is attributable to the third party domestic business, which benefited from a favorable mix in business as compared to the prior year quarter. Direct Operating Expenses. Direct operating expenses increased $0.9 million, or 5.2%, from $17.2 million in first quarter of 1998 to $18.1 million in first quarter 1999. As a result of the expansion of our extensive fleet of containers and chassis, lease expense increased by $1.1 million. This was offset by a reduction in railcar depreciation expense of $0.6 million due to a change in the estimated useful life of our railcars, in addition to a $0.4 million reduction in customer cargo claims. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $0.2 million, or 2.6%, to $8.0 million in 1999 from $7.8 million in 1998. Income from Operations. Operating income increased $2.1 million, or 38.2%, from $5.5 million, or 18.0%, of net revenues in 1998 to $7.6 million or 22.5% of net revenues due to the foregoing factors. 57 Net Income. Net income increased $1.3 million, or 37.1%, from $3.5 million in first quarter 1998 to $4.8 million in first quarter 1999, due to the increase in operating income and the related increase in income taxes. Year Ended December 25, 1998 Compared to the Year Ended December 26, 1997 The following discussion for the year ended December 26, 1997 has been presented for comparative purposes only and is the combination of the Stacktrain Services division of APL Land Transport Services, Inc. from December 28, 1996 to November 13, 1997 period and Pacer International from November 13, 1997 to December 26, 1997 period. As a result of the change in ownership of Pacer International, these numbers may not be indicative of what the full year 1997 was or would have been if the ownership change had not occurred. Gross Revenues. Gross revenues for 1998 increased $13.7 million to $590.8 million, or 2.4%, from $577.1 million in 1997. Freight revenues increased $10.0 million, or 1.8%, due to an increase in loads of 21,438, or 4.3%, offset by a slight decrease per load in the average freight rate as a result of product mix changes and the loss of certain premium business. The third-party domestic and third-party international business contributed with revenue increases of $17.0 million and $3.7 million, respectively, as a result of increased volumes of 7.9% and 11.7%, respectively, partially attributable to the additional 2,000 53-foot containers which were leased during 1998, and the strong import market positively impacting the third-party international business. The automotive and reefer business revenues declined $10.6 million primarily as a result of the rail service problems, as the reefer business is considered premium business and time sensitive. The type of automotive business that declined was primarily the time sensitive "Just-In-Time" business, which was lost to over-the-road truck transporters. Historically, our rates have been impacted by the rail service disruptions as certain expedited business, for which premium rates are charged, has been shifted by customers to more costly, yet more reliable over- the-road carriers. Reposition incentive revenues increased $2.3 million from 1997 to 1998 as a result of increased APL Limited shipping volume. Net Revenues. Net revenues increased $2.3 million to $124.5 million in 1998 from $122.2 million in 1997, as a result of the increased revenues discussed above. The net revenues as a percentage of gross revenues remained relatively constant in 1998 at 21.1% compared to 21.2% in 1997. Direct Operating Expenses. Direct operating costs increased $5.6 million, or 9.9%, to $62.4 million in 1998 from $56.8 million in 1997 due to increases in equipment lease expense of $6.4 million, railcar depreciation expense of $1.8 million and allocated maintenance and repair charges of $1.9 million, offset by a credit from a third-party transportation provider, to effectively reduce our third-party transportation costs, of $5.0 million. The additional lease expense primarily relates to the 2,000 additional 53- foot containers we leased in 1998 compared to 1997, which were delivered at various times throughout the year, with all of them in operation by the end of 1998. The additional containers were leased to fulfill customer demand during the period of rail service disruption. This increase in containers negatively impacted operating results as a result of the increased trip days combined with a decline in average revenue per container as previously discussed. In addition, we purchased 200 railcars in the first quarter of 1998 for $39.7 million, increasing depreciation expense in 1998. Historically, we were allocated maintenance and repair charges from APL Limited, based on a formula using the number of days the equipment was in use. The maintenance and repair charges increased in 1998 due to the increased volume of shipments in 1998 and the increased number of containers, railcars and chassis owned or leased by us compared to 1997. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $1.8 million, or 6.6%, in 1998 to $29.0 million compared to $27.2 million in 1997 primarily as a result of the total corporate expenses allocated to us from APL Limited increasing $1.0 million, and the increase in various direct selling, general and administrative expenses. Other Income and Expense. Other income decreased $1.9 million in 1998 to $0.7 million from $2.6 million in 1997 primarily attributed to a gain on the sale of certain operating equipment of $2.6 million in 1997 compared to a gain on the sale of certain equipment of $0.4 million in 1998. 58 Income From Operations. Operating income decreased $7.6 million in 1998 to $33.2 million or 26.7% of net revenues from $40.8 million or 33.4% in 1997 due to the foregoing factors. Interest expense. Interest expense decreased $2.3 million to $0.0 in 1998 due to reduced intercompany borrowings from APL Limited in 1998. Income taxes. Income taxes decreased $2.0 million in 1998 to $12.6 million compared to $14.6 million in 1997, as a result of the decrease in income before income taxes from 1997 to 1998. Year Ended December 25, 1997 Compared to the Year Ended December 27, 1996 Gross Revenues. Gross revenues increased $29.1 million to $577.1 million in 1997 from $548.0 million in 1996, or 5.3%, as a result of a 9.1% increase in container volume compared to 1996. Container volume increased by 41,680 containers to 501,523 in 1997 compared to 459,843 in 1996. The average revenue per container decreased 2.8% in 1997, primarily as a result of losing certain premium business to the trucking industry because of the railroad service problems beginning in the last four months of 1997. Third-party domestic business contributed to $5.4 million of the revenue increase as the volumes increased 6.3% from 1996 levels and average per container rates declined 3.4% due primarily to a shift in product mix and the loss of premium business. The automotive business revenues increased $11.5 million as a result of a 10.1% increase in container volume. Third-party-international business revenues increased $11.0 million as a result of a 14.7% increase in volume, which is attributed to the continued import volumes positively impacting the industry. Net Revenues. Net revenues declined $2.1 million, or 1.7%, in 1997 to $122.2 million from $124.3 million in 1996, or 21.2%, of gross revenues in 1997 compared to 22.7% of gross revenues in 1996. The net revenues were negatively impacted by higher transportation costs and a decrease in average rates per container as discussed above. The higher transportation costs were attributable to a shift in the shipping lanes utilized. Direct Operating Expenses. Direct operating expenses increased $19.4 million, or 51.9%, in 1997 to $56.8 million from $37.4 million in 1996. The increase is due to additional container and chassis lease expense of $8.8 million in 1997, an increase in allocated equipment maintenance and repair expenses of $1.3 million and a decrease in service penalty income from the railroads of $7.9 million. The increased lease expense is associated with the additional containers and chassis being leased in 1997. We had 27,479 container and chassis leased at December 26, 1997 compared to 19,310 at December 27, 1996. The additional containers were leased to fulfill customer demand during the period of rail service disruption. This increase in containers negatively impacted operating results as a result of the increased trip days combined with a decline in average revenue per container as previously discussed. The increase in equipment maintenance and repair expense is directly related to the increase in the containers and chassis fleet in 1997. In 1996, we received a $7.9 million credit from a transportation supplier for deficient service levels, as provided for in the contract between us and the transportation supplier. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $1.6 million, or 6.3%, in 1997 to $27.2 million from $25.6 million in 1996. The increase is due to the total increase in allocated corporate and information technology costs of $2.0 million to $12.3 million from $10.3 million in 1996 which is primarily attributable to APL Limited's implementation of a new information technology system, specifically for us. Other Income and Expense. Other income increased $2.4 million in 1997 to $2.6 million in 1997 from $0.2 million in 1996 as a result of our recording a $2.6 million gain on sale of certain operating equipment in 1997. Income From Operations. Operating income declined $20.7 million, or 33.7%, to $40.8 million, or 33.4%, of net revenues in 1997 from $61.5 million, or 49.5%, of net revenues in 1996 due to the foregoing factors. 59 Interest Expense. Interest expense increased $2.3 million in 1997 from $0.0 in 1996 due to increased intercompany borrowings in 1997. Income Taxes. Income taxes decreased $8.8 million or 37.6% in 1997 to $14.6 million from $23.4 million in 1996, as a result of the decrease in income before income taxes in 1997 from 1996. Liquidity and Capital Resources Historical Historically, we have used cash generated from operations for seasonal working capital purposes, to fund capital expenditures and repay intercompany debt. We generated net cash from operations of $17.4 million, $30.9 million and $31.8 million in 1996, 1997 and 1998, respectively, and $(60.6) million and $1.5 million in the first three months of 1998 and 1999, respectively. The increase in net cash provided by operating activities from 1996 to 1997 is attributable to a significant increase in accounts receivable in 1996 as a result of the sale of APL Limited's retail intermodal marketing operations to a third-party customer and therefore, the settlement timing of receivables was impacted. Additionally, the $(60.6) million net use of operating cash is the result of the timing of the settlement of intercompany receivables between APL Limited and us. Our excess cash from operations was historically remitted to our parent, APL Limited through our participation in the APL Limited cash management plan. If cash from operations were insufficient to fund capital expenditures, we borrowed the required cash from APL Limited. Interest expense was charged to us at a historical average borrowing rate for APL Limited. Net cash from operations in 1996 and 1997 was remitted to APL Limited. We primarily lease our fleet of operating equipment, however, capital expenditures have been historically funded through net cash from operations or a combination of cash from operations and intercompany borrowings. We purchased 200 railcars in 1998 for $39.7 million, of which $31.8 million was funded through operations and the remaining amount was funded by APL Limited. In connection with our recapitalization, we completed a sale and leaseback transaction for all the recently purchased railcars. The net impact on pro forma operating results from the additional lease expense, net of historical depreciation expense, as a result of the sale and leaseback transaction is $2.5 million. Post-Transactions Following our recapitalization and the Pacer Logistics transaction, our principal sources of liquidity are cash flow generated from combined operations and borrowings under our $100.0 million revolving credit facility. Our principal uses of capital are to meet debt service requirements, finance our strategic acquisitions and provide working capital, as needed. We do not expect to incur significant capital expenditures as additions to our equipment fleet will be through a mixture of long- and short-term operating leases. We expect that ongoing requirements for debt service, acquisitions and working capital will be funded by internally generated cash flow from the combined operations after the transactions and borrowings under our revolving credit facility. We incurred substantial indebtedness in connection with our recapitalization and the Pacer Logistics transaction. Following our recapitalization and the Pacer Logistics transaction, on a pro forma basis, we had approximately $285.0 million of indebtedness. Our debt service obligations could have important consequences to holders of the notes. See "Risk Factors." In connection with our recapitalization and the Pacer Logistics transaction, we entered into the Senior Credit Facilities, comprised of our $100.0 million revolving credit facility expiring in 2004 and a Term Loan facility aggregating $135.0 million, which matures in 2006. In general, the term loan and revolving credit facility bear interest at variable rates subject to increases or decreases based upon the achievement of certain financial ratios. Voluntary prepayments and commitment reductions will generally be permitted without premium or penalty, subject to certain conditions. Our credit facilities are generally guaranteed by all of our existing and future direct and indirect wholly-owned subsidiaries and are secured by certain liens on our properties and assets. Our credit facilities are subject to customary representations, warranties and covenants. See "Description of Our Credit Agreement." 60 Based upon the current level of operations and anticipated growth, including the Pacer Logistics operations and cash flow that management expects to be derived from those operations. We believe that operating cash flow and availability under our revolving credit facility will be adequate to meet our liquidity needs for the foreseeable future, although no assurance can be given in this regard. In connection with our recapitalization and the Pacer Logistics transaction, we incurred certain significant nonrecurring expenses (See "Unaudited Pro Forma Consolidated Financial Information"). We incurred approximately $8.2 million related to financing of our recapitalization and the Pacer Logistics transactions and $15.9 million in estimated transaction fees and expenses as a result of our recapitalization. Additionally, in connection with our recapitalization, a Section 338(h)(10) election was made to allow our recapitalization to be treated as an acquisition of assets for tax purposes. Accordingly, the assets were stepped-up to their fair market value for tax purposes. As a result, our income taxes payable will be offset by the $85.0 million deferred tax asset arising as a result of the step up. This will reduce cash payments for income taxes over the next fifteen years. Seasonality Our business is seasonal, and our quarterly revenues and profits historically have been lower during the first and second quarters of the year (January through June) and higher during the third and fourth quarters (July through December) due primarily to the retail industry's shipping requirements. Environmental We are subject to federal, state and local environmental regulations, including regulations relating to permitting requirements, wastewater discharges and underground storage tanks. We believe that we are in substantial compliance with these requirements and that we currently have no material environmental liabilities. Year 2000 Pursuant to an IT Supplemental Agreement, dated as of May 11, 1999 by and among APL Limited, Coyote Acquisition LLC and our company, we are currently completing negotiations of an Information Technology Outsourcing and License Agreement based upon a term sheet agreed by the parties. In accordance with the sheet, APL Limited will provide us with all necessary software, licenses and related services necessary to conduct the stacktrain business as it is currently being conducted and as it is enhanced pursuant to and during the term of the agreement. APL Limited will also be responsible for obtaining, maintaining, upgrading and replacing any software, equipment, facilities or personnel necessary in order to provide the services during the term of the agreement. The term of such agreement will be twenty years. Many computer systems in use today were designed and developed using two digits, rather than four, to specify the year. As a result, such systems will recognize the Year 2000 as "00". This could cause many computer applications to fail completely or to create erroneous results unless corrective measures are taken. APL Limited, and thus Pacer International, utilizes software and related computer technologies essential to its operations that could be affected by the Year 2000 issue. APL Limited has represented that it has devoted considerable personnel and resources to a comprehensive Year 2000 project that addresses mission-critical systems, infrastructure, vendors, suppliers and customers. Their goal is to minimize, as much as possible, any detrimental impact that the Year 2000 problem may have upon their ability to serve their clients and provide the services to us described in the Information Technology Outsourcing and Licensing Agreement term sheet. The fundamental approach of APL Limited is similar to those being employed by many organizations. The four key phases of APL Limited's approach are inventory assessment, remediation, testing and contingency planning. 61 APL Limited has represented that the inventory assessment phase relating to business systems and assets is virtually complete. APL Limited has further represented that change-control processes have been established in an effort to keep out non-compliant products or services and that appropriate language has been incorporated into all standard contracts. APL Limited has represented that the remediation phase of all critical mainframe applications was completed prior to the end of March 1999. APL Limited's Year 2000 project is also addressing other areas of the business environment including both IT and non-IT systems. APL Limited has represented that the remediation of all critical components was completed by the end of June 1999. Testing is a critical part of APL Limited's plan and is being conducted across all critical components utilizing comprehensive testing methods. APL Limited has represented that integrated testing began during the fourth quarter of 1998 and has targeted the third quarter of 1999 for completion of critical elements testing. The transportation industry is highly interconnected. Even after APL Limited's systems are converted, and even with APL Limited's efforts to coordinate Year 2000 solutions with third parties, APL Limited cannot be certain that it will not encounter a Year 2000 related system malfunction. Therefore, APL Limited has also represented that their Year 2000 program includes making detailed contingency plans for a variety of potential problems, ranging from information systems to vessel operations. Such plans can minimize, not eliminate any adverse impact on the business. The Information Technology Outsourcing and License Agreement term sheet contains customary representations and warranties, including, that the information technology, software, hardware and services being provided to us constitute all such items required to provide the information technology services necessary to run our business and relating to Year 2000 compliance of the software and hardware used in providing the services under the agreement. The term sheet also provides that APL Limited will indemnify us against breaches of these representations, losses resulting from claims brought by third parties alleging infringement of their intellectual property and losses associated with a failure of the information technology systems to operate that is either caused by APL Limited or covered by indemnification or warranties provided to APL Limited by responsible third parties. The Year 2000 problem also affects many of our major suppliers, including railroads, and customers, and our business could be disrupted if any of them fail to resolve their Year 2000 problems. Recent Accounting Pronouncements In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," modifying accounting and reporting standards for derivative instruments. We do not expect the effect of implementation of this standard to be significant. The AICPA has issued Statements of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." This statement was adopted for financial statements for fiscal years beginning after December 15, 1998 and did not have a material effect on the financial statements. In April 1998, the AcSEC issued Statement of Position 98-5 "Reporting on the Costs of Start-Up Activities." This statement was adopted for financial statements for fiscal years beginning after December 15, 1998 and did not have a material effect on the financial statements. The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and Related Information." Upon completion of the transactions, the Company will apply the provisions of this statement as applicable. 62 PACER LOGISTICS, INC. Overview Pacer Logistics' business consists primarily of (1) intermodal marketing, which involves the provision of brokerage and logistics services by coordinating the transportation of goods by truck and rail, (2) specialized trucking services, including flatbed heavy-haul trucking, drayage and cartage, and (3) other transportation services, such as freight consolidation and handling. As a non-asset-based service provider, Pacer Logistics is able to focus its efforts on providing value-added logistics solutions for its customers through its network of agents and independent contractors. Pacer Logistics primarily provides services to numerous global, national and regional manufacturers and retailers. PMT Holdings, Inc., a Delaware corporation, was formed on March 31, 1997 (inception), to acquire all of the capital stock of Pacific Motor Transport Company in a management buyout that was funded in part by Eos Partners, L.P. On March 31, 1997, PMT Holdings acquired all issued and outstanding shares of Pacific Motor Transport from Union Pacific Railroad Company and its subsidiaries in exchange for approximately $13.0 million in cash and warrants to purchase PMT Holdings common and preferred stock. Prior to the acquisition, Pacific Motor Transport was a provider of truckload freight services and intermodal marketing services. On December 16, 1997, PMT Holdings acquired all of the capital stock of Interstate Consolidation, Inc. and Interstate Consolidation Service, Inc. and its wholly owned subsidiary, Intermodal Container Service, Inc. for total consideration of $25.4 million including acquisition fees, consisting of $20.0 million in promissory notes and $5.4 million in cash and PMT Holdings stock. The Interstate companies are multipurpose providers of transportation services, including intermodal marketing, local trucking, and freight consolidation and handling. In May 1998, PMT Holdings was renamed Pacer International, Inc. and its subsidiaries reorganized. In connection with our recapitalization, Pacer International, Inc. was renamed Pacer Logistics, Inc. The name change has been given retroactive application in this discussion. On April 3, 1998 Pacer Logistics acquired all the stock of Intraco, Inc. for $1.9 million including acquisition fees, consisting of $0.5 million in cash and $1.4 million in Pacer Logistics stock. On June 5, 1998, Pacer Logistics acquired all of the capital stock of Cross Con Transport, Inc. and its subsidiary, Cross Con Terminals, Inc., in exchange for $16.4 million including acquisition fees, consisting of $11.6 million of cash and $4.8 million of Pacer Logistics stock. On July 25, 1998, Pacer Logistics acquired substantially all the assets of Professional Logistics Management Co., Inc. and 3PL Corporation, in exchange for $2.9 million in cash, including acquisition fees. On December 9, 1998, Pacer Logistics acquired all of the capital stock of Manufacturers Consolidation Service, Inc. and its subsidiaries, Levcon, Inc., MCS of Kansas, Inc. and Manufacturers Consolidated Service of Canada Inc. for $10.1 million in cash and assumed debt and acquisition fees. The Cross Con companies and the Manufacturers Consolidation Service companies are multipurpose providers of transportation services, including intermodal marketing and local trucking. Professional Logistics and 3PL are providers of logistics services and Intraco is involved in the transportation of equipment primarily for railroads. On April 20, 1999, Pacer Logistics acquired substantially all of the assets of Keystone Terminals, Inc. (DE) and Keystone Terminals, Inc. (NJ) in exchange for $8.25 million in cash. The Keystone companies are providers of transportation services. Gross Revenues Pacer Logistics' gross revenues are generated through fees charged for a broad portfolio of freight transportation services. Pacer Logistics' gross revenues are generated from its intermodal marketing and flatbed and specialized heavy-haul trucking services, augmented by local trucking, freight consolidation and handling, rail services and logistics outsourcing. Overall gross revenues for Pacer Logistics will be driven through its ability to market its broad array of transportation services to its existing customer base. Increases in gross 63 revenues from intermodal marketing are generated primarily from increased volumes, as rates are dependent upon product mix and transportation lane, which tend to remain relatively constant as customers' shipments tend to remain in similar lanes. The gross revenues from the flatbed and specialized heavy-haul segment are driven by the volume, length of haul and the rate per mile charged to the customer, which are dependent upon product mix. Local trucking services primarily support intermodal marketing and provide local transportation services to customers through independent operators. Revenues are driven primarily through increased volume. Pacer Logistics also provides a freight service in which it consolidates customer freight at loading docks and provides distribution services to specific customer locations throughout the United States. In addition to transporting freight, Pacer Logistics provides outsourcing services for customers' traffic departments and railcar repair and maintenance. Net Revenues Pacer Logistics' net revenues consist of the gross revenues earned from its third-party transportation services, net of the cost of purchased transportation services. Net revenues are driven by the mix of business services provided through its various services provided because net revenues as a percentage of gross revenues vary significantly based on the mix of services provided. Purchased transportation and services consists of amounts paid to third parties to provide services, such as, railroads, sub-contracted or in- house independent contractor truck drivers, freight terminal operators and dock workers. Third-party rail costs are charged through a contract maintained with the railroads and are dependent upon product mix and traffic lanes. Sub- contracted or independent operators may be paid a percentage of revenues, on a mileage basis or a fixed fee. Selling, General and Administrative Expenses Selling, general and administrative expenses relate to the costs of customer acquisition, billing, customer service and salaries and related expenses of marketing, as well as the executive and administrative staff's compensation, office expenses and professional fees. Pacer Logistics anticipates that it will incur increased overall selling related costs as it grows its operations, but that such costs will remain relatively consistent as a percentage of net revenues. The costs related to Pacer Logistics' corporate functions, such as administration, finance, legal, human resources and facilities will likely increase as the business grows, but will likely decrease as a percentage of net revenues as the business grows. Transaction Costs In connection with proposed initial public equity offering, Pacer Logistics and the Manufacturers Consolidation Service companies, prior to their acquisition by Pacer Logistics, incurred various non-recurring expenses associated directly with the offering. These are non-recurring expenses and are not expected to be incurred in the future. Depreciation and Amortization Depreciation and amortization consists of depreciation on office equipment and Pacer Logistics' owned transportation equipment and goodwill amortization related to historical acquisitions. Depreciation as a percentage of net revenues is historically low due to the low level of operating assets owned by Pacer Logistics, because of the level of reliance on third-party transportation providers. Pacer Logistics does not expect to significantly change its operating asset base. Results of Operations The following discussion of Pacer Logistics' results of operations covers the historical operating results for the periods presented plus a discussion of results as if all of the Pacer Logistics' acquisitions (excluding the Manufacturers Consolidation Service companies and the Keystone companies) were acquired at the beginning of the most recent fiscal year presented (referred to below as the "Integrated Company"). The following discussion of Pacer Logistics operating results refers to the income statements as historically presented without reclassifications which were made for pro forma presentation purposes. 64 Three Months Ended March 31, 1999 ("First Quarter 1999") Compared to the Three Months Ended March 31, 1998 ("First Quarter 1998") Gross Revenues. Gross revenues increased $39.5 million, or 78.4%, to $89.9 million in First Quarter 1999 from $50.4 million in First Quarter 1998. The increase in revenues was primarily the result of the acquisitions made by Pacer Logistics in 1998 and through internal growth. Gross revenues for the Integrated Company decreased 2.7% or $1.9 million. The decrease primarily results from a change in contractual and billing arrangements for logistics services, which has no effect on Pacer Logistics' net revenues. Net Revenues. Net revenues increased $6.3 million, or 75.0%, to $14.7 million in First Quarter 1999 from $8.4 million in First Quarter 1998. Net revenues as a percentage of gross revenues decreased to 16.4% in First Quarter 1999 from 16.7% in First Quarter 1998. The increase in net revenues is the result of the acquisitions throughout 1998. The net revenues percentage decrease reflects the lower margin business from acquisitions. Net revenues for the Integrated Company increased $0.2 million or 1.7%. The increase primarily results from increased freight handling services generated by servicing additional stores and locations for our existing customer base. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $4.7 million to $10.3 million in First Quarter 1999 from $5.6 million in First Quarter 1998. As a percentage of gross revenues, selling, general and administrative expenses increased to 11.5% in First Quarter 1999 from 11.1% in First Quarter 1998. The increase is due to additional salary and administrative costs associated with the acquisitions and growth of Pacer Logistics. Selling, general and administrative expense for the Integrated Company decreased slightly. Income From Operations. Operating income increased $1.3 million, or 54.2%, to $3.7 million and operating income for the Integrated Company increased $0.3 million or 9.7% to $3.4 million, as a result of the foregoing factors. Interest Expense. Net interest expense increased to $1.1 million in First Quarter 1999 from $0.6 million in First Quarter 1998. The increase is the result of increased borrowings to finance Pacer Logistics' acquisitions of the Interstate companies, Intraco, the Cross Con companies, Professional Logistics and the Manufacturers Consolidation Service companies. Income Taxes. Pacer Logistics' effective tax rate increased to 42.8% in First Quarter 1999 from 41.8% in First Quarter 1998. The increase is due primarily to the amortization of goodwill related to Pacer Logistics' acquisitions. Year Ended December 31, 1998 ("Fiscal 1998") Compared to Nine Months Ended December 31, 1997 ("Fiscal 1997") As a result of the management buyout in March 1997, the period ended December 31, 1997 consists of only nine months as compared to twelve months for the year ended December 31, 1998. For information purposes, year-to-year comparisons have also been provided. Gross Revenues. Revenues increased $171.7 million, or 211.7%, to $252.8 million in 1998 from $81.1 million in fiscal 1997. The increase in revenues was the result of the acquisitions made by Pacer Logistics in late 1997 and in 1998 and the inclusion of an additional quarter of revenues in 1998. Revenues increased $152.2 million, or 151.3%, to $252.8 million in the twelve month period ended December 31, 1998 from $100.6 million in the twelve month period ended December 31, 1997. Gross revenues for the Integrated Company increased $27.9 million, or 10.9%. The increase resulted from growth in flatbed services provided due to increased transportation of materials for a railroad customer, expansion of freight handling services provided by sub-contracting services for existing customers and the start-up of the railcar repair services provided in Long Beach. 65 Net Revenues. Net revenues increased $29.1 million, or 234.7%, to $41.5 million in 1998 from $12.4 million in fiscal 1997. Net revenues as a percentage of gross revenues increased to 16.4% in 1998 from 15.3% in fiscal 1997. The increase in net revenues is the result of the acquisitions made by Pacer Logistics in late 1997 and in 1998 and the inclusion of an additional quarter of revenues in 1998. The net revenue percentage increase reflects the impact from services provided to railroads in connection with their capital expenditure programs and the full year inclusion of higher-margin acquired businesses. Net revenues increased $26.1 million, or 169.5%, to $41.5 million in the twelve month period ended December 31, 1998 from $15.4 million in the twelve month period ended December 31, 1997. Net revenues for the Integrated Company increased $7.4 million or 18.9%. The increase in gross revenues noted above was related to the relatively high margin of the services provided which is the primary reason for the substantial percentage increase in net revenue. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $18.9 million to $27.7 million in 1998 from $8.8 million in fiscal 1997. As a percentage of gross revenues, selling, general and administrative expenses increased to 11.0% in 1998 from 10.8% in fiscal 1997. The increase is due to the additional quarter of selling, general and administrative costs in 1998 and to additional salary and administrative costs associated with the acquisitions and growth of Pacer Logistics. Selling, general and administrative expenses increased $16.6 million, or 149.5%, to $27.7 million in the twelve month period ended December 31, 1998 from $11.1 million in the twelve month period ended December 31, 1997. Selling, general and administrative expenses for the Integrated Company increased $3.8 million, or 12.8%. The increase primarily results from increases in variable costs associated with the increase in net revenues and additional corporate overhead. Transaction Costs. During 1998, Pacer Logistics incurred transaction costs of $1.5 million associated with the preparation and filing of a registration statement on Form S-1 related to an initial public offering of common stock. The initial public offering was not completed due to prevailing market conditions in the equity markets at the time of the proposed offering; accordingly, the costs were charged off in 1998. Income From Operations. Operating income increased $7.1 million or 221.9% to $10.3 million in 1998 from $3.2 million in fiscal 1997. Operating income increased $6.9 million, or 202.9%, to $10.3 million in 1998 from $3.4 million in the twelve months ended December 31, 1997. Operating income for the Integrated Company increased $3.6 million or 37.9% as a result of the foregoing factors. Interest Expense. Net interest expense increased to $2.9 million in 1998 from $0.7 million in fiscal 1997. The increase is the result of increased borrowings to finance Pacer Logistics' acquisitions of the Interstate companies, Intraco, the Cross Con companies, Professional Logistics and the Manufacturers Consolidation Service companies. Income Taxes. Pacer Logistics' effective tax rate increased to 42.7% in 1998 from 38.9% in fiscal 1997. The increase is due primarily to the amortization of goodwill related to acquisitions made during the period. Nine Months Ended December 31, 1997 (Fiscal 1997) Compared to Year Ended December 31, 1996 (1996) As a result of the management buyout in March 1997, the period ended December 31, 1997 consists of only nine months as compared to twelve months for the year ended December 31, 1996. For information purposes, year-to-year comparisons have also been provided. Gross Revenues. Gross revenues decreased $5.7 million, or 6.6%, to $81.1 million in Fiscal 1997 from $86.8 million in 1996. This decrease is due to the additional quarter of revenues in 1996, which is partially offset by additional business with Union Pacific in Fiscal 1997. Revenues increased $13.8 million, or 15.9%, to $100.6 million in the twelve month period ended December 31, 1997 compared to $86.8 million in the twelve month period ended December 31, 1996. The increase results primarily from volume growth in rail brokerage and flatbed trucking services. Net Revenues. Net revenues decreased $1.3 million, or 9.5%, to $12.4 million in Fiscal 1997 from $13.7 million in 1996. Net revenues as a percentage of gross revenues decreased to 15.3% in Fiscal 1997 from 15.8% in 1996. The decrease is due to the additional quarter of revenues in 1996, which is partially offset by additional business with Union Pacific in Fiscal 1997. 66 The net revenues percentage decrease reflects a marginal increase in the cost of purchased transportation. Net revenues increased $1.7 million, or 12.4%, to $15.4 million in the twelve month period ended December 31, 1997 from $13.7 million in the twelve month period ended December 31, 1996. Net revenues for the Integrated Company increased $4.3 million, or 12.3%. The increase is primarily attributable to the growth in gross revenues for rail brokerage and flatbed trucking. Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased $1.2 million to $8.8 million from $10.0 million in 1996. As a percentage of gross revenues, selling, general and administrative expenses decreased to 10.8% in Fiscal 1997 from 11.5% in 1996. The decrease is due to the additional quarter of selling, general and administrative expenses included in 1996, which is partially offset by additional salary and administrative expenses associated with the growth of Pacer Logistics and its management team after the management buyout. Selling, general and administrative expenses increased $1.1 million, or 11.0% to $11.1 million in the twelve month period ended December 31, 1997 as compared to $10.0 million in the twelve month period ended December 31, 1996. Selling, general and administrative expenses for the Integrated Company increased $2.0 million or 7.2%. The increase is primarily attributable to increases in variable costs associated with the increase in rail brokerage and flatbed trucking services provided. Income From Operations. Operating income decreased $0.3 million, or 8.6%, to $3.2 million in fiscal 1997 from $3.5 million in 1996. Operating income decreased $0.1 million, or 2.9%, to $3.4 million in the twelve months ended December 31, 1997 from $3.5 million in 1996. Operating income for the Integrated Company increased $2.3 million or 31.9%, as a result of the foregoing factors. Interest Expense (Income). Net interest expense increased $2.1 million to $0.7 million in Fiscal 1997 from $1.4 million in net interest income in 1996. The increase is a result of increased borrowings to finance the management buyout and the acquisition of Interstate. Income Taxes. Pacer Logistics' effective tax rate remained relatively unchanged in Fiscal 1997 as compared to 1996. Liquidity and Capital Resources Since its inception on March 31, 1997, Pacer Logistics' cash needs have been primarily to fund acquisitions, working capital and, on a limited basis, capital expenditures. Pacer Logistics' primary sources of capital have been the borrowings under bank credit agreements, and in Fiscal 1997, cash raised in connection with the formation of Pacer Logistics. In addition, Pacer Logistics has issued shares of common stock as part of the consideration in certain acquisitions. Pacer Logistics uses its bank credit agreement to manage its cash flow. At March 31, 1999 and December 31, 1998, availability under its bank credit agreement was $17.7 million and $17.6 million, respectively, and Pacer Logistics' working capital was $1.5 million and $0.4 million, respectively. Net cash provided from operating activities was $1.0 and $2.7 million during the First Quarter 1999 and First Quarter 1998, respectively. The decrease in cash provided was primarily due to a reduction in accrued expenses, partially offset by an increase in income taxes payable. Net cash provided by operating activities for 1998 was $0.8 million, and the net cash used in operating activities for Fiscal 1997 was $2.7 million. The increase in cash provided from operating activities in 1998 as compared to Fiscal 1997 is due primarily to higher net income in 1998. Net cash provided from (used in) investing activities was $2.6 million and $(0.4) million in the First Quarter 1999 and First Quarter 1998, respectively. Pacer Logistics received $3.0 million from the sale of trucks acquired as part of the acquisition of the Manufacturers Consolidation Service companies. Net cash used in investing activities was $20.3 million and $10.0 million in 1998 and Fiscal 1997, respectively. Net cash used in investing activities was used primarily to finance the acquisitions of Intraco, the Cross Con companies, Professional Logistics, 3PL and the Manufacturers Consolidation Service companies in 1998 and the management buyout and the acquisition of the Interstate companies in Fiscal 1997. 67 Net cash used in financing activities in First Quarter 1999 and First Quarter 1998 was $3.6 million and $2.3 million, respectively, principally used to repay outstanding indebtedness. Net cash provided by financing activities was $19.4 million and $11.2 million during 1998 and Fiscal 1997, respectively. The net cash provided by financing activities in 1998 was provided by borrowings under Pacer Logistics' bank credit agreements. In Fiscal 1997, net cash provided by financing activities was provided by borrowings under Pacer Logistics' bank credit agreements and cash raised in connection with the formation of Pacer Logistics. On December 7, 1998, Pacer Logistics entered into a bank credit agreement consisting of a term loan of $32.0 million and revolving credit facility of $38.0 million. In conjunction with the credit agreement, the amounts outstanding under the term loan of $20.0 million and $12.0 million line of credit were repaid. Year 2000 The Year 2000 issue arises because many computerized systems use two digit dates instead of four digits to identify the year, causing some date sensitive systems to incorrectly recognize and process information. Resolution of the Year 2000 problem is among Pacer Logistics' highest priorities, and a task force been established to address its many aspects. The task force activities relate to the following four business categories: . Infrastructure, consisting of computing systems hardware and systems software. . Applications Software, consisting of vendor provided or custom written operations software. . Embedded Processors in equipment used by the Company, consisting of communications equipment, voice and data, and other miscellaneous systems. . Significant third party vendors and service providers and customers. Pacer Logistics has developed a five-phase approach to resolving the Year 2000 issue. The phases are: . Inventory of all data-sensitive systems and equipment, . Assessing compliance and assigning priorities to items identified as not being compliant, . Remediation of non-compliant items, . Testing and certification of systems and equipment being brought into compliance, and . Contingency planning to provide for continuity of business activities in the event of unanticipated failures, whether of internal or external origin. Approximately 90% of the actions required relating to Infrastructure have been completed as of the end of First Quarter, 1999. All such components are expected to be fully compliant by the end of the third quarter of 1999. Testing and certification will continue into the second half of 1999. Remediation is underway for all Applications Software currently in use by the Company. At the end of First Quarter 1999 approximately 75% of all vendor provided software in use is represented by the vendor to be compliant. The remaining percentage is being replaced. Custom written software that is not compliant has in most instances been or is being replaced by vendor-provided software that is compliant. In certain cases, custom written software is being internally brought into compliance. Testing and certification is currently in process. Remediation will continue into the third quarter. Inventories of Embedded Processors have been reviewed and non-compliant items have been identified for remediation. Activities are underway upgrading or replacement as required. This activity should be complete by the end of the third quarter of 1999. 68 Pacer Logistics has initiated formal communications with all of its significant vendors and customers, with special attention being directed toward electronic business partnerships, to determine vulnerability to those third parties' failure to remediate their Year 2000 issues. This process is ongoing and will continue into the second half of 1999. Although Pacer Logistics is striving to assure that its products and services are Year 2000 ready, Pacer Logistics cannot guarantee that all systems and services will function without error before, at or after December 31, 1999. Service may still be affected by the performance of third parties with which Pacer Logistics does business, or exchanges information. We believe, however, that our efforts will avoid significant problems and will enable us to rapidly address and correct any problems that do arise. 69 BUSINESS Overview We are a leading freight transportation and logistics provider, offering a broad array of services to facilitate the movement of freight from origin to destination. We believe, as one of the largest transporters of intermodal freight in North America, we controlled approximately 23.0% of all domestic intermodal containers in 1998. We are also the third largest intermodal marketing company in the United States, as measured by intermodal rail revenues. Intermodal transportation is the movement of freight via trailer or container using two or more transportation modes. Intermodal transportation nearly always includes a rail and truck segment. An intermodal marketing company arranges intermodal transportation for global, national and regional retailers and manufacturers. Our pro forma gross revenues and Adjusted EBITDA were $987.4 million and $72.2 million, respectively, for the twelve month period ended April 2, 1999. Through implementation of our unique business model, we believe we maintain an advantage over our competitors by providing our customers with access to: . a low cost single-source package of integrated transportation services; . our coast to coast land transportation network with priority handling status; . one of the largest container and chassis fleets in the industry; and . sophisticated information systems. Through our stacktrain business, we are the largest provider of intermodal rail service in North America that is not affiliated with an individual railroad company. Stacktrain service is the movement of freight in containers stacked two high on railcars. Through this business, we provide our customers with rail capacity, equipment and shipment tracking and control on a nationwide basis. We operate one of the industry's largest fleets of stacktrain equipment, including railcars, containers and chassis. Through contracts with major rail carriers and our access to sophisticated proprietary information systems, we operate our equipment over a 50,000 mile rail network. We benefit from having developed close working relationships with the railroads and we are the single largest customer of our primary rail carrier, historically representing approximately 20% of its intermodal revenues. In the past, during periods of equipment scarcity and network bottlenecks, we have benefited from our strong relationships with our rail carriers and capitalized on our priority handling status with such carriers. In addition, our access to sophisticated information systems allows us to track shipments throughout our rail network and provide shippers with a level of service which we believe is unmatched in the industry. The breadth of our rail network, together with our access to such information systems, allows us to manage our fleet of equipment on a national basis and thereby maximize availability, utilization and reliability. On a pro forma basis from 1996 to 1998, we increased our intermodal shipments by an average of 12.6% per annum through the addition of new customers and increased volumes with existing customers. Complementing our stacktrain business, we offer a broad range of additional transportation services, including trucking, intermodal marketing and logistics services, to a broad range of shippers such as Sony, Ford Motor Company and Wal-Mart Stores. As an integrated provider of transportation services, we can optimize the flow of freight across multiple transportation modes or develop a unique package of customized transportation and logistics services to meet our customers' specific needs. As a single-source provider, we negotiate rail, truck and intermodal rates, determine the optimal route, electronically track shipments in transit, consolidate billing and handle claims of freight loss or damage on behalf of our customers, and manage the handling, consolidation and storage of freight throughout the process. Our size and scope allow us to provide a comprehensive product offering on a national basis and pass on volume rate savings and economies of scale to our customers. A significant portion of our intermodal, trucking, logistics and freight handling services is provided through a network of agents and independent contractors. These relationships allow us to control a large fleet of specialized equipment and provide our customers with a broad range of transportation services without 70 committing significant capital to the acquisition and maintenance of an extensive asset base. Our relatively low capital and working capital requirements and variable cost structure enable us to generate strong free cash flow in a variety of market conditions. We have an experienced management team with a strong record of successfully integrating businesses in the transportation industry. Donald C. Orris, our chairman, president and chief executive officer, was previously the chairman, president and chief executive officer of Pacer Logistics and was the president and chief operating officer of the Southern Pacific Transportation Company (now part of the Union Pacific Railroad Company). Mr. Orris also founded our stacktrain business in 1984 while he was an officer of APL Limited. After giving effect to our option plans and assuming the exchange of certain preferred stock of Pacer Logistics, Mr. Orris and other members of our senior management team and certain other employees will own approximately 29.0% of Pacer International's capital stock on a fully diluted basis. If the exchange of certain preferred stock of Pacer Logistics for common stock of Pacer International or the purchase by Pacer International of such preferred stock of Pacer Logistics with certain preferred stock of Pacer International does not occur, Mr. Orris and other members of our senior management team will remain holders of preferred stock of Pacer Logistics. See "Our Capital Stock." Competitive Strengths We believe our market leadership, strong historical financial performance and significant opportunities for continued growth and increased profitability are primarily attributable to the following competitive strengths: Leading Intermodal Shipper We believe, as one of the largest transporters of intermodal freight in North America, we controlled approximately 23.0% of all domestic intermodal containers in 1998. Our North American land transportation network spans over 50,000 miles and directly serves most major population and commercial centers. Due to our significant intermodal market share, we have developed close working relationships with major railroads, including long-term operating agreements with favorable rates, priority handling status and access to nationwide terminal facilities. In addition to our relationships with our rail providers, we maintained as of June 25, 1999 a fleet of 558 double stack railcars, 19,693 containers and 18,551 chassis, which are primarily leased, and have access to APL Limited's fleet of chassis and containers. We believe that the contract terms with our rail providers combined with our extensive fleet of equipment allow us to pass significant cost savings to our customers and provide them with a high degree of reliability and responsiveness. Strong Customer Base We have a strong, diverse customer base consisting of global, national and regional manufacturers and retailers, including numerous Fortune 500 companies such as Sony, Ford Motor Company and Wal-Mart Stores. We have served many of our customers for over 15 years and believe that the strength of our customer base is attributable to our customer-focused marketing and service philosophy. We create a customized package of integrated transportation services for many of our customers and seek to expand our customer relationships by matching each customer's transportation and logistics needs with our broad menu of service offerings, with many customers using more than one service. We believe that our customers will increasingly look to us as the industry's trend towards single- source outsourcing continues. Flexible Business Model We seek to limit the capital investment required to maintain and grow our business and, therefore, maximize our returns on invested capital. Our business model provides the following key benefits: . We have developed our transportation network through contracts and arrangements with various rail partners, trucking companies, independent contractors and agents and other providers thereby limiting our investment in equipment, facilities and working capital; . The majority of our equipment is leased based on flexible leasing arrangements, which contributes to our ability to maintain an 80%-90% variable cost structure; 71 . Favorable contractual terms with our rail and truck service providers due to our high shipment volume allow us to operate with favorable net working capital; and . An ability to generate strong free cash flow in a variety of market conditions. Counterbalanced Freight Flows We have a unique balance of domestic and internationally originating freight flow, which enables us to maximize the return on our intermodal equipment and negotiate incentives with our transportation providers. The majority of Asian exports to the United States which are transported by rail are moved from ports on the West Coast to population centers in the midwest and northeast regions. However, domestic railroad freight which originates in the United States moves predominantly westbound from eastern and midwestern production centers to consumption centers on the West Coast. Our access to APL Limited's international equipment delivered to the interior of the United States from trans-Pacific shipments allows us to further support our domestic westbound business. We are able to achieve high utilization rates and steady revenue production from our intermodal equipment due to our high volume of both eastbound and westbound shipments. Experienced Management Team with Substantial Equity Ownership We have an experienced management team with a strong record of successfully integrating businesses in the transportation industry. Our senior management team has an average of over 25 years of experience in the transportation and logistics industry, and we believe their knowledge and relationships within the industry provide us with a significant competitive advantage. After founding our stacktrain business in 1984 while at APL Limited, Mr. Orris and his management team managed the growth of the business and related operations to over $1.0 billion in annual revenues by 1990. In addition, over the past two years, Mr. Orris and his management team have successfully grown Pacer Logistics' 1996 EBITDA of $3.6 to 1998 Adjusted EBITDA of $19.1 million. After giving effect to our stock option plans and assuming the exchange of certain preferred stock of Pacer Logistics, Mr. Orris and other members of our senior management team and certain other employees will own approximately 29.0% of Pacer International capital stock on a fully diluted basis. Growth Strategy We have developed a strategy designed to increase revenues, cash flow and profitability while maximizing returns on invested capital. Our management team has established a history of internal growth. Our pro forma gross revenues and Adjusted EBITDA were $981.6 million and $69.9 million, respectively, for the fiscal year ended December 25, 1998. For the twelve month period ended April 2, 1999, our pro forma gross revenues and Adjusted EBITDA were $987.4 million and $72.2 million, respectively. The primary components of our growth strategy include: Capitalize on Stacktrain Growth Opportunities We believe that the stacktrain business, which has grown at a compound annual rate of 15.0% over the last decade, provides a significant opportunity for continued growth. We expect our stacktrain business to take additional market share from other forms of container and trailer transport due to economic and operational efficiencies offered by the stacktrain technology. In addition, recent consolidation and restructuring in the railroad industry caused an increase in the average duration of stacktrain shipments from origin to destination. We believe that this reduced level of service resulted in lost profit opportunities which can be recaptured as the railroad industry returns to historical service levels. We have also recently added additional 53-foot containers and chassis to our equipment fleet. This larger-sized equipment provides us with a cost-efficient capacity to capture additional load volume. In addition, we believe that our acquisition of the stacktrain business and its separation from APL Limited, an international shipping company, will lead to increased business from other international shipping companies who were historically reluctant to contract with a subsidiary of a direct competitor. Finally, our senior management team has extensive experience in the intermodal business and we believe they will be better able to capitalize quickly on growth opportunities by operating the stacktrain business independently from APL Limited. 72 Expand Service Offerings to Capitalize on Strong Logistics Industry Trends We believe it is important to meet the diverse needs of customers who are increasingly looking to outsource their transportation requirements. We intend to capitalize on the continuing trend of vendor consolidation and outsourcing by maintaining a broad range of service offerings and introducing new services to handle our customers' diverse transportation and logistics requirements. Our recent acquisitions have added rail-related logistics services and expanded our geographic coverage for our intermodal marketing capabilities. We believe that through our broad menu of existing service offerings and the development and acquisition of new service offerings we can continue to provide and expand our integrated transportation service on an efficient and cost effective basis. Increase Sales to Existing Customers We intend to increase our revenues by providing additional transportation services to existing customers. We believe that by offering a broad menu of services, we will be able to expand our relationships with our existing customers. Our strategy involves a continued focus on capturing additional freight volume from existing customers which is currently being shipped by long-haul trucking companies or intermodal competitors as well as providing logistics services. For example, while we have provided J.C. Penney with substantial local trucking services in Southern California for several years, J.C. Penney has recently awarded us a new contract providing for freight consolidation and handling in Southern California. Expand Our Customer Base We believe our national presence, large size and broad scope of services make us well positioned to capture an increasing number of customers seeking a single-source freight transportation and logistics provider. We intend to expand our customer base by leveraging our operating infrastructure and adding sales agents and independent contractors. We expect that expansion in these areas will increase our capacity to solicit and maintain customer relationships, thereby increasing our geographic scope and expanding our size and service offerings. In addition, we believe our stacktrain business is well- positioned to acquire new business from international shipping companies who were historically reluctant to utilize our stacktrain services when the business was owned by APL Limited, a direct competitor of such international shipping companies. Pursue Strategic Acquisitions As an additional component of our growth strategy, we intend to continue our disciplined acquisition program. For example, since Pacer Logistics' founding in 1997, Pacer Logistics has completed six acquisitions with a total transaction value, including debt assumed, of approximately $65.0 million, including transaction costs. Acquisition candidates typically will fall into one or more of the following three categories: . operations that expand our presence in a particular service category; . operations that expand our existing services in a new geographic area; or . operations that enable us to provide a new or expanded form of complementary services to our customer base. Due to the fragmented nature of the industry and the general industry trend toward consolidation, we believe there is increased pressure on these smaller transportation and logistics companies to consolidate. We intend to seek acquisition candidates with complementary management and operating philosophies and service capabilities that we can add to and integrate with our current menu of services. The Freight Transportation and Logistics Industry Overview The domestic freight transportation and logistics market includes the transport of goods made and consumed domestically, the domestic portion of the transport of international freight and the supply of logistics services such as warehousing and logistics administration. The total commercial freight transportation and 73 logistics market in 1997 was approximately $536.0 billion, representing over 6.0% of the U.S. economy measured as a percentage of gross national product. Providers of freight transportation services include private shippers who manage the transportation of their own freight, for-hire service providers such as over-the-road trucking companies and third-party transportation and logistics companies such as intermodel marketing companies. The bases of competition in the freight transportation industry are primarily cost, delivery time, reliability and precision of delivery and pick-up, as well as freight- specific requirements such as handling and temperature control. Transportation modes include rail, highway, water, air and pipeline transportation. Ground transportation is the largest component of the domestic freight transportation market, totaling approximately $409.0 billion in 1997. Ground transportation consists primarily of trucking and rail services, with a small portion related to pipeline transport. Transportation service offerings that utilize multiple modes of transportation are commonly known as intermodal. Our services are targeted at freight that is shipped within the United States by truck or rail or by intermodal transport between truck and rail. The commercial transportation and logistics market also includes several types of intermediary firms that facilitate the movement of freight by providing services such as logistics, warehousing and intermodal marketing. Intermodal marketing companies sell intermodal service to shippers while buying space on intermodal rail trains. These companies provide a link between intermodal rail service providers and a significant number of shippers and often provide additional transportation and logistical services such as consolidation and warehousing. In recent years, many sectors of the transportation industry have experienced a trend toward consolidation. Increasingly, providers of transportation services are seeking to use information technology and customized service packages to offer their customers solutions to broader transportation-related concerns. Since 1992, the third party transportation industry has grown at a compound annual rate in excess of 20%, as compared to 3% per annum growth for the remainder of the domestic freight transportation industry as a whole, as shippers have increasingly outsourced their transportation requirements. The U.S. market for third-party transportation services is highly fragmented, however, consolidation is accelerating as shippers seek single-service providers to merge all aspects of freight transportation and logistics management. Intermodal/Stacktrain Intermodal transportation is the movement of freight from origin to destination via trailer or container using two or more transportation modes. Intermodal transportation nearly always includes a rail and truck segment. Rail transportation is the primary mode for the movement of intermodal freight with truckers typically providing transportation at the points of origin and destination. Intermodal transportation addresses certain of the problems of traditional rail service because the use of multiple modes of transit allows for "door-to-door" transportation in a competitive manner. The intermodal market currently comprises approximately $10.0 billion, or 2.3%, of the total domestic freight market excluding logistics services such as warehousing and logistics administration. From 1980 to 1997, railroad intermodal traffic increased at a compound annual rate of 6.3% while overall rail traffic grew only 2.3% compounded annually. In 1998, total intermodal shipments declined 1.0% due to a decline in the intermodal transport of truck trailers on railroad flatcars. However, the shipment of intermodal freight in containers, which constitutes all of our stacktrain business, increased 3.3% in 1998. The decline in the intermodal transport of truck-trailers was primarily attributable to rail service disruptions related to consolidation and restructuring in the rail industry. These service problems are being resolved by the railroads and management believes that the intermodal industry will return to historical growth rates for both containers and trailers. In 1997, approximately $6.0 billion, or 18%, of railroads' total revenues were generated from intermodal shipments. As intermodal transportation has increased as a percentage of railroad revenues and volume, railroads have made significant capital expenditures upgrading track and equipment to increase the efficiency of intermodal service. Despite rail service disruptions in 1997 and 1998, the industry's general trend towards consolidation, cost reduction and improved technology are expected to yield improved process management, 74 asset utilization and service quality and reliability. We anticipate that these improvements will be passed through to intermodal service. In addition, the increased spending on railroad infrastructure is expected to further improve the ability of intermodal rail transport to compete with motor carriers. Intermodal transportation has benefited from the introduction of stacktrain service, consisting of the movement of cargo containers stacked two high on special rail cars. Stacktrain service significantly improves the efficiency of intermodal transportation by increasing capacity at low incremental cost without sacrificing quality of service. For both international and domestic freight, stacktrain service has grown faster than intermodal freight transportation generally, with revenues for domestic stacktrain services growing at a compound annual rate of 15.0% over the last decade to approximately $3.6 billion in 1998. With approximately 58.4% of our 1998 pro forma gross revenues generated by our stacktrain operations, we believe we are well positioned to take advantage of continued growth in the intermodal transportation sector. In the intermodal sector, railroads and shippers rely on intermodal marketing companies which currently handle 60.0% to 70.0% of all intermodal shipments. An intermodal marketing company arranges intermodal transportation for global, national and regional retailers and manufacturers. The intermodal marketing industry originated because railroads chose not to invest in the infrastructure and resources needed to market their intermodal services. Intermodal marketing companies pass on the economies of scale attributable to volume purchasing arrangements to shippers and provide shippers access to large equipment pools. In addition, intermodal marketing companies generally have superior information systems and can take full responsibility for shipments that may move among numerous railroads or truckers while in transit. Trucking The trucking segment of the transportation industry generated revenues of approximately $347.0 billion in 1997, or 79.0% of the total domestic freight transportation market excluding logistics services. The trucking market is comprised of private and for-hire fleets, handling either truckload or less- than-truckload shipments over various lengths of haul. Relative advantages of trucking versus other modes include flexibility of pickup, route, and delivery as well as relatively rapid delivery cycles. Trucking is often at a cost disadvantage versus other modes of transportation, such as rail, due to capacity limitations and high variable costs related to fuel and labor. However, trucking is often advantageous for shorter lengths of haul. Private fleets operated by shippers represent the largest sector of the non-local trucking industry, but has been losing market share to for-hire carriers since deregulation of the industry began in 1980. Shippers' increased focus on cost reduction and core competencies has led to an accelerated rate of growth of the for-hire trucking sector. The trucking industry is divided into the truckload and less-than-truckload sectors, both of which are highly fragmented. The truckload sector is composed primarily of specialized carriers operating in markets defined by the length of haul and the type of equipment utilized. Excluding private fleets, revenues in the truckload segment were $65.0 billion in 1997, generated by 50,000 carriers, approximately 95.0% of which had annual revenue of less than $1.0 million. A majority of the trucking services we provide are truckload services. Less-than- truckload carriers specialize in consolidating smaller shipments into truckload quantities for transportation across regional and national networks. Many less- than-truckload carriers have high fixed costs due to investments in infrastructure. Other less-than-truckload carriers utilize the fixed facilities of others and provide specialized outsourced services. The less-than-truckload market generated approximately $18.0 billion of revenues in 1997. We derive only a small portion of our revenues from less-than-truckload freight. Other elements of the trucking industry include truck brokerage and the use of independent contractors to provide services. Truck brokerage involves the outsourced arrangement of trucking services by a third-party with a licensed carrier on behalf of a shipper. Truck brokerage allows the provider to offer trucking services without actually having dedicated capacity. The use of independent contractors generally facilitates a low investment in transportation equipment and increased flexibility. 75 Railroads The railroad industry generated revenues of approximately $36.0 billion in 1997, or 8.0% of the total domestic freight transportation market excluding logistics services. The major participants in the rail market are Union Pacific ($9.8 billion of 1997 revenues), Burlington Northern Santa Fe ($8.4 billion), CSX Transportation ($5.0 billion) and Norfolk Southern ($4.2 billion). Rail transportation is particularly competitive for moving freight over long distances, due to its high capacity per shipment and low variable labor and fuel requirements per ton/mile. Rail service generally offers less flexibility relative to trucking because it is limited in its origin and destination points. The railroad industry has been characterized in recent years by several mergers, including Burlington Northern and Santa Fe in 1995, Union Pacific and Southern Pacific in 1996 and most recently, the division of Conrail between CSX and Norfolk Southern which was completed in June 1999. Integration problems have contributed to rail service disruptions following certain of the mergers. For example, following the Union Pacific/Southern Pacific merger, labor shortages and delayed integration of the companies' information systems contributed to misrouted and lost freight cars as well as general service delays. In addition, the Conrail/CSX/Norfolk Southern transaction has resulted in some service disruptions in markets formerly served by Conrail. Despite these difficulties, the railroad mergers have generally contributed to cost savings in the industry by cutting employment, and the railroads are expected to return to historical service levels as the integration problems are resolved. In addition, railroads have reduced their costs through increased utilization of new technology and outsourcing. Logistics Logistics is the management and transportation of materials and inventory throughout the supply chain. The logistics business has been bolstered in recent years by the competitiveness of the global economy, which causes shippers to focus on reducing handling costs, operating with lower inventories and shortening inventory transit times. The logistics sector of the commercial freight transportation market was approximately $30.0 billion in 1997. Using a network of transportation, handling and storage providers in multiple transportation modes, logistics companies seek to improve their customers' operating efficiency by reducing their inventory levels and related handling costs. Many logistics providers are non-asset-based, primarily utilizing physical assets owned by others in multiple transport modes. The logistics business increasingly relies upon advanced information technology to link the shipper with its inventory and as an analytical tool to optimize transportation solutions. This trend favors the larger, more professionally managed companies that have the resources to support a sophisticated information technology infrastructure. Freight Handling, Consolidation and Storage Because of the complexity of freight patterns and the need to optimize multi-modal routes, the handling and storage of freight on behalf of the shipper is often required during the transportation process. Certain of these services involve freight consolidation and deconsolidation, in which freight is unloaded, temporarily stored in warehouses or on cross-docks, and then re- loaded for further shipment. An example of such a service category in which we compete involves the unloading of imported container freight on the West Coast and the reconsolidation of the freight into new shipments for domestic redistribution. Our Service Offerings Stacktrain Rail Service Our stacktrain operations originated in the efforts of American President Lines, an international ocean shipper and an affiliate of APL Limited, to transport its international freight to destinations within North America in a cost and time efficient manner. American President Lines had historically shipped freight through the Panama Canal to reach destinations on the East Coast of the United States or relied directly on railroads to transport its international freight to destinations within North America. However, due to the length of shipping times for transportation through the Panama Canal and the lack of control and inconsistent service levels associated with direct reliance on the railroads, APL Limited and American President Lines determined that it 76 would be more efficient and cost-effective to develop a proprietary intermodal rail service. The superior performance of this proprietary intermodal rail service, and the subsequent development of stacktrain service, became the basis for the offering of stacktrain service to third parties. APL Limited has indicated it is selling its stracktrain business pursuant to the strategy of its corporate parent, Neptune Orient Lines, to focus its operations on global container transportation and logistics services. Through our stacktrain business, we are the largest provider of intermodal rail service in North America that is not affiliated with an individual railroad company. The size of our equipment fleet, our frequent departures and the scope of our geographic coverage provide us with a significant advantage in attaining the responsiveness and reliability required by our customers. In addition, the geographic coverage provided by our transportation network provides our customers with single-company control over their rail transportation requirements and thereby increases both cost effectiveness and reliability. Our access to sophisticated information technology enables us to continuously track cargo containers, chassis and railcars throughout our transportation network. We market our services primarily to intermodal marketing companies and shippers and compete primarily against rail carriers offering intermodal service and over-the-road full truckload carriers. Our 50,000 mile rail transportation network is accessed through long-term contracts and other arrangements with major rail carriers in North America. Through the geographic coverage of our rail network and our terminal locations, we serve most major population and industrial centers in the United States, Canada and Mexico. As a result of our extensive transportation network, many of our customers view us as the only national railroad and value our ability to control an entire freight movement from coast to coast. Given our significant intermodal rail market share, we have developed close working relationships with the railroads. We have long-term contracts with the rail carriers which provide, among other things, for favorable rates, guaranteed minimum service levels and the utilization of certain terminal facilities. In addition, we have benefited in the past from our strong relationships with rail carriers and have capitalized on our priority handling status during times of equipment scarcity and network bottlenecks. We maintain an extensive fleet of railcars, containers and chassis. Our equipment consists of 558 doublestack railcars, 19,693 containers and 18,551 chassis as of June 25, 1999. We also have access to APL Limited's fleet of equipment, which we use to support the eastbound domestic transport of international freight for APL Limited and other international shipping companies. In addition, we provide APL Limited with equipment repositioning services through which we transport APL Limited's empty containers from destinations within North America to their West Coast points of origin. To the extent we are able to fill these empty containers with the westbound freight of other stacktrain customers, we receive compensation from both APL Limited for our repositioning service and from the other customers for shipment of their freight. Management believes that we have access to over 100,000 empty containers annually for repositioning. In 1998 we filled 65,645 repositioned containers with freight for shipment via our stacktrain network on behalf of our domestic customers. Because of increased Pacer Logistics volumes, we believe that we will be able to increase the percentage of repositioned containers that are filled and transported on behalf of our customers and thereby increase the profitability of our repositioning business. See "Certain Agreements." Our proprietary fleet of equipment, priority handling status with rail carriers and range of transportation services has resulted in an outstanding track record of service quality, reliability and consistency. Through our equipment fleet and long-term arrangements with rail carriers, we can control our assets, linehaul operations and terminal operations and thereby provide a high level of intermodal service. We are therefore positioned to provide a reliable, cost effective and highly competitive transportation alternative. Our stacktrain business was recognized in 1998 as "Best of the Best" for on- time performance, value, equipment and operations, customer service and technology and was ranked first overall as an intermodal service provider in a survey of 3,500 shippers conducted by Logistics Management & Distribution Report and Cahners Research. In addition, we believe that our unique market position and service offerings position us to capitalize on considerable growth opportunities in the intermodal transportation market. 77 Intermodal Marketing In our role as an intermodal marketing company, we arrange for the movement of freight in containers and trailers throughout North America for global, national and regional manufacturers and retailers and provide customized electronic tracking and analysis of charges. In addition, we negotiate rail, truck and intermodal rates, determine the optimal route, electronically track shipments in transit, consolidate billing, handle claims of freight loss or damage on behalf of our customers and manage the handling, consolidation and storage of freight throughout the process. We provide the majority of these services through a network of agents and independent contractors. Our intermodal marketing operations are based in Lafayette (California), Los Angeles, East Rutherford (New Jersey), Memphis and Chicago and employ experienced transportation personnel. This staff is responsible for operations, customer service, marketing, management information systems and our relationships with the rail carriers. Through our intermodal marketing operations we assist the railroads and our stacktrain operation in balancing freight originating in or destined to its service areas, resulting in improved asset utilization. In addition, we provide value to our customers by passing on certain economies of scale as a volume buyer from railroads, stacktrain operators, trucking companies and other third party transportation providers, thereby providing access to large equipment pools and streamlining the paperwork and logistics of an intermodal move. We believe that the combination of our stacktrain operations with our intermodal marketing services will enable us to provide enhanced service to our customers and the opportunity for increased profitability and growth. Trucking Services We also offer a number of trucking services. We believe that our ability to provide a range of trucking services provides a competitive advantage as companies increasingly seek to outsource to those companies which can manage multiple transportation requirements. We compete in both the truckload and less-than-truckload segments of the trucking industry, although the majority of our trucking revenues are derived from truckload operations. Our truckload operations consist of flatbed and specialized heavy-haul trucking services. Our less-than-truckload operation specializes in long-haul transportation of a variety of freight through hubs operated by others throughout the United States. Our less-than-truckload operations leverage the mix of traffic we receive from customers by integrating shipments which have common destinations in order to lower the linehaul, pick- up and delivery costs. Our capital investment in both less-than-truckload and truckload operations is limited. Pursuant to our truckload operations, we control a specialized fleet of 480 vehicles which are owned and operated by independent contractors and we own 63 specialized heavy-haul trailers. We do not employ any drivers used in our less-than-truckload operations, but coordinate with regional transportation providers at transportation hubs to provide local delivery and distribution services. We maintain local trucking operations in Los Angeles, Oakland, Jacksonville, Chicago, Memphis, Kansas City, Houston, Dallas and Baltimore. Pursuant to our operations, we contract with independent contractors who control more than 300 trucks. We also maintain interchange agreements with all of the major steamship lines, railroads and stacktrain operators. Our network of independent contractors allows us to serve shippers, ocean carriers and freight forwarders across the country to supply local transport requirements. We provide truck brokerage services throughout North America through our customer service centers in Los Angeles, Lafayette (California), Dallas, Chicago, and East Rutherford (New Jersey). Truck brokerage involves the arrangement by a broker of trucking services with a licensed independent carrier on behalf of a shipper. We are currently expanding our truck brokerage operation into a flexible, nationwide network of customer service centers supplying freight to a core group of reliable carriers. This network provides a cost efficient and convenient back-up service to handle surges in customers' volume. Services provided by the network are managed by sophisticated information systems. 78 Logistics We provide not only a broad range of traditional transportation related services, such as trucking and intermodal marketing, but also an array of logistics solutions which can be tailored to fit a particular customer's needs. By optimizing the flow of goods through the supply chain and across a variety of services, we can significantly reduce our customers' freight handling, delivery and inventory costs. We currently offer logistics services such as local trucking, transportation purchasing and management, distribution planning and other specialized services. We believe that demand for value-added logistics services will continue to grow as companies downsize and outsource many of these functions to third parties. As part of our logistics services, we offer a variety of freight handling services, including consolidation/deconsolidation and warehousing. Our logistics operation has prospered by focusing on providing customers with specially designed transportation packages which fit the shipper's specific transportation needs. Additionally, we have designed service packages intended to reduce the shipper's handling requirements and improve inventory efficiency. These services are primarily offered on the West Coast and we have recently established additional regional freight handling facilities to meet the needs of our customers. Customers Through our sales and customer service organizations and with the support of our centralized pricing and logistics management systems, we market our stacktrain services primarily to four customer segments: . intermodal marketing companies; . the automotive industry; . ocean carriers; and . shippers of refrigerated freight. Our largest single stacktrain customer group consists of intermodal marketing companies, such as Pacer Logistics, who sell intermodal service to shippers while buying space on intermodal rail trains. Through our sales network, and the sales networks of the intermodal marketing companies to which we sell stacktrain services, we provide stacktrain services to more than 5,000 shippers such Sony, Ford Motor Company and Wal-Mart Stores. In addition, we provide stacktrain services to APL Limited's in-house intermodal marketing operation and its affiliated automotive logistics company. We are also responsible for the handling of APL Limited's international container shipping and for the repositioning of APL Limited's empty containers from the interior to the West Coast of the United States so that they may be reused by APL Limited in its international shipping operations. Pacer Logistics currently provides services on a nationwide basis to retailers and manufacturers. Pacer Logistics provides services to a number of Fortune 500 companies, such as Kmart, Walt Disney and the Union Pacific Railroad, several of which have been long-term customers of Pacer Logistics. A significant portion of our sales obtained through Pacer Logistics are with customers that utilize more than one service. For example, while we have provided J.C. Penney with substantial local trucking services in Southern California for several years, J.C. Penney has recently awarded us a new agreement providing for freight consolidation and handling in Southern California. Competition Our stacktrain business competes primarily with over-the-road full truckload carriers, conventional intermodal movement of trailers-on-flatcars, and containerized intermodal rail services offered directly by railroads. Competition between our stacktrain business and truckload carriers is particularly intense for shipments of freight over shorter distances. This is primarily attributable to the fact that the competitive advantage of intermodal transportation's low variable labor and fuel requirements per ton/mile is diminished for 79 shorter distance shipments. The major competitors of our stacktrain business include Burlington Northern Santa Fe, Union Pacific, CSX Intermodal and J.B. Hunt Transport. The transportation services industry is highly competitive. Our intermodal marketing, trucking and logistics business competes primarily against other domestic non-asset-based transportation and logistics companies, asset-based transportation and logistics companies, third-party freight brokers, private shipping departments and freight forwarders. Competition is based primarily on freight rates, quality of service (such as damage free shipments, on-time delivery and consistent transit times), reliable pickup and delivery and scope of operations. We also compete with transportation services companies for the services of independent commission agents, and with trucklines for the services of independent contractors and drivers. The major competitors of Pacer Logistics include Hub Group, Mark VII, Alliance Shippers and C.H. Robinson. Sales and Marketing As of June 25, 1999 our stacktrain operations were marketed by 16 sales and 25 customer service representatives. These representatives operate through seven regional and district sales offices and three regional service centers which are situated in the major shipping locations for the stacktrain business in order to provide support for the customers of the stacktrain business. The 16 sales representatives are directly responsible for the management of and liaison with existing customers and for the solicitation of new business. The customer service representatives are responsible for supporting existing customers and sales representatives through, among other things, providing cargo tracking services, responding to customer complaints and processing customer inquiries. In addition, intermodal marketing companies are an important link between our stacktrain operations and shippers. Intermodal marketing companies, who sell intermodal service to shippers while buying space on intermodal rail trains, enable us to market our services through their sales networks and indirectly access shippers in more than 100 major metropolitan areas. As of June 25, 1999, Pacer Logistics' marketing operation included 242 sales agents, 185 of which are independent sales agents, supported by regional sales offices in 17 cities, including Los Angeles, Chicago, Atlanta, Seattle, Dallas and Oakland. This sales force is primarily responsible for selling the services offered by our Pacer Logistics business unit. Our salaried sales representatives are deployed in major transportation hubs and target major accounts, while commissioned sales agents located throughout the country contribute additional business that enables us to meet our volume commitments and balance traffic flows. A number of our sales agents focus on particular industries and in many cases we dedicate personnel to service particular customers. We also have a national network of commissioned sales agents, strategically located in key metropolitan areas, who, in connection with our trucking services, contact local customers, solicit business and move freight in conjunction with central dispatch coordinators. Information Technology Through APL Limited, we operate our stacktrain business with highly sophisticated computer systems that enable continuous tracking of cargo containers, chassis and railcars throughout the intermodal system. These systems also provide us with performance, utilization and profitability indicators in all aspects of the stacktrain business. These information systems create a competitive advantage for us as they increase the efficiency of our intermodal operations and enable us to provide shippers with the level of information which they increasingly demand as part of their freight management operations. See "Certain Agreements." We have also invested in information technology to support the operations of Pacer Logistics. Our information systems which apply to both our stacktrain business and the operations of Pacer Logistics are capable of providing a wide range of communication alternatives, typically through the medium requested by our customers. As such, employees are linked with each other and with customers and carriers by telephone, facsimile, E-mail, the Internet and/or electronic data interchange ("EDI"). This interconnection allows us to easily communicate requirements and availability of equipment and volume, to confirm and bill orders and to track shipments. In addition, we are able to track chassis, trailers and containers and deploy that equipment to fulfill our customers' shipping requirements. 80 We believe that our strong track record of high quality service and reliability evidences the sophistication and successful implementation of our technology systems. Our information technology includes integrated software packages geared toward ensuring that goods are delivered in the most timely and cost effective manner. We use a variety of proprietary software to track customer orders and cargo, generate management reports to meet federal highway authority requirements and locate all containers, chassis and railcars throughout our network. Our systems also contain timely information on rail, drayage, and truck contract rates, perform accounting functions and generate management reports and billing statements. Our technology provides us with critical information regarding the flow of freight, rail schedules, and equipment availability. Based on this information, we are better able to deliver timely and efficient service to our customers and provide the railroads with increased equipment utilization and balanced freight flows. Currently, our technological efforts are primarily focused on reducing customer service response time, enhancing the customer service profile database, and expanding the number of customers and service providers with which we share data using EDI applications. Facilities/Equipment Our stacktrain transportation network services a total of 67 locations across North America. Our integrated rail network, combined with our equipment fleet, enables us to provide our customers with single-company control over rail transportation to locations throughout North America. Substantially all of our terminals are owned by rail or highway carriers and are managed on our behalf. However, full-time personnel work on-site at major locations to ensure close coordination of the services provided at the facilities. In addition to these terminals, other locations throughout the eastern United States serve as stand-alone container depots, where empty containers can be picked up or dropped off, or supply points, where empty containers can be picked up only. In connection with our trucking services, agents provide marketing and sales, terminal facilities and driver recruiting, while an operations center provides, among other services, insurance, claims handling, safety compliance, credit, billing and collection and operating advances and payments to drivers and agents. Our stacktrain equipment fleet consists of a large number double stack railcars, containers and chassis which are owned or subject to short and long term leases. As of June 25, 1999 our stacktrain equipment fleet consisted of the following:
Owned Leased Total ----- ------ ------ Containers 48' Containers......................................... 706 14,141 14,847 53' Containers......................................... 31 4,815 4,846 ----- ------ ------ Total................................................ 737 18,956 19,693 ===== ====== ====== Chassis 48' Chassis............................................ 5,813 7,218 13,031 53' Chassis............................................ 39 5,481 5,520 ----- ------ ------ Subtotal............................................. 5,852 12,699 18,551 20', 40' and 45'(/1/).................................. -- 4,016 4,016 ----- ------ ------ Total................................................ 5,852 16,715 22,567 ===== ====== ====== Doublestack Railcars..................................... 210 348 558 ===== ====== ======
- -------- (/1/Represents)the current allocation of chassis sublet to us pursuant to the terms of the TPI Chassis Sublet Agreement which was entered into between us and APL Limited. See "Certain Agreements." 81 Supplementing the equipment listed above we have access to an extensive inventory of 20-, 40- and 45-foot containers from APL Limited's international network in addition to the empty containers which we reposition on behalf of APL Limited. Pacer Logistics also owns a limited amount of equipment to support our trucking operations. The majority of our trucking operations are conducted through contracts with independent contractors who own and operate their own equipment. Through Pacer Logistics, we lease two warehouses in Kansas City and a facility in Los Angeles for dockspace, warehousing and parking for tractors and trailers. Suppliers Railroads We have long-term contracts with certain of the railroads regarding movement of our stacktrains. In addition, the railroad contracts generally provide for access to terminals controlled by the railroads as well as support services related to our stacktrain operations. Through these contracts, our stacktrain business has established a North American transportation network. Pacer Logistics also maintains contracts with the railroads which govern the transportation services and payment terms pursuant to which its intermodal shipments are handled by the railroads. The Pacer Logistics contracts are typically of short duration, usually twelve month terms, and subject to renewal or extension. While there can be no assurance that Pacer Logistics' contracts will be renewed, we have in the past successfully negotiated extensions of the contracts with the railroads. We maintain close working relationships with all of the major railroads in the United States and view each relationship as a partnership. We will continue to focus our efforts on strengthening these relationships. Through our contracts with rail carriers, we have access to a 50,000 mile rail network throughout North America. Our rail contracts, which generally provide that the rail carriers will perform linehaul and terminal services for us, are typically long-term agreements, with major contracts providing for a remaining term of 13 to 15 years. Pursuant to the service provisions, the rail carriers provide transportation of our stacktrains across their rail networks and terminal services related to loading and unloading of containers, equipment movement and general administration. Our rail contracts generally establish per container rates for stacktrain shipments made on rail carriers' transportation networks and typically provide that we are obligated to transport a certain percentage of our total stacktrain shipments with each of the rail carriers. The terms of our rail contracts, including rates, are generally subject to adjustment or renegotiation throughout the term of the contract, based on factors such as the continuing fairness of the contract terms, prevailing market conditions and changes in the rail carriers' costs to provide rail service. Generally, we have the benefit of advantageous rate provisions in our rail contracts. Based upon these provisions, and the volume of freight which we ship with each of the rail carriers, we believe that we enjoy favorable transportation rates for our stacktrain shipments. Independent Contractors We rely on the services of independent agents and contractors in certain of our transportation services. Although we own a small number of tractors and trailers, the majority of our truck equipment and drivers are provided by independent contractors and agents. Our relationships with independent contractors allow us to provide customers with a broad range of trucking services without the need to commit capital to acquire and maintain an asset base. Although our agreements with independent contractors are typically long- term in practice, they are generally terminable by either party on short notice. Independent contractors and fleet owners are compensated on the basis of mileage rates and a fixed percentage of the revenue generated from the shipments they haul. Under the terms of our typical lease contracts, independent contractors must pay all the expenses of operating their equipment, including driver wages and benefits, fuel, physical damage insurance, maintenance and debt service. 82 Local Trucking Companies We have established a good working relationship with a large network of local truckers in many major urban centers throughout the United States. The quality of these relationships helps ensure reliable pickups and deliveries, which is a major differentiating factor among intermodal marketing companies. Our strategy has been to concentrate business with a select group of local truckers in a particular urban area, which increases our economic value with the local truckers, and in turn raises the quality of service that we receive. Relationship with APL Limited We have entered into a long-term agreement with APL Limited for the domestic transportation on our stacktrain network of APL Limited's international freight. The majority of APL Limited's imports to the United States are transported on the stacktrain from ports on the West Coast to population centers in the Midwest and Northeast regions. However, domestic stacktrain freight which originates in the United States moves predominantly westbound from eastern and midwestern production centers to consumption centers on the West Coast. Because of our agreement with APL Limited, we are able to achieve high utilization and steady revenue production from our intermodal equipment due to our high volume of both eastbound and westbound shipments. The APL Limited freight also significantly increases the stacktrain volume, thereby improving our bargaining position with the railroads regarding contract terms. In addition, we provide APL Limited with equipment repositioning services through which we transport APL Limited's empty containers from destinations within North America to their West Coast points of origin. To the extent we are able to fill these empty containers with the westbound freight of other stacktrain customers, we receive compensation from both APL Limited for our repositioning service and from the other customers for shipment of their freight. In addition to the foregoing, we are in the process of negotiating a long-term agreement with APL Limited, pursuant to which APL Limited will provide us with certain information technology services essential to our stacktrain business. See "Certain Agreements." Government Regulation Regulation of Our Trucking and Stacktrain Operations The transportation industry has been subject to legislative and regulatory changes that have affected the economics of the industry by requiring changes in operating practices or influencing the demand for, and cost of, providing transportation services. We are subject to licensing and regulation as a transportation provider pursuant to our trucking operations. We are licensed by the Department of Transportation as a national freight broker in arranging for the transportation of general commodities by motor vehicle and operate pursuant to a 48-state, irregular route common and contract carrier authority. The Department of Transportation prescribes qualifications for acting in our capacity as a national freight broker, including certain surety bonding requirements. We provide motor carrier transportation services that require registration with the Department of Transportation and compliance with certain economic regulations administered by the Department of Transportation, including a requirement to maintain insurance coverage in minimum prescribed amounts. Other sourcing and distribution activities may be subject to various federal and state food and drug statutes and regulations. Although Congress enacted legislation in 1994 that substantially preempts the authority of states to exercise economic regulation of motor carriers and brokers of freight, we and several of our subsidiaries continue to be subject to a variety of vehicle registration and licensing requirements. We and the carriers that we rely on in arranging transportation services for our customers are also subject to a variety of federal and state safety and environmental regulations. Intermodal operations, like ours, were exempted from virtually all active regulatory supervision by the Interstate Commerce Commission, predecessor to the regulatory responsibilities now held by the federal Surface Transportation Board. Such exemption is revocable by the Surface Transportation Board, but the standards for revocation of regulatory exemptions issued by the Interstate Commerce Commission or Surface Transportation Board are high. 83 Regulation of Our Suppliers and Customers We have a substantial number of customers who provide ocean carriage of intermodal shipments. Ocean carriage is subject to regulation by the Federal Maritime Commission and, to a lesser extent, by other agencies. The regulatory regime applicable to ocean shipping was revised by the Ocean Shipping Reform Act of 1998, which took effect May 1, 1999. It is unclear at this time to what extent implementation of the Ocean Shipping Reform Act will affect the competitiveness and/or efficiency of operations of our various ocean carrier customers. The Federal Maritime Commission is reported to be pursuing an investigation at this time concerning alleged violations of statutory and regulatory requirements by ocean carriers involved in the eastbound trans-Pacific trades during the peak shipping season of 1998. The scope and focus of such investigation and the remedies which may be imposed by the Federal Maritime Commission based on its findings is presently unclear. Litigation A subsidiary of Pacer Logistics is a named defendant in a class action filed in July, 1997 in the State of California, Los Angeles Superior Court, Central District, alleging, among other things, breach of fiduciary duty, unfair business practices and conversion in connection with monies allegedly wrongfully deducted from truck drivers' earnings. The Pacer Logistics subsidiary has entered into a Judge Pro Tempore Submission Agreement dated as of October 9, 1998 pursuant to which the plaintiffs and defendants have waived their rights to a jury trial, stipulated to a certified class and agreed to a minimum judgment of $250,000 and a maximum judgment of $1.75 million to be determined by a panel of three judges. Trial is scheduled to begin on August 9, 1999. To date, this action has not had a material negative impact on our relationships with independent contractors, drayage companies or fleet owners. We are currently not otherwise subject to any other pending or threatened litigation other than routine litigation arising in the ordinary course of business, none of which is expected to have a material adverse effect on our business, financial condition or results of operations. Most of the lawsuits to which we are a party are covered by insurance and are being defended by our insurance carriers. Environmental We are subject to federal, state and local environmental regulations, including regulations relating to permitting requirements, wastewater discharges and underground storage tanks. We believe that we are in substantial compliance with these requirements and that we currently have no material environmental liabilities. Where You Can Get More Information We have filed with the Securities and Exchange Commission a registration statement under the Securities Act of 1933, as amended, covering the notes to be issued in the exchange offer. As permitted by the Commission rules, this prospectus omits certain information included in the registration statement. For further information pertaining to the notes, we refer you to the registration statement, including its exhibits. Any statement made in this prospectus concerning the contents of any contract, agreement or other document is not necessarily complete. If we have filed any such contract, agreement or other document as an exhibit to the registration statement, you should read the exhibit for a more complete understanding of the document or matter involved. Each statement regarding a contract, agreement or other document made in this prospectus is not necessarily complete and you should refer to the exhibits attached to the registration statement for a copy of the actual document. You may read and copy any of the information we file with the Commission at the Commission's public reference rooms at 1024, 450 Fifth Street, N.W., Washington, D.C., at 7 World Trade Center, 13th Floor, New York, New York 10048. You can also obtain copies of filed documents by mail from the public reference section of the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. You may call the Commission at 1- 800-SEC-0330 for further information on the operation of the public reference rooms. Filed documents are also available to the public at the Commission's web site at http://www.sec.gov. 84 Following the exchange offer, we will be required to file annual, quarterly and special reports, proxy statements and other information with the Commission under the Exchange Act. Our obligation to file periodic reports with the Commission will be suspended if the notes issued in the exchange offer are held of record by fewer than 300 holders as of the beginning of any year. However, to the extent permitted, the indenture governing the notes requires us to file with the Commission financial and other information for public availability. In addition, the indenture governing the notes requires us to deliver to you copies of all reports that we file with the Commission without any cost to you. We will also furnish such other reports as we may determine or as the law requires. 85 MANAGEMENT Directors and Executive Officers The following table sets forth information regarding the directors and executive officers of our company following our recapitalization and this offering.
Name Age Position with Pacer International - ---- --- --------------------------------- Donald C. Orris............. 57 Chairman, President and Chief Executive Officer Gerry Angeli................ 52 Executive Vice President Gary I. Goldfein............ 54 Executive Vice President Robert L. Cross............. 52 Executive Vice President Richard P. Hyland........... 45 Executive Vice President Allen E. Steiner............ 59 Executive Vice President Lawrence C. Yarberry........ 57 Executive Vice President, Chief Financial Officer and Treasurer Joseph P. Atturio........... 41 Vice President, Controller and Secretary Joshua J. Harris............ 35 Director Bruce H. Spector............ 57 Director Marc E. Becker.............. 27 Director Timothy J. Rhein............ 58 Director
Donald C. Orris has served as Chairman, President and Chief Executive Officer of our company since May 1999. From Pacer Logistics' inception in March 1997 until May 1999, Mr. Orris served as Chairman, President and Chief Executive Officer of Pacer Logistics. From March 1997 until May 1998, Mr. Orris served as President and Chief Executive Officer of an affiliate of Pacer Logistics. He also has served as Chairman of Pacer Logistics' other subsidiaries since their formation or acquisition by Pacer Logistics. Mr. Orris has been the President of Pacer International Consulting LLC (f/k/a Logistics International LLC), a wholly owned subsidiary of Pacer Logistics, since September 1996. From January 1995 to September 1996, Mr. Orris served as President and Chief Operating Officer, and from 1990 until January 1995, he served as an Executive Vice President, of Southern Pacific Transportation Company. Mr. Orris was the President and Chief Operating Officer of American President Domestic Company and American President Intermodal Company from 1982 until 1990. Gerry Angeli has served as an Executive Vice President of our company since May 1999. From Pacer Logistics' inception in March 1997 until May 1999, Mr. Angeli served as an Executive Vice President and Assistant Secretary of Pacer Logistics and as a director of Pacer Logistics from April 1998 until May 1999. He also served as a director of each of Pacer Logistics' subsidiaries. Since May 1998, Mr. Angeli has served as President and Chief Executive Officer and Vice President of certain Pacer Logistics subsidiaries. Mr. Angeli also served as a Vice President and Assistant Secretary of PMTC from March 1997 until May 1998. Since 1982, Mr. Angeli has served as President and Chief Executive Officer of the Pacer division of PMTC and, concurrent therewith, from 1987 until December 1993, Mr. Angeli served as President and Chief Executive Officer of Southern Pacific Motor Trucking, a wholly owned subsidiary of the Southern Pacific Railroad. Gary I. Goldfein has served as an Executive Vice President of our company since May 1999. Mr. Goldfein served as an Executive Vice President and director of Pacer Logistics from December 1997 until May 1999. He also served as a director of each of Pacer Logistics' subsidiaries and as an officer of certain Pacer Logistics subsidiaries since May 1998. Mr. Goldfein was a co-founder of ICI and ICSI in 1972. From 1972 until December 1997, Mr. Goldfein served as President and Treasurer of ICSI and IMCS and Vice President and Secretary of ICI. Robert L. Cross has served as an Executive Vice President of our company since May 1999. Mr. Cross served as an Executive Vice President and Assistant Secretary of Pacer Logistics and as an officer of certain Pacer Logistics subsidiaries from Pacer Logistics' inception in March 1997 until May 1999. From 1991 until March 1997, Mr. Cross served as President of ABL-TRANS. 86 Richard P. Hyland has served as an Executive Vice President of our company since May 1999. Mr. Hyland served as an Executive Vice President of Pacer Logistics and as an officer of certain Pacer Logistics subsidiaries from June 1998 until May 1999. Mr. Hyland is the founder of Cross Con and has served as President of Cross Con since 1977. Allen E. Steiner has served as an Executive Vice President of our company since May 1999. Mr. Steiner served as an Executive Vice President of Pacer Logistics from December 1997 until May 1999. Since May 1998, Mr. Steiner has served as Executive Vice President of certain Pacer Logistics subsidiaries. Mr. Steiner was a co-founder of ICI and ICSI in 1972. From 1972 until December 1997, Mr. Steiner served as President and Treasurer of ICI and Vice President and Secretary of ICSI and IMCS. Lawrence C. Yarberry has served as an Executive Vice President, Chief Financial Officer and Treasurer of our company since May 1999. Mr. Yarberry served as an Executive Vice President, Chief Financial Officer and Treasurer of Pacer Logistics from May 1998 until May 1999. Mr. Yarberry served as a consultant to Pacer Logistics from February 1998 until April 1998. From April 1990 until December 1997, Mr. Yarberry served as a Vice President of Finance of Southern Pacific Transportation Company and was Vice President of Finance and Chief Financial Officer of Southern Pacific Rail Corporation. Joseph P. Atturio has served as a Vice President, Controller and Secretary of our company since May 1999. Mr. Atturio served as Vice President and Secretary of Pacer Logistics since its inception in March 1997 until May 1999. Prior to joining Pacer Logistics, Mr. Atturio served as Comptroller of SPMT from August 1988 until December 1993 and as a Vice President of SPMT from July 1992 until December 1993. From January 1994 until March 1997, he served as Vice President and Comptroller of PMTC and served as a Regional Director of PMT Auto Transport, a division of PMTC, from January 1986 until 1988. Joshua J. Harris has served as a director of our company since May 1999. Mr. Harris is a partner in Apollo Management and has served as an officer of certain affiliates of Apollo Management since 1990. Prior to that time, Mr. Harris was a member of the Mergers and Acquisitions Department of Drexel Burnham Lambert Incorporated. Mr. Harris is also a director of Converse Inc., Florsheim Group Inc., NRT, Incorporated, SMT Health Services Inc., Breuners Home Furnishings Corporation, Alliance Imaging, Inc. and Quality Distribution Inc. Bruce H. Spector has served as a director of our company since May 1999. Mr. Spector has been a consultant to Apollo Advisors since 1992 and has been a principal in Apollo Advisors since 1995. Prior to October 1992, Mr. Spector, a reorganization attorney, was a member of the Los Angeles law firm of Stutman Triester and Glatt. Mr. Spector is also a director of Telemundo Group, Inc., United International Holdings, Inc., Nexthealth, Inc., Vail Resorts, Inc. and Metropolis Realty Trust, Inc. Marc E. Becker has served as a director of our company since May 1999. Mr. Becker has been associated with Apollo Management since 1996. Prior to that time, Mr. Becker was employed by Smith Barney Inc. in the Financial Entrepreneurs group within its Investment Banking division. Mr. Becker also serves as a director of National Financial Partners Corporation. Timothy J. Rhein has served as a director of our company since May 1999. Mr. Rhein has been President and Chief Executive Officer of APL Limited since October 1995. Mr. Rhein served as APL Limited's President and Chief Operating Officer from July 1995 to October 1995. Prior to that, Mr. Rhein served as President and Chief Executive Officer of APL Land Transport Services, Inc. from May 1990 to October 1995 and President and Chief Operating Officer of American President Lines, Ltd. from January 1987 to May 1990. Mr. Rhein has served as a director of APL Limited since July 1990. Director Compensation Messrs. Harris, Spector, Becker and Rhein have each been granted an option under the Pacer International, Inc. 1999 Stock Option Plan to purchase 6,000 shares of our common stock with an exercise price of $10 per share. 87 Executive Compensation Summary Compensation Table
Annual Compensation Long Term Compensation - --------------------------------------------------------------- --------------------------------------------- Awards Payouts ------------ ------- (a) (b) (c) (d) (e) (f) (g) (h) (i) Restricted Securities Other Annual Stock Underlying LTIP All-Other Name and Principal Position Year Salary Bonus Compensation Award(s)/1/ Options/SARs Payouts Compensation - --------------------------- ---- -------- ------- ------------ ----------- ------------ ------- ------------ Donald C. Orris......... 1998 $250,000 $90,000 -- -- -- -- $6,250 Gerry Angeli............ 1998 $250,000 $90,000 -- -- -- -- $7,500 Gary I. Goldfein........ 1998 $235,000 $90,000 -- -- -- -- $1,600 Robert L. Cross......... 1998 $220,000 $90,000 -- -- -- -- $6,558 Alan E. Steiner......... 1998 $220,000 $90,000 -- -- -- -- $1,600
- -------- /1/Mr. Orris, Mr. Angeli and Mr. Cross each hold 17,500 restricted shares of Pacer Logistics preferred stock with a fiscal year end 1998 fair market value of $171,738 (based on a fiscal year end 1998 fair market value of $9 per share of such preferred stock, plus accrued dividends). /2/Consists of company matching contributions to 401(k) plan. Option/SAR Grants in Last Fiscal Year No stock options or stock appreciation rights were granted to Named Executive Officers during fiscal year 1998.
Aggregate Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values ---------------------------------------------------------------------------------------- (a) (b) (c) (d)(/1/) (e) Number of Securities Underlying Unexercised Options/SARs at fiscal Value of Unexercised In-the-Money year end Options/SARs at fiscal year end(/2/) Shares Acquired Value Name On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable ---- ----------- -------- ------------------ ------------------ ------------------- ------------------- Donald C. Orris......... -- -- 200,291 (common) 182,875 (common) $1,576,683 (common) $1,788,859 (common) 19,167 (preferred) 17,500 (preferred) $0 (preferred) $0 (preferred) Gerry Angeli............ -- -- 200,291 (common) 182,875 (common) $1,576,683 (common) $1,788,849 (common) 19,167 (preferred) 17,500 (preferred) $0 (preferred) $0 (preferred) Gary I. Goldfein........ -- -- -- -- Robert L. Cross......... -- -- 200,291 (common) 182,875 (common) $1,576,683 (common) $1,788,849 (common) 19,167 (preferred) 17,500 (preferred) $0 (preferred) $0 (preferred) Alan E. Steiner......... -- -- -- --
- -------- (/1/In)connection with the Pacer Logistics transaction, certain of the options relating to Pacer Logistics preferred stock will convert to options to purchase Pacer Logistics Series A Preferred Stock. See "Our Capital Stock." (/2/Based)upon end of year fair market value of $10 per share of common stock and $9 per share of Pacer Logistics preferred stock. Stock Option Plan Our Board of Directors adopted the Pacer International, Inc. 1999 Stock Option Plan in May 1999. The purpose of this plan is to further our growth and success by permitting our employees, as well as employees of Pacer Logistics, to acquire shares of our common stock and the preferred stock of Pacer Logistics, in the case of employees of Pacer Logistics, thereby increasing their personal interest in our growth and success and to provide a means of rewarding outstanding contribution by these employees. With the exception of the 562,861 incentive stock options which were rolled into this plan from the PMT Holdings, Inc. 1997 Stock Option Plan and the Pacer International, Inc. 1998 Stock Option Plan, options subject to this plan do not qualify as incentive stock options under the provisions of section 422 of the Internal Revenue Code. 88 No more than 1,793,747 shares may be issued pursuant to all option grants under this plan. In the event of certain corporate reorganizations, recapitalizations, or other specified corporate transactions affecting our stock, this plan permits proportionate adjustments to the number and kinds of shares subject to options and/or the exercise price of those shares. All of our employees, as well as the employees of any of our subsidiaries, as well as non-employee directors are eligible for option grants under this plan. This plan is administered by a committee of our Board of Directors and, except with respect to initial grants described below, such committee has the power and authority to approve the persons to whom options are granted, the time or times at which options are granted, the number of shares subject to each option, the exercise price of each option and the vesting and exercisability provisions of each option and has all powers with respect to the administration and interpretation of this plan. This plan provides for initial grants to specified employees. The aggregate number of shares subject to these initial grants is 832,000 and their exercise price is $10.00 per share. These initial grants are divided into three tranches, Tranche A, Tranche B and Tranche C. Tranche A options vest in five equal installments on the date of the grant's first five anniversary dates, provided the employee is employed by us on each anniversary date. Tranche B options generally vest on the date of grant's seventh anniversary date if the employee is employed by us on that date. However, if on any of the grant's first five anniversary dates certain per share target values are attained and the employee is employed by us on that date, then 20% of the Tranche B options will vest. Accelerated vesting of the Tranche B options is possible if a sale of our company occurs prior to the date of grant's fifth anniversary and the fair market value of the per share consideration to be received by the shareholder equals or exceeds an amount calculated in accordance with this plan. Tranche C options vest in substantially the same manner as Tranche B options, including acceleration upon a sale of our company, except that the per share target values as of a given anniversary date are increased. Options granted to non-employee directors vest in four equal installments on the date of grant's first four anniversary dates. A vested option that has not yet been exercised will automatically terminate on the first to occur of (1) the grant's tenth anniversary, (2) ninety days following the employee's service of employment for any reason other than death or disability, (3) twelve months following the employee's service of employment due to death or disability, or (4) as otherwise determined by the committee. Each option that is vested as of the date of the sale of our company remains exercisable until the sale's closing, after which time such option is unenforceable. Non-vested Tranche A, Tranche B and Tranche C options will vest in accordance with the vesting schedules described above, however, an option that vests after our company is sold will remain exercisable for 10 days before such portion of the option terminates and is of no further force or effect. All options granted under this plan are nontransferable except upon death, by such employee's will or the laws of descent and distribution, or transfers to family members of the employee that are approved by the committee. This plan has a term of ten years, subject to earlier termination by our Board of Directors, who may modify or amend this plan in any respect, provided that no amendment or modification affects an option already granted without the consent of the option holder. Employment and Related Agreements We have entered into employment agreements dated as of March 31, 1997, and amended as of April 7, 1999, with each of Donald C. Orris, Gerry Angeli and Robert L. Cross and employment agreements dated as of December 16, 1997, and amended as of April 7, 1999, with each of Gary I. Goldfein and Allen E. Steiner. Each of these employment agreements, as amended, has a term of two years commencing upon the closing of the Pacer Logistics transactions, with automatic one year renewals on each anniversary of their commencement date. The minimum base salary under these employment agreements is $225,000, $225,000, $200,000, $235,000, and $220,000 per year for Messrs. Orris, Angeli, Cross, Goldfein, and Steiner, respectively, subject to increase by our board of directors, except in the case of Mr. Orris, in which case the base salary is subject to increase as agreed to by Mr. Orris and our Board of Directors. 89 Under the employment agreements of Messrs. Orris, Angeli and Cross, our Board of Directors may award an annual bonus to the employee in an amount up to $83,000 and under the employment agreements of Messrs. Goldfein and Steiner such bonus may be in an amount up to $90,000. In each case, such bonus is based on the attainment of certain operating income targets. All of the employment agreements provide that if the employment of these employees is terminated for any reason, they would be entitled to receive any unpaid portion of their base salary, reimbursement for any expenses incurred prior to the date of termination and any unpaid amounts earned prior to the effective date of termination pursuant to the terms of any bonus or benefit program in which they participated at the time of termination. In addition, the employment agreements provide that if the employment of these employees is terminated without "cause", as defined in the employment agreements, they would be entitled to receive 100% of their base salary for a period of between twelve and twenty-four months, with such amount to be reduced by 50% of any salary earned during this severance period from other sources. All of the employment agreements include certain restrictive covenants for our benefit relating to the non-disclosure by these employees of our confidential business information and trade secrets, the disclosure grant and assignment of inventions and non-competition with regards to any business in competition with us. 90 CERTAIN AGREEMENTS APL Limited Agreements We have entered into, or have entered negotiations to enter into, agreements with APL Limited and certain of its affiliates relating to our stacktrain business. Except as otherwise described below, these agreements were entered into simultaneously with the consummation of our recapitalization. Non-Competition Agreement Pursuant to a Non-Competition Agreement, Neptune Orient Lines Limited, APL Limited, and their affiliates agreed not to compete with us, either through ownership of, participation in management of, or by lending their respective names to, any business involved in arranging stacktrain services for a period of ten (10) years from the closing date of our recapitalization. Neptune Orient Lines, APL Limited and their affiliates further agreed to refrain from soliciting or recruiting any person employed by us as of the closing date of our recapitalization for a period of ten (10) years. Administrative Services Agreement Pursuant to an Administrative Services Agreement, APL Limited provides us with certain administrative and support services. We compensate APL Limited on a per transaction basis and a headcount basis, as applicable. APL Limited represented to us that the transaction fees contained in the Administrative Services Agreement, when applied to the actual number of transactions in 1998, would not result in figures substantially different from those reflected in the audited financial results of Pacer International (f/k/a APL Land Transport Services, Inc.) for the 1998 fiscal year. Furthermore, during the term of this agreement, we have the right to audit, at our own expense, the total expenditures presented by APL Limited. The Administrative Services Agreement will expire one year from the closing of our recapitalization or on such other date as may be mutually agreed upon by us and APL Limited. Either party may terminate this agreement if the other party defaults on the performance of its material obligations and such default is not cured within thirty (30) days. Information Technology Outsourcing and License Agreement Pursuant to an IT Supplemental Agreement, dated as of May 11, 1999 by and among APL Limited, Coyote Acquisition LLC and our Company, we are currently completing negotiation of an Information Technology Outsourcing and License Agreement based upon a term sheet agreed by the parties. If any party so elects, the parties may enter into private mediation to finalize the Information Technology Outsourcing and License Agreement. In the interim, the Information Technology Outsourcing and License Agreement term sheet governs the relationship between the parties regarding information technology. The Information Technology Outsourcing and License Agreement term sheet provides that, APL Limited will, for a period of twenty years, provide us with all necessary software, licenses and related services necessary to conduct the stacktrain business as it is now being conducted and as it is enhanced pursuant to and during the term of the agreement. These services will, at a minimum, include the same level of services provided to our company by APL Limited prior to our recapitalization. APL Limited will also be responsible for obtaining, maintaining, upgrading, and replacing any software, equipment, facilities or personnel necessary in order to provide the services during the term of the agreement. APL Limited will be required to provide personnel with the adequate skills, experience and knowledge of our business to ensure that all information technology systems are supported at previously existing levels, and as these levels are subsequently enhanced. In addition, any software that relates solely to our business will be transferred to us directly. 91 In accordance with the Information Technology Outsourcing and License Agreement term sheet we will have access to APL Limited's proprietary software that is used to run the information systems through perpetual, worldwide, royalty-free licenses granted to us by APL Limited. APL Limited will also ensure that we are licensed to use all other software needed to operate the systems. These rights will remain in place even after the agreement expires or terminates and regardless of the reason for termination. The Information Technology Outsourcing and License Agreement term sheet provides that the services are tendered at what we believe are competitive prices. The annual fee will be frozen during the first four years of the agreement and will be increased nominally thereafter. In addition, for the first five years we will be charged for costs related to increased usage of the services only to the extent the increase exceeds certain specified growth levels for the company and thereafter for all of our actual direct costs related to volume growth. The Information Technology Outsourcing and License Agreement term sheet also provides that we will have the option to terminate the agreement for our convenience at any point during the term, either in its entirety or on a system-by-system basis, by giving 120 days' notice to APL Limited. In addition, we may terminate if APL Limited fails to meet certain specified performance standards or is in material breach of the agreement and fails to correct the breach in a timely fashion. The agreement will also be terminable by APL Limited, but only if we fail to meet our payment. However, should APL Limited elect to terminate the agreement because we are acquired by a competitor of APL Limited, APL Limited will be responsible for all costs related to establishing us with a comparable service provider on a similar computer infrastructure. APL Limited would also be responsible for the costs of transferring our systems if we terminate the agreement for any of the following reasons: (1) an uncorrected material breach by APL Limited; (2) the occurrence of certain specified performance failures resulting from APL Limited 's willful misconduct or gross negligence; or (3) the occurrence of any two performance failures within a 12-month period, regardless of the cause. In the Information Technology Outsourcing and License Agreement term sheet APL Limited has made customary representations and warranties to us, including, that the information technology, software, hardware and services being provided to us constitute all such items required to provide the information technology services necessary to run our business and relating to Year 2000 compliance of the software and hardware used in providing the services under the agreement. APL Limited also indemnifies us against breaches of these representations, losses resulting from claims brought by third parties alleging infringement of their intellectual property and losses associated with a failure of the information technology systems to operate that is either caused by APL Limited or covered by indemnification or warranties provided to APL Limited by the responsible third parties. Stacktrain Services Agreement Pursuant to a Stacktrain Services Agreement, we arrange and administer inland intermodal rail transportation for APL Limited's international freight shipments and its empty containers between points in the United States, between points in Canada and between points in the United States and Canada. In addition, we arrange and administer inland intermodal rail transportation for any other volume tendered by APL Automotive Logistics and APL Intermodal Management Services, each a division of APL Limited, between points in the United States, Canada and Mexico. In connection with this agreement, APL Limited agreed to tender to us all of its international shipments and containerized freight for United States or Canadian rail movement and APL Automotive Logistics and APL Intermodal Management Services will use their best efforts to deliver their business to us for handling. Each year, during the term of the Stacktrain Services Agreement, APL Limited has agreed to pay us $6.6 million as a management fee. In addition, APL Limited has agreed to pay us a fee for each container moved equal to the amount payable by us to the underlying rail carrier for the movement of such containers. Any savings received by us under the terms of our agreements with the underlying rail carriers will be passed 92 through on a dollar-for-dollar basis to APL Limited. We do not assess any administrative fees against APL Limited for the movement of its containers. APL Limited pays us for the repositioning of its empty containers. APL Limited pays us a fee calculated based on established rates agreed upon by the parties for each empty container of APL Limited that is repositioned by us. The Stacktrain Service Agreement will expire twenty (20) years following the closing date of our recapitalization. However, the term of the Stacktrain Services Agreement will be extended in the event that the current agreement between Pacer International and the Union Pacific Railroad Company, or its successor, is extended. The effect of this provision is that the Stacktrain Services Agreement and our agreement with the Union Pacific Railroad Company will expire simultaneously. TPI Chassis Sublet Agreement Pursuant to a TPI Chassis Sublet Agreement, APL Limited sublets chassis to us for use in the transport of international freight on the stacktrain network on behalf of international shippers other than APL Limited. The number of chassis to be sublet is determined according to a market plan which we deliver to APL Limited prior to each year during the term of the TPI Chassis Sublet Agreement. If our chassis requirements decrease from the current market plan allocation and APL Limited does not absorb the additional chassis into its own fleet, we are responsible for any early lease termination penalties incurred by APL Limited. If our need for chassis increases beyond the current market plan allocation, APL Limited will supply additional chassis to the extent they are available for our use. The TPI Chassis Sublet Agreement provides that if we consistently exceed our allocation of chassis under our market plan, or if APL Limited consistently supplies less than such allocation, both parties will promptly discuss the remedies for such an excess or shortage. The term of the TPI Chassis Sublet Agreement will be the same as the term of the Stacktrain Services Agreement. If the TPI Chassis Sublet Agreement is terminated prior to twenty years from its execution, we may require APL Limited to assign the leases for all of the chassis covered under the agreement to us. In addition, during the first year of the agreement we may require APL Limited to assign to us the leases for the chassis. Equipment Supply Agreement An Equipment Supply Agreement sets forth the mechanics of the supply of containers and chassis from APL Limited to us for repositioning by us within the interior United States. The containers and chassis which are subject to the agreement are used by APL Limited in its international shipping operations. Specifically, the Equipment Supply Agreement sets forth the underlying interchanges of possession and supply points and return locations for the repositioning of the containers and chassis. In addition, the Equipment Supply Agreement sets forth the requirements for timely repositioning of the equipment and charges which may be incurred by us for failing to reposition the equipment in a timely manner. The Equipment Supply Agreement also sets forth certain charges which may be incurred by us for damage to the containers and chassis during repositioning. The Equipment Supply Agreement has the same term as the Stacktrain Services Agreement. Stock Purchase Agreement Pursuant to the Stock Purchase Agreement, dated as of March 15, 1999, by and between Coyote Acquisition LLC and APL Limited, we may be required to pay APL Limited additional cash consideration of up to $15.0 million following our recapitalization, in the event that Pacer International's EBITDA for the fiscal year ending December 31, 1999 on an unconsolidated basis equals or exceeds certain EBITDA targets set forth in the Stock Purchase Agreement. The EBITDA targets set forth in the Stock Purchase Agreement exceed Pacer International's historic results. Immediately prior to the closing of our recapitalization, Coyote Acquisition assigned a small portion of its purchase rights under the Stock Purchase Agreement to an affiliate, Coyote Acquisition II LLC, and to certain affiliates of Deutsche Bank Securities Inc. and Credit Suisse First Boston Corporation. As a result of such assignment, and the exercise of such assigned purchase rights, Coyote Acquisition II LLC owns 4.6% of our outstanding common stock and certain affiliates of Deutsche Bank Securities Inc. and Credit Suisse First Boston Corporation collectively own 2.9%, of our outstanding common stock. 93 Primary Obligation and Guaranty Agreement We are a party to a Primary Obligation and Guaranty Agreement dated March 15, 1999, with Neptune Orient Lines Limited and Coyote Acquisition. The Primary Obligation and Guaranty Agreement provides that, prior to an initial public offering by APL Limited or certain of its affiliates, Neptune Orient Lines will be directly liable for all of APL Limited's obligations under the following agreements as if it had been a signatory thereto: . Stacktrain Services Agreement; . Administrative Services Agreement; . Information Technology Outsourcing and License Agreement; . TPI Chassis Sublet Agreement; . Equipment Supply Agreement; . our Shareholders' Agreement with Coyote Acquisition, Coyote Acquisition II and APL Limited; and . Stock Purchase Agreement. Following an initial public offering of APL Limited or certain of its affiliates, Neptune Orient Lines will guarantee any payments owed to us by APL Limited. Such guarantee is subject to the requirement that we first exhaust our rights to collect any guaranteed obligations from APL Limited, so long as the collection efforts against APL Limited, in our judgment or the judgment of Coyote Acquisition, do not prejudice in any manner the ability of Coyote Acquisition and us to collect on the guarantee, in which case we and Coyote Acquisition can proceed directly against Neptune Orient Lines. Neptune Orient Lines' obligations will not be limited by any bankruptcy, insolvency, or reorganization proceedings. The Primary Obligation and Guaranty Agreement will terminate when all other agreements and all other guaranteed obligations are terminated or satisfied. Other Agreements Shareholders' Agreements We are a party to a Shareholders' Agreement with Coyote Acquisition, Coyote Acquisition II and APL Limited which governs certain aspects of the relationship between ourselves and our currently existing shareholders. The Shareholders' Agreement contains, among other matters, (1) a provision restricting the rights of APL Limited to transfer the shares of Pacer International common stock, subject to certain permitted or required transfers and a right of first refusal in favor of Pacer International, Coyote Acquisition and Coyote Acquisition II; (2) certain incidental registration rights in the event Pacer International effects a registration of its common stock; (3) certain participation rights that, when triggered, permit APL Limited to participate, on a pro rata basis, in a sale by Coyote Acquisition and Coyote Acquisition II of Pacer International common stock held by them; and (4) certain bring along rights that, when triggered, permit Coyote Acquisition and Coyote Acquisition II to require APL Limited to transfer an equivalent portion of Pacer International common stock held by it. The Shareholders' Agreement will terminate upon the earlier of: (a) the tenth anniversary thereof; or (b) such time as Pacer International is a public company with equity securities listed on a national securities exchange or publicly traded in the over-the-counter market and Coyote Acquisition and Coyote Acquisition II shall have sold, in the aggregate, pursuant to one or more offerings a total of fifty percent (50%) of the total shares of Pacer International common stock held by it. 94 We are a party to Shareholders' Agreements with (1) certain members of Pacer Logistics management, Coyote Acquisition and Coyote Acquisition II and (2) certain affiliates of Credit Suisse First Boston Corporation and Deutsche Bank Securities Inc. and Coyote Acquisition and Coyote Acquisition II. The terms of such Shareholders' Agreements are substantially similar to those set forth above. Apollo Registration Rights Agreement In addition to the Shareholders' Agreements, we entered into a separate Registration Rights Agreement with certain affiliates of Apollo Management pursuant to which such affiliates obtained certain demand and incidental registration rights. As a result, at Apollo Management's written request, we are obliged to prepare and file a registration statement covering the shares so requested to be registered by Apollo Management. In addition, should we propose to register any of our own common stock for sale to the public, Apollo Management has the opportunity to include its common stock in the same or concurrent registration statement filed by us. We will bear all expenses, with the exception of selling expenses, incurred in the registration process. Apollo Management Agreement We have entered into a Management Agreement with Apollo Management. Under the terms of the Management Agreement, we appointed Apollo Management to provide financial and strategic advice to us. Pursuant to the terms of the Management Agreement, Apollo Management has agreed to provide us with financial and strategic services as our board of directors may reasonably request. As consideration for services rendered and to be rendered under the Management Agreement, we will pay Apollo an annual fee of $500,000 until termination of the Management Agreement. In addition, we may pay Apollo Management a transaction fee for any purchase, sale, recapitalization or similar transaction completed by us, whether by merger, stock purchase or sale, asset purchase or sale or otherwise. The Management Agreement may be terminated upon 30 days' written notice by either party to the other party thereto. In connection with our recapitalization we have paid Apollo Management a fee of $1,500,000. Tax Sharing Agreement Coyote Acquisition, Pacer International, Pacer Logistics, and the direct and indirect subsidiaries of Pacer International and Pacer Logistics entered into a Tax Sharing Agreement. The Tax Sharing Agreement generally contemplates that two or more of the parties to the Tax Sharing Agreement may become members of an affiliated group that files a consolidated federal income tax return for U.S. federal income tax purposes and, perhaps, one or more consolidated, combined or unitary groups for state, local and/or foreign tax purposes. The Tax Sharing Agreement provides, among other things, methods for allocating the tax liability of an affiliated group among its members, for reimbursing Coyote Acquisition, or another entity as appropriate, for the payment of an affiliated group's tax liability, and for reimbursing members of an affiliated group for the use of net operating losses and other tax benefits that reduce an affiliated group's tax liability otherwise payable. 95 STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth information regarding the anticipated beneficial ownership of shares of the common stock immediately following the recapitalization by each person anticipated to be the owner of 5% or more of the common stock, by each person who is a director or executive officer of our company and by all directors and executive officers of our company as a group. The following table does not include the ownership by certain directors and executives of the Pacer Logistics 7.5% Exchangeable Preferred Stock.
Common Stock(/1/) --------------------- Number Percentage of Shares of Class ---------- ---------- Apollo Management IV, L.P.(/2/)......................... 9,390,000 89.9% c/o Apollo Management, L.P. 1301 Avenue of the Americas New York, NY 10019 APL Limited............................................. 750,000 7.2% 1111 Broadway Oakland, CA 94607 Donald C. Orris(/3/)(/13/).............................. 34,833 0.3% Gerry Angeli(/4/)(/13/)................................. 34,833 0.3% Gary I. Goldfein(/5/)(/13/)............................. -- -- Robert L. Cross(/6/)(/13/).............................. 34,833 0.3% Richard P. Hyland(/7/)(/13/)............................ -- -- Allen E. Steiner(/8/)(/13/)............................. -- -- Lawrence C. Yarberry(/9/)(/13/)......................... 11,000 0.1% Joseph P. Atturio(/10/)(/13/)........................... 19,582 0.2% Joshua J. Harris(/11/)(/14/)............................ -- -- Bruce M. Spector(/11/)(/15/)............................ -- -- Marc E. Becker(/11/)(/14/).............................. -- -- Timothy J. Rhein(/12/)(/16/)............................ -- -- All directors and executive officers as a group (12 persons)............................................... 135,081 1.3%
- -------- (1) The amounts and percentage of common stock beneficially owned are reported on the basis of regulations of the SEC governing the determination of beneficial ownership of securities. Under the rules of the SEC, a person is deemed to be a "beneficial owner" of a security if that person has or shares "voting power," which includes the power to vote or to direct the voting of such security, or "investment power," which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days. Under these rules, more than one person may be deemed a beneficial owner of the same securities and a person may be deemed a beneficial owner of securities as to which he has no economic interest. (2) Through its interest in Coyote Acquisition LLC and Coyote Acquisition II LLC, Apollo Management IV, L.P. is deemed to beneficially own all of the shares of common stock owned by Coyote Acquisition LLC and Coyote Acquisition II LLC. Coyote Acquisition LLC owns 8,912,000 shares, or 85.3%, of our outstanding common stock. Coyote Acquisition II LLC owns 478,000 shares, or 4.6%, of our outstanding common stock. (3) Includes 34,833 shares of common stock issuable upon the exercise of presently exercisable options held by the stockholder. Does not include an additional 100,000 options and an additional 121,916 options which vest in the future or 2,329.25 shares of the Pacer Logistics 7.5% Exchangeable Preferred Stock held by the stockholder. (4) Includes 34,833 shares of common stock issuable upon the exercise of presently exercisable options held by the stockholder. Does not include an additional 100,000 options and an additional 121,916 options which vest in the future or 2,264.16 shares of the Pacer Logistics 7.5% Exchangeable Preferred Stock held by the stockholder. (5) Does not include 100,000 options which vest in the future or 4,963.75 shares of the Pacer Logistics 7.5% Exchangeable Preferred Stock held by the stockholder. 96 (6) Includes 34,833 shares of common stock issuable upon the exercise of presently exercisable options held by the stockholder. Does not include an additional 100,000 options and an additional 121,916 options which vest in the future or 2,264.16 shares of the Pacer Logistics 7.5% Exchangeable Preferred Stock held by the stockholder. (7) Does not include 100,000 options which vest in the future or 5,956.5 shares of the Pacer Logistics 7.5% Exchangeable Preferred Stock held by the stockholder. (8) Does not include 100,000 options which vest in the future or 4,963.75 shares of the Pacer Logistics 7.5% Exchangeable Preferred Stock held by the stockholder. (9) Includes 11,000 shares of common stock issuable upon the exercise of presently exercisable options held by the stockholder. Does not include an additional 22,000 options which vest in the future. (10) Includes 19,582 shares of common stock issuable upon the exercise of presently exercisable options held by the stockholder. Does not include an additional 9,781 options which vest in the future. (11) Messrs. Harris, Spector and Becker are each principals and/or employees of certain affiliates of Apollo Management IV, L.P. Accordingly, each such person may be deemed to beneficially own shares of common stock held by Apollo Management IV, L.P. Each such person disclaims beneficial ownership of any such shares in which he does not have a pecuniary interest. (12) Mr. Rhein is President, Chief Executive Officer and a director of APL Limited. Accordingly, he may be deemed to beneficially own shares of common stock held by APL Limited. Mr. Rhein disclaims beneficial ownership of any such shares in which he does not have a pecuniary interest. (13) The business address for Messrs. Orris, Angeli, Goldfein, Cross, Hyland, Steiner, Yarberry and Atturio is Pacer International, Inc., 1340 Treat Boulevard, Suite 200, Walnut Creek, CA 94596. (14) The business address for Messrs. Harris and Becker is Apollo Management L.P., 1301 Avenue of the Americas, New York, NY 10019. (15) The business address for Mr. Spector is Apollo Management L.P., 1999 Avenue of the Stars, Suite 1900, Los Angeles, CA 90067. (16) The business address for Mr. Rhein is APL Limited, 1111 Broadway, Oakland, CA 94607. 97 OUR CAPITAL STOCK We have a total of 21 million shares of authorized capital stock of which 20 million shares, no par value, are of a class designated as "common stock" and 1 million shares, par value $.01 per share, are of a class designated as "preferred stock." Pacer Logistics authorized a total of 11 million shares of capital stock of which 10 million shares, par value $.01 per share are designated as "common stock" and 1 million shares, par value $.01 per share, are of a class designated as "preferred stock". Pacer Logistics has two series of preferred stock. The designation, assigned values, preferences and relative, participating, optional or other rights, qualifications, limitations or restrictions on such preferred stock are described in full in their respective Certificates of Designation. Each share of common stock of Pacer International and Pacer Logistics entitles the holder thereof to one vote at every annual or special meeting of the stockholders of such company. There is no cumulative voting. Shares of preferred stock of each company may be issued from time to time, in one or more series, with such designation, assigned values, preferences and relative, participating, optional or other rights, qualifications, limitations or restrictions thereof as the Board of Directors of Pacer International or Pacer Logistics, as the case may be, from time to time may adopt by resolution. Each series shall consist of such number of shares as shall be stated and expressed in such resolution or resolutions providing for the issuance of the stock of such series. All shares of any one series of preferred stock shall be identical. No holder of shares of our capital stock or Pacer Logistics capital stock shall have any preferential or preemptive right to subscribe for, purchase or receive any share of our stock or Pacer Logistics stock, as the case may be, any options or warrants for such shares, any rights to subscribe to or purchase such shares or any securities which may at any time or from time to time be issued, sold or offered for sale by us or Pacer Logistics, as the case may be. The following description is a summary of the material terms of each series of preferred stock, but does not restate the Certificates of Designation in their entirety. 7.5% Exchangeable Preferred Stock 24,300 of Pacer Logistics' 1 million authorized shares of preferred stock are designated "7.5% Exchangeable Preferred Stock." The 24,300 shares of 7.5% Exchangeable Preferred Stock were issued to certain management shareholders of Pacer Logistics in connection with the Pacer Logistics transaction. The remainder have been reserved for issuance by Pacer Logistics as payment-in-kind dividends. Except as otherwise required by law, or as stated below, shares of exchangeable preferred stock are not entitled to voting rights. Liquidation Preference The exchangeable preferred stock has a liquidation preference of $1,000 per share, plus accrued and unpaid dividends thereon. In addition, holders of the preferred stock are entitled to an amount per share equal to 5% of the total assets available for distribution to equity holders divided by the number of shares of preferred stock outstanding. Dividends Dividends payable per share of the exchangeable preferred stock are equal to the greater of: (1) 7.5% of the $1,000 liquidation preference per share payable annually in arrears in additional shares of the exchangeable preferred stock or (2) an amount equal to 10% of the aggregate of certain dividends paid on the Pacer Logistics common stock divided by the number of outstanding shares of Pacer Logistics preferred stock, payable annually in arrears in cash. 98 Voluntary Exchange At any time at least 15 months after, but before 24 months following the closing of our recapitalization, each holder of the exchangeable preferred stock has the right to exchange its shares into shares of Pacer International common stock at a 15% premium. As a condition to the exchange of such preferred stock, each holder will be required to become a party to the Shareholders' Agreement and will be bound by all of the terms and conditions of the Shareholders' Agreement as though such persons were original parties thereto. Upon joining in the Shareholders' Agreement, such persons will have the same rights and responsibilities as those of APL Limited, as set forth in the Shareholders' Agreement. Purchase Right At any time at least 15 months after the closing of our recapitalization, the exchangeable preferred stock may be purchased by Pacer International for newly issued shares of preferred stock of Pacer International or cash. Our credit agreement and the indenture governing the notes generally prohibits us from purchasing the exchangeable preferred stock for cash for the initial 15 month time period. The Pacer International preferred stock has a 7.5% dividend, payable in shares of such preferred stock and is mandatorily redeemable by Pacer International on the tenth anniversary of issue. Change of Control Upon a change of control, each holder of exchangeable preferred stock shall have the right to exchange the shares of exchangeable preferred stock held by such holder for Pacer International common stock at the ratio set forth in the Certificate of Designation multiplied by the following applicable premium which shall be allocated pro rata on a monthly basis: Prior to the End of Year 1....... 115.00% End of Year 1.................... 106.75% End of Year 2.................... 100.00%
Voting Provisions Except as required by law and except for matters which affect the rights and preferences of the exchangeable preferred stock, the exchangeable preferred stock is not entitled to vote on any matter submitted to a vote of the stockholders of Pacer Logistics. If (1) the voluntary exchange of 7.5% Exchangeable Preferred Stock by the holders thereof for Pacer International common stock or (2) the purchase of such preferred stock by Pacer International as contemplated above does not occur, Mr. Orris and other members of our senior management team will remain holders of the 7.5% Exchangeable Preferred Stock. Series A Preferred Stock In addition to the foregoing, Pacer Logistics has outstanding options to purchase 44,997 shares of its Series A Preferred Stock. No shares of Series A Preferred Stock are currently outstanding. Such options are exercisable at $9.00 per share and are redeemable by Pacer Logistics at $9.00 per share. 99 DESCRIPTION OF OUR CREDIT AGREEMENT In connection with the private offering, we entered into a credit agreement with a syndicate of financial institutions. Our credit agreement provides for the following: (1) a seven-year $135.0 million term loan which was used to finance in part our recapitalization and certain related costs and expenses, and to refinance certain indebtedness of our company; and (2) a five-year $100.0 million revolving credit facility, which may include letters of credit (subject to a sublimit to be determined), to be used for, among other things, working capital and general corporate purposes of our company and its subsidiaries, including, without limitation, effecting certain permitted acquisitions. Prepayments The loans under the term loan facility are required to be prepaid with, and after the repayment in full of such loans, permanent reductions to the revolving credit facility are required in an amount equal to, (a) 100.0% (or a lesser percentage determined based upon the achievement of certain financial ratios) of the net cash proceeds of all asset sales and dispositions by our company and its subsidiaries, subject to certain exceptions, (b) 100.0% (or a lesser percentage determined based upon the achievement of certain financial ratios) of the net cash proceeds of issuances of certain debt obligations and certain preferred stock by our company and its subsidiaries, subject to certain exceptions, (c) 50.0% (or a lesser percentage determined based upon the achievement of certain financial ratios) of the net cash proceeds from common equity and certain preferred stock issuances by our company and its subsidiaries, subject to certain exceptions, including in connection with permitted acquisitions, (d) 75.0% (or a lesser percentage determined based upon the achievement of certain financial ratios) of annual Excess Cash Flow (as defined in our credit agreement) and (e) 100.00% of certain insurance proceeds, subject to certain exceptions. Such mandatory prepayments and permanent reductions will be allocated first, to the term loan facility and second, to the revolving credit facility. Our credit agreement requires our company to make annual amortization payments (payable in quarterly installments) in respect of the term loan facility. Voluntary prepayments and commitment reductions are permitted in whole or in part, subject to minimum prepayment or reduction requirements, without premium or penalty, provided that voluntary prepayments of certain loans on a date other than the last day of the relevant interest period are subject to payment of customary breakage costs, if any. Interests and Fees The interest rates under the our credit agreement are as follows: (1) At our option, the interest rate on our term loan facility is (a) 2.00% in excess of the base rate equal to the higher of (x) 1/2 of 1.0% in excess of the federal funds rate or (y) the rate that Bankers Trust Company as the administrative agent announces from time to time as its prime lending rate, as in effect from time to time, and (b) 3.00% in excess of the Eurodollar rate for Eurodollar Loans (as defined in our credit agreement), in each case, subject to increases or decreases based upon the achievement of certain financial ratios; and (2) At our option, the interest rate on our revolving credit facility is (a) 1.50% in excess of the base rate equal to the higher of (x) 1/2 of 1.0% in excess of the federal funds rate or (y) the rate that Bankers 100 Trust Company, as the administrative agent announces from time to time as its prime lending rate, as in effect from time to time and (b) 2.50% in excess of the Eurodollar rate for Eurodollar Loans, in each case, subject to increases or decreases based upon the achievement of certain financial ratios. We may elect interest periods of 1, 2, 3 or 6 months or to the extent available to each lender with loans and/or commitments under the term loan facility or the revolving credit facility, 9 or 12 months for Eurodollar Loans under the applicable term loan or the revolving credit facility. With respect to Eurodollar Loans, interest is payable at the end of each interest period and, in any event, at least every 3 months. With respect to Base Rate Loans (as defined in our credit agreement), interest is payable quarterly on the last business day of each fiscal quarter. In each case, calculations of interest are based on a 360-day year and actual days elapsed. Our credit agreement provides for payment by our company in respect of outstanding letters of credit of: (1) an annual fee equal to the applicable margin over the Eurodollar rate for Eurodollar Loans under the revolving credit facility from time to time in effect on the aggregate outstanding stated amounts of such letters of credit; (2) a fronting fee equal to 1/4 of 1.0% on the aggregate outstanding stated amounts of such letters of credit; and (3) customary administrative charges. We pay a commitment fee equal to a percentage equal to 1/2 of 1.0% per annum on the undrawn portion of the available commitment under the revolving credit facility, subject to decreases based on the achievement of certain financial ratios and subject to increases based on the amount of unused commitments under the revolving credit facility. Collateral and Guarantees The loans and letters of credit under our credit agreement are guaranteed by all of our existing and future direct and indirect wholly-owned subsidiaries. Our obligations and the obligations of such subsidiaries are secured by a first priority perfected lien on substantially all of our properties and assets and all of the properties and assets of such subsidiaries, whether such properties and assets are now owned or subsequently acquired, subject to certain exceptions. The security includes a pledge of all capital stock and notes owned by us and such subsidiaries, provided that, in certain cases, no more than 66 2/3% of the stock of our foreign subsidiaries was required to be pledged. Representations and Warranties and Covenants Our credit agreement and related documentation contains certain customary representations and warranties by our company and its subsidiaries. In addition, our credit agreement contains customary covenants restricting our ability and the ability of certain of our subsidiaries to, among other things: . declare dividends; . prepay debt; . incur liens; . make investments; . incur additional indebtedness; . amend certain organizational, corporate and other documents; . make capital expenditures; . engage in mergers, acquisitions and asset sales; . engage in certain transactions with affiliates and formation of subsidiaries; and . issue redeemable common stock and preferred stock, subject to certain exceptions. 101 In addition, we are required to comply with specified financial covenants and customary affirmative covenants. Events of Default Events of default under our credit agreement include: . our failure to pay principal or interest when due or pay a reimbursement obligation on a letter of credit; . a material breach of any representation or warranty; . covenant defaults; . events of bankruptcy; . a change of control of our company; and . other customary events of default. The above summary highlights the material provisions of our credit agreement, but does not purport to be complete and is subject to, and is qualified in its entirety by, all the provisions of our credit agreement, a copy of which is available upon request to our company. 102 DESCRIPTION OF NOTES You can find definitions of certain terms used in this description under the subheading "--Certain Definitions." In this description, the words "Pacer International" refer only to Pacer International, Inc. and not to any of its subsidiaries. The notes were issued under an indenture dated as of May 28, 1999 by and among Pacer International, the Guarantors and Wilmington Trust Company as trustee. The following summary highlights certain material terms of the indenture. Because this is a summary, it does not contain all of the information that is included in the indenture. You should read the entire indenture, including the definitions of certain terms used below, because it, and not this summary, defines your rights as holders of the notes. The indenture is subject to and governed by the Trust Indenture Act of 1939, as amended. We have filed a copy of the indenture as an exhibit to the registration statement of which this prospectus forms a part. General The notes will be general unsecured obligations of Pacer International, ranking subordinate in right of payment to all existing and future Senior Debt of Pacer International. The notes will be issued in fully registered form only, without coupons, in denominations of $1,000 and integral multiples thereof. Initially, the Trustee will act as Paying Agent and Registrar for the Notes. The Notes may be presented for registration or transfer and exchange at the offices of the Registrar, which initially will be the Trustee's corporate trust office. Pacer International may change any Paying Agent and Registrar without notice to holders of the Notes. Pacer International will pay principal, and premium, if any, on the notes at the Trustee's corporate office in New York, New York. At Pacer International's option, interest may be paid at the Trustee's corporate trust office or by check mailed to the registered address of holders of the notes. Any old notes that remain outstanding after completion of the exchange offer, together with the exchange notes issued in connection with the exchange offer, will be treated as a single class of securities under the Indenture. Principal, Maturity and Interest The notes will mature on June 1, 2007. Additional notes in an unlimited amount may be issued under the indenture from time to time, subject to the limitations set forth under "--Certain Covenants--Limitation on Incurrence of Additional Indebtedness." Interest on the notes will be payable semi-annually in cash on each June 1 and December 1, commencing on December 1, 1999, to the persons who are registered Holders at the close of business on the May 15 and November 15 immediately preceding the applicable interest payment date. Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from and including the date of issuance and will be computed on the basis of a 360-day year of twelve 30-day months. The notes will not be entitled to the benefit of any mandatory sinking fund. Redemption Optional Redemption Pacer International may redeem the notes, in whole at any time or in part from time to time, on and after June 1, 2003, upon not less than 30 nor more than 60 days' notice, at the following redemption prices 103 (expressed as percentages of the principal amount thereof) if redeemed during the twelve-month period commencing on June 1 of the year set forth below, plus, in each case, accrued and unpaid interest thereon, if any, to the date of redemption:
Year Percentage ---- ---------- 2003.......................................................... 105.875% 2004.......................................................... 102.938% 2005 and thereafter........................................... 100.000%
Optional Redemption upon Equity Offerings At any time, or from time to time, on or prior to June 1, 2002, Pacer International may, at its option, use the net cash proceeds of one or more Equity Offerings (as defined below) to redeem up to 35% in aggregate principal amount of the notes originally issued under the indenture at a redemption price equal to 111.750% of the principal amount thereof plus accrued and unpaid interest thereon, if any, to the date of redemption; provided, however, that after any such redemption the aggregate principal amount of the notes outstanding must equal at least 65% of the aggregate amount of the notes originally issued under the indenture. In order to effect the foregoing redemption with the net cash proceeds of any Equity Offering, Pacer International shall make such redemption not more than 120 days after the consummation of any such Equity Offering. As used in the preceding paragraph, "Equity Offering" means a public or private sale of Qualified Capital Stock, other than public offerings with respect to the Company's Common Stock on Form S-8, of Pacer International. Optional Redemption upon Change of Control In addition, at any time prior to June 1, 2003, upon the occurrence of a Change of Control, Pacer International may redeem the notes, in whole but not in part, at a redemption price equal to the principal amount thereof plus the Applicable Premium plus accrued and unpaid interest, if any, to the date of redemption. Notice of redemption of the notes pursuant to this paragraph shall be mailed to holders of the notes not more than 30 days following the occurrence of a Change of Control. Pacer International may not redeem notes pursuant to this paragraph if it has made an offer to repurchase notes with respect to such Change of Control. Selection and Notice of Redemption In the event that less than all of the notes are to be redeemed at any time, selection of such notes for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which such notes are listed or, if such notes are not then listed on a national securities exchange, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate; provided, however, that no notes of a principal amount of $1,000 or less shall be redeemed in part; provided, further, that if a partial redemption is made with the net cash proceeds of an Equity Offering, selection of the notes or portions thereof for redemption shall be made by the Trustee only on a pro rata basis or on as nearly a pro rata basis as is practicable, subject to DTC procedures, unless such method is otherwise prohibited. Notice of redemption shall be mailed by first-class mail at least 30 but not more than 60 days before the redemption date to each holder of notes to be redeemed at its registered address. If any note is to be redeemed in part only, the notice of redemption that relates to such note shall state the portion of the principal amount thereof to be redeemed. A new note in a principal amount equal to the unredeemed portion thereof will be issued in the name of the holder thereof upon cancellation of the original note. On and after the redemption date, interest will cease to accrue on notes or portions thereof called for redemption as long as Pacer International has deposited with the Paying Agent funds in satisfaction of the applicable redemption price pursuant to the Indenture. 104 Subordination The payment of all Obligations on or relating to the notes is subordinated in right of payment to the prior payment in full in cash or Cash Equivalents of all Obligations on Senior Debt of Pacer International, including the Obligations with respect to the Credit Agreement. The holders of Senior Debt will be entitled to receive payment in full in cash or Cash Equivalents of all Obligations due in respect of Senior Debt, including interest after the commencement of any bankruptcy or other like proceeding at the rate specified in the applicable Senior Debt whether or not such interest is an allowed claim in any such proceeding, before the holders of notes will be entitled to receive any payment or distribution of any kind or character with respect to any Obligations on, or relating to, the notes in the event of any distribution to creditors of Pacer International: (1) in a liquidation or dissolution of Pacer International; (2) in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to Pacer International or its property; (3) in an assignment for the benefit of creditors; or (4) in any marshalling of Pacer International's assets and liabilities. Pacer International also may not make any payment or distribution of any kind or character with respect to any Obligations on, or relating to, the notes or acquire any notes for cash or property or otherwise if: (1) a payment default on any Senior Debt occurs and is continuing; or (2) any other default occurs and is continuing on Designated Senior Debt that permits holders of the Designated Senior Debt to accelerate its maturity and the Trustee receives a notice of such default (a "Payment Blockage Notice") from the Representative of any Designated Senior Debt. Payments on and distributions with respect to any Obligations on, or with respect to, the notes may and shall be resumed: (1) in the case of a payment default, upon the date on which such default is cured or waived; and (2) in case of a nonpayment default, the earlier of (x) the date on which all nonpayment defaults are cured or waived (so long as no other event of default exists), (y) 180 days after the date on which the applicable Payment Blockage Notice is received or (z) the date on which the Trustee receives notice from the Representative for such Designated Senior Debt rescinding the Payment Blockage Notice, unless the maturity of any Designated Senior Debt has been accelerated. No new Payment Blockage Notice may be delivered unless and until 360 days have elapsed since the effectiveness of the immediately prior Payment Blockage Notice. No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice unless such default shall have been cured or waived for a period of not less than 90 consecutive days, it being acknowledged that any subsequent action, or any breach of any financial covenants for a period commencing after the date of delivery of such initial Payment Blockage Notice that in either case would give rise to a default pursuant to any provisions under which a default previously existed or was continuing shall constitute a new default for this purpose. Pacer International must promptly notify holders of Senior Debt if payment of the notes is accelerated because of an Event of Default. By reason of such subordination, in the event of the insolvency of Pacer International, creditors of Pacer International who are not holders of Senior Debt, including the Holders of the notes, may recover less, ratably, than holders of Senior Debt. 105 After giving effect to the Transactions, on a pro forma basis, at April 2, 1999, Pacer International would have had approximately $135.0 million of Senior Debt outstanding (exclusive of $100.0 million of unused commitments under the Credit Agreement). Guarantees Each Guarantor unconditionally guarantees, on a senior subordinated basis, jointly and severally, to each holder of notes and the Trustee, the full and prompt performance of Pacer International's obligations under the indenture and the notes, including the payment of principal of and interest on the notes. The Guarantees will be subordinated to Guarantor Senior Debt on the same basis as the notes are subordinated to Senior Debt. The obligations of each Guarantor are limited to the maximum amount which, after giving effect to all other contingent and fixed liabilities of such Guarantor (including, without limitation, its Guarantor Senior Debt) and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Guarantee or pursuant to its contribution obligations under the indenture, will result in the obligations of such Guarantor under the Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal or state law. Each Guarantor that makes a payment or distribution under a Guarantee shall be entitled to a contribution from each other Guarantor in an amount pro rata, based on the net assets of each Guarantor, determined in accordance with GAAP. Each Guarantor may consolidate with or merge into or sell its assets to Pacer International or another Guarantor without limitation, or with other Persons upon the terms and conditions set forth in the indenture. See "Certain Covenants--Merger, Consolidation and Sale of Assets." In the event all of the Capital Stock of a Guarantor is disposed of by Pacer International, whether by merger, consolidation, sale or otherwise, and the disposition complies with the provisions set forth in "Certain Covenants--Limitation on Asset Sales," the Guarantor's Guarantee will be released. Separate financial statements of the Guarantors are not included herein because such Guarantors are jointly and severally liable with respect to Pacer International's obligations pursuant to the notes, and the aggregate net assets, earnings and equity of the Guarantors and Pacer International are substantially equivalent to the net assets, earnings and equity of Pacer International on a consolidated basis. Change of Control The indenture provides that upon the occurrence of a Change of Control, each holder of notes will have the right to require that Pacer International purchase all or a portion of such holder's notes pursuant to the offer described below (the "Change of Control Offer"), at a purchase price equal to 101.0% of the principal amount thereof plus accrued interest to the date of purchase. The indenture provides that, prior to the mailing of the notice referred to below, but in any event within 30 days following any Change of Control (as defined below), Pacer International covenants to: (1) repay in full and terminate all commitments under Indebtedness under the Credit Agreement and all other Senior Debt the terms of which require repayment upon a Change of Control or offer to repay in full and terminate all commitments under all Indebtedness under the Credit Agreement and all other such Senior Debt and to repay the Indebtedness owed to each lender which has accepted such offer; or (2) obtain the requisite consents under the Credit Agreement and all other Senior Debt to permit the repurchase of the notes as provided below. Pacer International shall first comply with the covenant in the immediately preceding sentence before it shall be required to repurchase notes pursuant to the provisions described below. Pacer International's failure to comply with the covenant described in the second preceding sentence (and any failure to send the notice referred to in the succeeding paragraph as a result of the prohibition in the second preceding sentence) shall constitute an Event of Default described in clause (3) and not in clause (2) under "Events of Default" below. 106 Within 30 days following the date upon which the Change of Control occurred, Pacer International shall send, by first class mail, a notice to each holder of notes, with a copy to the Trustee, which notice shall govern the terms of the Change of Control Offer. Such notice shall state, among other things, the purchase date, which must be no earlier than 30 days nor later than 60 days from the date such notice is mailed, other than as may be required by law (the "Change of Control Payment Date"). Holders of notes electing to have a note purchased pursuant to a Change of Control Offer will be required to surrender the note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the note completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third business day prior to the Change of Control Payment Date. If a Change of Control Offer is made, there can be no assurance that Pacer International will have available funds sufficient to pay the Change of Control purchase price for all the notes that might be delivered by holders thereof seeking to accept the Change of Control Offer. In the event Pacer International is required to purchase outstanding notes pursuant to a Change of Control Offer, Pacer International expects that it would seek third party financing to the extent it does not have available funds to meet its purchase obligations. However, there can be no assurance that Pacer International would be able to obtain such financing. Neither the Board of Directors of Pacer International nor the Trustee may waive the covenant relating to a note holder's right to redemption upon a Change of Control. Restrictions in the indenture described herein on the ability of Pacer International and its Restricted Subsidiaries to incur additional Indebtedness, to grant liens on its property, to make Restricted Payments and to make Asset Sales may also make more difficult or discourage a takeover of Pacer International, whether favored or opposed by the management of Pacer International. Consummation of any such transaction in certain circumstances may require redemption or repurchase of the notes, and there can be no assurance that Pacer International or the acquiring party will have sufficient financial resources to effect such redemption or repurchase. Such restrictions and the restrictions on transactions with Affiliates may, in certain circumstances, make more difficult or discourage any leveraged buyout of Pacer International or any of its Restricted Subsidiaries by the management of Pacer International. While such restrictions cover a wide variety of arrangements which have traditionally been used to effect highly leveraged transactions, the indenture may not afford the holders of notes protection in all circumstances from the adverse aspects of a highly leveraged transaction, reorganization, restructuring, merger or similar transaction. Pacer International will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of notes pursuant to a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the "Change of Control" provisions of the indenture, Pacer International shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the "Change of Control" provisions of the Indenture by virtue thereof. The definition of "Change of Control" includes, among other transactions, a disposition of "all or substantially all" of the property and assets of Pacer International. With respect to the disposition of property or assets, the phrase "all or substantially all" as used in the indenture varies according to the facts and circumstances of the subject transaction, has no clearly established meaning under relevant law and is subject to judicial interpretation. Accordingly, in certain circumstances, there may be a degree of uncertainty in ascertaining whether a particular transaction would involve a disposition of "all or substantially all" of the property or assets of a Person, and therefore it may be unclear whether a Change of Control has occurred and whether Pacer International is required to make a Change of Control Offer. Certain Covenants The indenture contains, among others, the following covenants: Limitation on Incurrence of Additional Indebtedness Pacer International will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume, guarantee, acquire, become liable, contingently or otherwise, with respect to, or otherwise 107 become responsible for payment of (collectively, "incur") any Indebtedness (other than Permitted Indebtedness); provided, however, that if no Default or Event of Default shall have occurred and be continuing at the time of or as a consequence of the incurrence of any such Indebtedness, Pacer International or any of the Guarantors may incur Indebtedness (including, without limitation, Acquired Indebtedness) and Restricted Subsidiaries of Pacer International that are not Guarantors may incur Acquired Indebtedness, in each case if on the date of the incurrence of such Indebtedness, after giving effect to the incurrence thereof, the Consolidated Fixed Charge Coverage Ratio of Pacer International is greater than 2.25 to 1.0 if such incurrence is on or prior to June 1, 2000 and 2.5 to 1.0 if such incurrence is thereafter. Limitation on Restricted Payments Pacer International will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, (1) declare or pay any dividend or make any distribution, other than dividends or distributions payable in Qualified Capital Stock of Pacer International, on or in respect of shares of Pacer International's Capital Stock to holders of such Capital Stock; (2) purchase, redeem or otherwise acquire or retire for value any Capital Stock of Pacer International or any warrants, rights or options to purchase or acquire shares of any class of such Capital Stock; (3) make any principal payment on, purchase, defease, redeem, prepay, decrease or otherwise acquire or retire for value, prior to any scheduled final maturity, scheduled repayment or scheduled sinking fund payment, any Indebtedness of Pacer International, other than the notes, that is subordinate or junior in right of payment to the notes; or (4) make any Investment, other than Permitted Investments (each of the foregoing actions set forth in clauses (1), (2), (3) and (4) being referred to as a "Restricted Payment"), if at the time of such Restricted Payment or immediately after giving effect thereto: (1) a Default or an Event of Default shall have occurred and be continuing; or (2) Pacer International is not able to incur at least $1.00 of additional Indebtedness, other than Permitted Indebtedness, in compliance with the "Limitation on Incurrence of Additional Indebtedness" covenant; or (3) the aggregate amount of Restricted Payments, including such proposed Restricted Payment, made subsequent to the Issue Date (the amount expended for such purposes, if other than in cash, being the fair market value of such property as determined reasonably and in good faith by the Board of Directors of Pacer International) shall exceed the sum of: (a) 50% of the cumulative Consolidated Net Income, or if cumulative Consolidated Net Income shall be a loss, minus 100% of such loss) of Pacer International earned subsequent to the Issue Date and on or prior to the date the Restricted Payment occurs (the "Reference Date"), treating such period as a single accounting period; plus (b) 100% of the aggregate net cash proceeds and the fair market value, as determined in good faith by the Board of Directors, of property other than cash received by Pacer International from any Person, other than a Subsidiary of Pacer International, from the issuance and sale subsequent to the Issue Date and on or prior to the Reference Date of Qualified Capital Stock of Pacer International other than any Qualified Capital Stock issued in exchange for the Pacer Preferred Stock; plus (c) without duplication of any amounts included in clause (3)(b) above, 100% of the aggregate net cash proceeds of any equity contribution received by Pacer International from a holder of Pacer International's Capital Stock; plus 108 (d) without duplication, the sum of: (I) the aggregate amount returned in cash on or with respect to Investments (other than Permitted Investments) made subsequent to the Issue Date whether through interest payments, principal payments, dividends or other distributions or payments; (II) the net cash proceeds received by Pacer International or any Restricted Subsidiary of Pacer International from the disposition of all or any portion of such Investments (other than to a Subsidiary of Pacer International); and (III) upon redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, the fair market value of such Subsidiary (valued in each case as provided in the definition of "Investment"); provided, however, that the sum of clauses (I), (II) and (III) above shall not exceed the aggregate amount of all such Investments made by Pacer International or any Restricted Subsidiary in the relevant Person or Unrestricted Subsidiary subsequent to the Issue Date. Notwithstanding the foregoing, the provisions set forth in the immediately preceding paragraph do not prohibit: (1) the payment of any dividend within 60 days after the date of declaration of such dividend if the dividend would have been permitted on the date of declaration; (2) if no Default or Event of Default shall have occurred and be continuing, the acquisition of any shares of Capital Stock of Pacer International, either (a) solely in exchange for shares of Qualified Capital Stock of Pacer International or (b) through the application of net proceeds of a substantially concurrent sale for cash (other than to a Subsidiary of Pacer International) of shares of Qualified Capital Stock of Pacer International; (3) if no Default or Event of Default shall have occurred and be continuing, the acquisition of any Indebtedness of Pacer International that is subordinate or junior in right of payment to the notes either (a) solely in exchange for shares of Qualified Capital Stock of Pacer International, or (b) through the application of net proceeds of a substantially concurrent sale for cash (other than to a Subsidiary of Pacer International) of (I) shares of Qualified Capital Stock of Pacer International or (II) Refinancing Indebtedness; (4) if no Default or Event of Default shall have occurred and be continuing, repurchases by Pacer International or any Restricted Subsidiary of Pacer International of Capital Stock of Pacer International or any Restricted Subsidiary of Pacer International from (i) employees of Pacer International or any of its Subsidiaries or their authorized representatives (a) upon the death, disability or termination of employment of such employees or consultants or to the extent required pursuant to employee benefit plans, employment agreements or consulting agreements, (b) pursuant to any other agreements with such employees of or consultants to Pacer International or any of its Subsidiaries, in an aggregate amount not to exceed $5.0 million in any calendar year (with unused amounts in any calendar year being carried over to succeeding years subject to a maximum of $10.0 million in any calendar year) or (c) to the extent required pursuant to the Shareholder Agreement or the Option Plan or (ii) Richard P. Hyland; (5) the declaration and payment of dividends to holders of any class or series of Preferred Stock (other than Disqualified Capital Stock) issued after the issue date, provided that for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date of issuance of such Preferred Stock, after giving effect to such issuance on a pro forma basis, Pacer International would have had a Consolidated Fixed Charge Coverage Ratio of at least 1.75 to 1.0; (6) the payment of dividends on Pacer International's Common Stock, following the first public offering of Pacer International's Common Stock after the Issue Date, of up to 6% per annum of the net proceeds received by Pacer International in such public offering, other than public offerings with respect to Pacer International's Common Stock registered on Form S-8; (7) the repurchase, retirement or other acquisition or retirement for value of equity interests of Pacer International in existence on the Issue Date and from the persons holding such equity interests on the Issue 109 Date and which are not held by Apollo or any of its Affiliates or members of management of Pacer International and its Subsidiaries on the Issue Date (including any equity interests issued in respect of such equity interests as a result of a stock split, recapitalization, merger, combination, consolidation or similar transaction), provided, however, that Pacer International shall be permitted to make Restricted Payments under this clause only if after giving effect thereto, Pacer International would be permitted to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to the "Limitation on Incurrence of Additional Indebtedness" covenant; (8) other Restricted Payments in an aggregate amount not to exceed $10.0 million; (9) if no Default or Event of Default shall have occurred and be continuing, payments or distributions to dissenting stockholders pursuant to applicable law, pursuant to or in connection with a consolidation, merger or transfer of assets that complies with the provisions of the Indenture applicable to mergers, consolidations and transfers of all or substantially all of the property and assets of Pacer International; and (10) if no Default or Event of Default shall have occurred and be continuing, payments of cash in lieu of the issuance of fractional shares upon the exercise of warrants or upon the conversion or exchange of, or issuance of Capital Stock in lieu of cash dividends on, any Capital Stock of Pacer International or any Restricted Subsidiary, which in the aggregate do not exceed $3.0 million. In determining the aggregate amount of Restricted Payments made subsequent to the Issue Date in accordance with clause (3) of the immediately preceding paragraph, amounts expended pursuant to clauses (1), (2)(b), (4), (5), (6), (7), (8), (9) and (10) shall be included in such calculation. Not later than the date of making any Restricted Payment, Pacer International shall deliver to the Trustee an officers' certificate stating that such Restricted Payment complies with the indenture and setting forth in reasonable detail the basis upon which the required calculations were computed, which calculations may be based upon Pacer International's latest available internal quarterly financial statements. Limitation on Asset Sales Pacer International will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless: (1) Pacer International or the applicable Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets sold or otherwise disposed of (as determined in good faith by Pacer International's Board of Directors); (2) at least 75% of the consideration received by Pacer International or the Restricted Subsidiary, as the case may be, from such Asset Sale shall be in the form of cash or Cash Equivalents and is received at the time of such disposition; provided that the amount of (a) any liabilities (as shown on Pacer International's or such Restricted Subsidiary's most recent balance sheet) of Pacer International or any Restricted Subsidiary (other than liabilities that are by their terms subordinated to the notes) that are assumed by the transferee of any such assets, and (b) any notes or other obligations received by Pacer International or any such Restricted Subsidiary from such transferee that are converted by Pacer International or such Restricted Subsidiary into cash within 180 days after such Asset Sale (to the extent of the cash received) shall be deemed to be cash for the purposes of this provision only; and (3) upon the consummation of an Asset Sale, Pacer International shall apply, or cause such Restricted Subsidiary to apply, the Net Cash Proceeds relating to such Asset Sale within 360 days of receipt thereof either: (a) to prepay any Senior Debt or Guarantor Senior Debt and, in the case of any Senior Debt or Guarantor Senior Debt under any revolving credit facility, effect a permanent reduction in the availability under such revolving credit facility; (b) to make an Investment (x) in properties and assets that replace the properties and assets that were the subject of such Asset Sale, (y) in properties and assets that will be used in the business of 110 Pacer International and its Restricted Subsidiaries as existing on the Issue Date or in businesses the same, similar or reasonably related thereto or (z) permitted by clause (1) of the definition of Permitted Investments (collectively, "Replacement Assets"); or (c) a combination of prepayment and investment permitted by the foregoing clauses (3)(a) and (3)(b). On the 361st day after an Asset Sale or such earlier date, if any, as the Board of Directors of Pacer International or of such Restricted Subsidiary determines not to apply the Net Cash Proceeds relating to such Asset Sale as set forth in clauses (3)(a), (3)(b) and (3)(c) of the next preceding paragraph (each, a "Net Proceeds Offer Trigger Date"), such aggregate amount of Net Cash Proceeds which have not been applied on or before such Net Proceeds Offer Trigger Date as permitted in clauses (3)(a), (3)(b) and (3)(c) of the next preceding paragraph (each a "Net Proceeds Offer Amount") shall be applied by Pacer International or such Restricted Subsidiary to make an offer to purchase (the "Net Proceeds Offer") on a date (the "Net Proceeds Offer Payment Date") not less than 30 nor more than 60 days following the applicable Net Proceeds Offer Trigger Date, from all holders of notes on a pro rata basis, that amount of notes equal to the Net Proceeds Offer Amount at a price equal to 100% of the principal amount of the notes to be purchased, plus accrued and unpaid interest thereon, if any, to the date of purchase; provided, however, that if at any time any non-cash consideration received by Pacer International or any Restricted Subsidiary of Pacer International, as the case may be, in connection with any Asset Sale is converted into or sold or otherwise disposed of for cash (other than interest received with respect to any such non-cash consideration), then such conversion or disposition shall be deemed to constitute an Asset Sale hereunder as of the date of such conversion or disposition and the Net Cash Proceeds thereof shall be applied in accordance with this covenant. Pacer International may defer the Net Proceeds Offer until there is an aggregate unutilized Net Proceeds Offer Amount equal to or in excess of $7.5 million resulting from one or more Asset Sales (at which time, the entire unutilized Net Proceeds Offer Amount, and not just the amount in excess of $7.5 million, shall be applied as required pursuant to the preceding paragraph). In the event of the transfer of substantially all (but not all) of the property and assets of Pacer International and its Restricted Subsidiaries as an entirety to a Person in a transaction permitted under "-- Merger, Consolidation and Sale of Assets," which transaction does not constitute a Change of Control, the successor corporation shall be deemed to have sold the properties and assets of Pacer International and its Restricted Subsidiaries not so transferred for purposes of this covenant, and shall comply with the provisions of this covenant with respect to such deemed sale as if it were an Asset Sale. In addition, the fair market value of such properties and assets of Pacer International or its Restricted Subsidiaries deemed to be sold shall be deemed to be Net Cash Proceeds for purposes of this covenant. Notwithstanding the first two paragraphs of this covenant, Pacer International and its Restricted Subsidiaries will be permitted to consummate an Asset Sale without complying with such paragraphs to the extent that: (1) at least 75% of the consideration for such Asset Sale constitutes Replacement Assets; and (2) such Asset Sale is for fair market value; provided that any consideration not constituting Replacement Assets received by Pacer International or any of its Restricted Subsidiaries in connection with any Asset Sale permitted to be consummated under this paragraph shall constitute Net Cash Proceeds subject to the provisions of the first two paragraphs of this covenant. Notice of each Net Proceeds Offer will be mailed to the record holders of notes as shown on the register of holders of notes within 25 days following the Net Proceeds Offer Trigger Date, with a copy to the Trustee, and shall comply with the procedures set forth in the indenture. Upon receiving notice of the Net Proceeds Offer, holders may elect to tender their notes in whole or in part in integral multiples of $1,000 in exchange for cash. To the extent holders properly tender notes in an amount exceeding the Net Proceeds Offer Amount, notes of tendering holders will be purchased on a pro rata basis (based on amounts tendered). To the extent that the aggregate amount of the notes tendered pursuant to a Net Proceeds Offer is less than the Net Proceeds Offer Amount, Pacer International may use such excess Net Proceeds Offer Amount for general corporate 111 purposes or for any other purposes not prohibited by the indenture. Upon completion of any such Net Proceeds Offer, the Net Proceeds Offer Amount shall be reset at zero. A Net Proceeds Offer shall remain open for a period of 20 business days or such longer period as may be required by law. Pacer International will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of notes pursuant to a Net Proceeds Offer. To the extent that the provisions of any securities laws or regulations conflict with the "Asset Sale" provisions of the indenture, Pacer International shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the "Asset Sale" provisions of the Indenture by virtue thereof. Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries Pacer International will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or permit to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary of Pacer International to (a) pay dividends or make any other distributions on or in respect of its Capital Stock; (b) make loans or advances or to pay any Indebtedness or other obligation owed to Pacer International or any other Restricted Subsidiary of Pacer International; or (c) transfer any of its property or assets to Pacer International or any other Restricted Subsidiary of Pacer International, except for such encumbrances or restrictions existing under or by reason of: (1) applicable law; (2) the indenture; (3) the Credit Agreement; (4) customary non-assignment provisions of any contract or any lease governing a leasehold interest of any Restricted Subsidiary of Pacer International; (5) any instrument governing Acquired Indebtedness, which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person or the properties or assets of the Person so acquired; (6) agreements existing on the Issue Date to the extent and in the manner such agreements are in effect on the Issue Date; (7) purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature discussed in clause (c) above on the property so acquired; (8) contracts for the sale of assets, including, without limitation, customary restrictions with respect to a Restricted Subsidiary of Pacer International pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock or assets of such Restricted Subsidiary; (9) secured Indebtedness otherwise permitted to be incurred pursuant to the covenants described under "Limitation on Incurrence of Additional Indebtedness" and "Limitation on Liens" that limit the right of the debtor to dispose of the assets securing such Indebtedness; (10) customary provisions in joint venture agreements and other similar agreements entered into in the ordinary course of business; (11) customary net worth provisions contained in leases and other agreements entered into by Pacer International or any Restricted Subsidiary; (12) an agreement governing Indebtedness incurred to Refinance the Indebtedness issued, assumed or incurred pursuant to an agreement referred to in clauses (1) through (11) above; provided, however, that the provisions relating to such encumbrance or restriction contained in any such Indebtedness are no less favorable to Pacer International in any material respect as determined by the board of directors of Pacer International in their reasonable and good faith judgment than the provisions relating to such encumbrance or restriction contained in agreements referred to in such clauses; or 112 (13) an agreement governing Indebtedness permitted to be incurred pursuant to the "Limitation on Incurrence on Additional Indebtedness" covenant; provided that the provisions relating to such encumbrance or restriction contained in such Indebtedness are no less favorable to Pacer International in any material respect as determined by the board of directors of Pacer International in their reasonable and good faith judgment than the provisions contained in the Credit Agreement as in effect on the Issue Date. Limitation on Liens Pacer International will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or permit or suffer to exist any Liens of any kind against or upon any property or assets of Pacer International or any of its Restricted Subsidiaries whether owned on the Issue Date or acquired after the Issue Date, or any proceeds therefrom, or assign or otherwise convey any right to receive income or profits therefrom unless: (1) in the case of Liens securing Indebtedness that is expressly subordinate or junior in right of payment to the notes, the notes are secured by a Lien on such property, assets or proceeds that is senior in priority to such Liens; and (2) in all other cases, the notes are equally and ratably secured, except for the following Liens which are expressly permitted: (a) Liens existing as of the Issue Date to the extent and in the manner such Liens are in effect on the Issue Date; (b) Liens securing Senior Debt and Liens securing Guarantor Senior Debt; (c) Liens securing the notes and the Guarantees; (d) Liens of Pacer International or a Wholly Owned Restricted Subsidiary of Pacer International on assets of any Restricted Subsidiary of Pacer International; (e) Liens securing Refinancing Indebtedness which is incurred to Refinance any Indebtedness (including, without limitation, Acquired Indebtedness) which has been secured by a Lien permitted under the Indenture and which has been incurred in accordance with the provisions of the Indenture; provided, however, that such Liens: (I) are no less favorable to the holders of notes and are not more favorable to the lienholders with respect to such Liens than the Liens in respect of the Indebtedness being Refinanced; and (II) do not extend to or cover any property or assets of Pacer International or any of its Restricted Subsidiaries not securing the Indebtedness so Refinanced; and (f) Permitted Liens. Prohibition on Incurrence of Senior Subordinated Debt Pacer International and the Guarantors have not incurred or suffered to exist Indebtedness that is senior in right of payment to the notes or the Guarantees, as the case may be, and subordinate in right of payment by its terms to any other Indebtedness of Pacer International or such Guarantor, as the case may be. Merger, Consolidation and Sale of Assets Pacer International will not, in a single transaction or series of related transactions, consolidate or merge with or into any Person, or sell, assign, transfer, lease, convey or otherwise dispose of (or cause or permit any Restricted Subsidiary of Pacer International to sell, assign, transfer, lease, convey or otherwise dispose of) all or substantially all of Pacer International's assets (determined on a consolidated basis for Pacer International and Pacer International's Restricted Subsidiaries) whether as an entirety or substantially as an entirety to any Person unless: (1) either (a) Pacer International shall be the surviving or continuing corporation or (b) the Person (if other than Pacer International) formed by such consolidation or into which Pacer International is merged 113 or the Person which acquires by sale, assignment, transfer, lease, conveyance or other disposition the properties and assets of Pacer International and of Pacer International's Restricted Subsidiaries substantially as an entirety (the "Surviving Entity"): (x) shall be a corporation organized and validly existing under the laws of the United States or any State thereof or the District of Columbia; and (y) shall expressly assume, by supplemental indenture (in form and substance satisfactory to the Trustee), executed and delivered to the Trustee, the due and punctual payment of the principal of, and premium, if any, and interest on all of the notes and the performance of every covenant of the notes and the indenture on the part of Pacer International to be performed or observed; (2) immediately after giving effect to such transaction on a pro forma basis and the assumption contemplated by clause (1)(b)(y) above (including giving effect to any Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred in connection with or in respect of such transaction), Pacer International or such Surviving Entity, as the case may be, shall be able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to the "Limitation on Incurrence of Additional Indebtedness" covenant; (3) immediately before and immediately after giving effect to such transaction on a pro forma basis and the assumption contemplated by clause (1)(b)(y) above (including, without limitation, giving effect to any Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred or repaid and any Lien granted or to be released in connection with or in respect of the transaction), no Default or Event of Default shall have occurred or be continuing; and (4) Pacer International or the Surviving Entity, as the case may be, shall have delivered to the Trustee an officers' certificate and an opinion of counsel, each stating that such consolidation, merger, sale, assignment, transfer, lease, conveyance or other disposition and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with the applicable provisions of the indenture and that all conditions precedent in the indenture relating to such transaction have been satisfied. Notwithstanding the foregoing, the merger of Pacer International with an Affiliate incorporated solely for the purpose of reincorporating Pacer International in another jurisdiction shall be permitted. For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties or assets of one or more Restricted Subsidiaries of Pacer International the Capital Stock of which constitutes all or substantially all of the properties and assets of Pacer International, shall be deemed to be the transfer of all or substantially all of the properties and assets of Pacer International. The indenture provides that upon any consolidation, combination or merger or any transfer of all or substantially all of the assets of Pacer International in accordance with the foregoing, in which Pacer International is not the continuing corporation, the successor Person formed by such consolidation or into which Pacer International is merged or to which such conveyance, lease or transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, Pacer International under the indenture and the notes with the same effect as if such Surviving Entity had been named as such. Each Guarantor (other than any Guarantor whose Guarantee is to be released in accordance with the terms of the Guarantee and the indenture in connection with any transaction complying with the provisions of "--Limitation on Asset Sales") will not, and Pacer International will not cause or permit any Guarantor to, consolidate with or merge with or into any Person other than Pacer International or any other Guarantor unless: (1) the entity formed by or surviving any such consolidation or merger (if other than the Guarantor) or to which such sale, lease, conveyance or other disposition shall have been made is a corporation organized and existing under the laws of the United States or any State thereof or the District of Columbia; 114 (2) such entity assumes by supplemental indenture all of the obligations of the Guarantor on the Guarantee; (3) immediately after giving effect to such transaction on a pro forma basis, no Default or Event of Default shall have occurred and be continuing; and (4) immediately after giving effect to such transaction and the use of any net proceeds therefrom on a pro forma basis, Pacer International could satisfy the provisions of clause (2) of the first paragraph of this covenant. Any merger or consolidation of a Guarantor with and into Pacer International (with Pacer International being the surviving entity) or another Guarantor that is a Wholly Owned Restricted Subsidiary of Pacer International need only comply with clause (4) of the first paragraph of this covenant. Limitations on Transactions with Affiliates (1) Pacer International will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction or series of related transactions (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with, or for the benefit of, any of its Affiliates (each an "Affiliate Transaction"), other than (x) Affiliate Transactions permitted under paragraph (2) below and (y) Affiliate Transactions on terms that are no less favorable than those that might reasonably have been obtained in a comparable transaction at such time on an arm's-length basis from a Person that is not an Affiliate of Pacer International or such Restricted Subsidiary. All Affiliate Transactions (and each series of related Affiliate Transactions which are similar or part of a common plan) involving aggregate payments or other property with a fair market value in excess of $2.0 million shall be approved by the board of directors of Pacer International or such Restricted Subsidiary, as the case may be, such approval to be evidenced by a Board Resolution stating that such board of directors has determined that such transaction complies with the foregoing provisions. If Pacer International or any Restricted Subsidiary of Pacer International enters into an Affiliate Transaction (or a series of related Affiliate Transactions related to a common plan) that involves an aggregate fair market value of more than $10.0 million, Pacer International or such Restricted Subsidiary, as the case may be, shall, prior to the consummation thereof, obtain a favorable opinion as to the fairness of such transaction or series of related transactions to Pacer International or the relevant Restricted Subsidiary, as the case may be, from a financial point of view, from an Independent Financial Advisor and file the same with the Trustee. (2) The restrictions set forth in clause (1) shall not apply to: (a) reasonable fees and compensation paid to and indemnity provided on behalf of, officers, directors, employees or consultants of Pacer International or any Restricted Subsidiary of Pacer International as determined in good faith by Pacer International's board of directors; (b) transactions exclusively between or among Pacer International and any of its Wholly Owned Restricted Subsidiaries or exclusively between or among such Wholly Owned Restricted Subsidiaries, provided such transactions are not otherwise prohibited by the indenture; (c) any agreement as in effect as of the Issue Date or any amendment thereto or any transaction contemplated thereby (including pursuant to any amendment thereto) in any replacement agreement thereto so long as any such amendment or replacement agreement is not more disadvantageous to the Holders in any material respect than the original agreement as in effect on the Issue Date; (d) Restricted Payments permitted by the indenture; (e) transactions in which Pacer International or any of its Restricted Subsidiaries, as the case may be, delivers to the Trustee a letter from an Independent Financial Advisor stating that such transaction is fair to Pacer International or such Restricted Subsidiary from a financial point of view or meets the requirements of the first sentence of paragraph (1) above; (f) the existence of, or the performance by Pacer International or any of its Restricted Subsidiaries of its obligations under the terms of, any stockholders agreement (including any registration rights agreement 115 or purchase agreement related thereto) to which it is a party as of the Issue Date and any similar agreements which it may enter into thereafter; provided, however, that the existence of, or the performance by Pacer International or any of its Restricted Subsidiaries of obligations under, any future amendment to any such existing agreement or under any similar agreement entered into after that Issue Date shall only be permitted by this clause to the extent that the terms of any such amendment or new agreement are not otherwise disadvantageous to the holders of the notes in any material respect; (g) the issuance of securities or other payments, awards or grants in cash securities or otherwise pursuant to or the funding of, employment arrangements, stock options and stock ownership plans approved by the Board of Directors of Pacer International in good faith and loans to employees of Pacer International and its Subsidiaries which are approved by the board of directors of Pacer International in good faith; (h) the payment of all fees and expenses related to the Transactions; (i) transactions with customers, clients, suppliers, or purchasers or sellers of goods or services, in each case in the ordinary course of business and otherwise in compliance with the terms of the indenture, which are fair to Pacer International or its Restricted Subsidiaries, in the reasonable determination of the board of directors of Pacer International or the senior management thereof, or are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated party; and (j) fees payable to Apollo pursuant to the Management Agreement and the Shareholders Agreement. Additional Subsidiary Guarantees If Pacer International or any of its Restricted Subsidiaries transfers or causes to be transferred, in one transaction or a series of related transactions, any property to any Domestic Restricted Subsidiary that is not a Guarantor, or if Pacer International or any of its Restricted Subsidiaries shall organize, acquire or otherwise invest in another Domestic Restricted Subsidiary having total equity value in excess of $1.0 million, then such transferee or acquired or other Restricted Subsidiary shall: (1) execute and deliver to the Trustee a supplemental indenture in form reasonably satisfactory to the Trustee pursuant to which such Restricted Subsidiary shall unconditionally guarantee all of Pacer International obligations under the notes and the indenture on the terms set forth in the indenture; (2) deliver to the Trustee an opinion of counsel that such supplemental indenture has been duly authorized, executed and delivered by such Restricted Subsidiary and constitutes a legal, valid, binding and enforceable obligation of such Restricted Subsidiary; and (3) execute a Guarantee. Thereafter, such Restricted Subsidiary shall be a Guarantor for all purposes of the indenture. Reports to Holders The indenture provides that, whether or not required by the rules and regulations of the Commission, so long as any notes are outstanding, Pacer International will file a copy of the following information and reports with the Commission for public availability (unless the Commission will not accept such a filing) and will furnish to the holders of notes and to securities analysts and prospective investors, upon their request: (1) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if Pacer International were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the financial condition and results of operations of Pacer International and its consolidated Subsidiaries and, with respect to the annual information only, a report thereon by Pacer International's certified independent accounts; and (2) all current reports that would be required to be filed with the Commission on Form 8-K if Pacer International were required to file such reports, 116 in each case within five days the time periods specified in the Commission's rules and regulations. In addition, following the consummation of this exchange offer contemplated by the Registration Rights Agreement, whether or not required by the rules and regulations of the Commission, Pacer International will file a copy of all such information and reports with the Commission for public availability within the time periods specified in the Commission's rules and regulations (unless the Commission will not accept such a filing) and make such information available to securities analysts and prospective investors upon written request to Pacer International. In addition, Pacer International has agreed that, for so long as any notes remain outstanding, it will furnish to the holders thereof and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. Events of Default The following events are defined in the indenture as "Events of Default": (1) the failure to pay interest on any notes when the same becomes due and payable and the default continues for a period of 30 days (whether or not such payment shall be prohibited by the subordination provisions of the indenture); (2) the failure to pay the principal on any notes, when such principal becomes due and payable, at maturity, upon redemption or otherwise (including the failure to make a payment to purchase notes tendered pursuant to a Change of Control Offer or a Net Proceeds Offer) (whether or not such payment shall be prohibited by the subordination provisions of the indenture); (3) a default in the observance or performance of any other covenant or agreement contained in the indenture which default continues for a period of 30 days after Pacer International receives written notice specifying the default (and demanding that such default be remedied) from the Trustee or the holders of at least 25% of the outstanding principal amount of the notes; (4) the failure to pay at final stated maturity (giving effect to any applicable grace periods and any extensions thereof) the principal amount of any Indebtedness of Pacer International or any Restricted Subsidiary of Pacer International, or the acceleration of the final stated maturity of any such Indebtedness if the aggregate principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness in default for failure to pay principal at final stated maturity or which has been accelerated, aggregates $10.0 million or more at any time; (5) one or more judgments in an aggregate amount in excess of $10.0 million shall have been rendered against Pacer International or any of its Restricted Subsidiaries and such judgments remain undischarged, unpaid or unstayed for a period of 60 days after such judgment or judgments become final and non-appealable; (6) certain events of bankruptcy affecting Pacer International or any of its Significant Subsidiaries; or (7) any of the Guarantees of a Significant Subsidiary ceases to be in full force and effect or any of the Guarantees of a Significant Subsidiary is declared to be null and void and unenforceable or any of the Guarantees of a Significant Subsidiary is found to be invalid or any Guarantor that is a Significant Subsidiary denies its liability under its Guarantee (other than by reason of release of a Guarantor in accordance with the terms of the indenture). If an Event of Default (other than an Event of Default specified in clause (6) above with respect to Pacer International) shall occur and be continuing, the Trustee or the holders of at least 25% in principal amount of outstanding notes may declare the principal of and accrued interest on all the notes to be due and payable by notice in writing to Pacer International and the Trustee specifying the respective Event of Default and that it is a "notice of acceleration", and the same (1) shall become immediately due and payable or (2) if there are any amounts outstanding under the Credit Agreement, shall become immediately due and payable upon the first to 117 occur of an acceleration under the Credit Agreement or five business days after receipt by Pacer International and the Representative under the Credit Agreement of such notice of acceleration but only if such Event of Default is then continuing. If an Event of Default specified in clause (6) above with respect to Pacer International occurs and is continuing, then all unpaid principal of, and premium, if any, and accrued and unpaid interest on all of the outstanding notes shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any holder of notes. The indenture provides that, at any time after a declaration of acceleration with respect to the notes as described in the preceding paragraph, the holders of a majority in principal amount of the notes may rescind and cancel such declaration and its consequences: (1) if the rescission would not conflict with any judgment or decree; (2) if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration; (3) to the extent the payment of such interest is lawful, interest on overdue installments of interest and overdue principal, which has become due otherwise than by such declaration of acceleration, has been paid; (4) if Pacer International has paid the Trustee its reasonable compensation and reimbursed the Trustee for its expenses, disbursements and advances; and (5) in the event of the cure or waiver of an Event of Default of the type described in clause (6) of the description above of Events of Default, the Trustee shall have received an officers' certificate and an opinion of counsel that such Event of Default has been cured or waived. No such rescission shall affect any subsequent Default or impair any right consequent thereto. The holders of a majority in principal amount of the notes may waive any existing Default or Event of Default under the indenture, and its consequences, except a default in the payment of the principal of or interest on any notes. Holders of the notes may not enforce the indenture or the notes except as provided in the indenture and under the Trust Indenture Act. Subject to the provisions of the indenture relating to the duties of the Trustee, the Trustee is under no obligation to exercise any of its rights or powers under the indenture at the request, order or direction of any of the holders the notes, unless such holders have offered to the Trustee reasonable indemnity. Subject to all provisions of the indenture and applicable law, the holders of a majority in aggregate principal amount of the then outstanding notes have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. Under the indenture, Pacer International is required to provide an officers' certificate to the Trustee promptly upon any such officer obtaining knowledge of any Default or Event of Default (provided that such officers shall provide such certification at least annually whether or not they know of any Default or Event of Default) that has occurred and, if applicable, describe such Default or Event of Default and the status thereof. No Personal Liability of Directors, Officers, Employees and Stockholders No Affiliate, director, officer, employee or stockholder of Pacer International or any Subsidiary, as such, shall have any liability for any obligations of Pacer International under the notes or the indenture or the Guarantees or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each holder of notes by accepting a note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the notes. Legal Defeasance and Covenant Defeasance Pacer International may, at its option and at any time, elect to have its obligations and the obligations of the Guarantors discharged with respect to the outstanding notes ("Legal Defeasance"). Such Legal Defeasance 118 means that Pacer International shall be deemed to have paid and discharged the entire indebtedness represented by the outstanding notes, except for: (1) the rights of holders of notes to receive payments in respect of the principal of, premium, if any, and interest on the notes when such payments are due; (2) Pacer International's obligations with respect to the notes concerning issuing temporary notes, registration of notes, mutilated, destroyed, lost or stolen notes and the maintenance of an office or agency for payments; (3) the rights, powers, trust, duties and immunities of the Trustee and Pacer International's obligations in connection therewith; and (4) the Legal Defeasance provisions of the indenture. In addition, Pacer International may, at its option and at any time, elect to have the obligations of Pacer International released with respect to certain covenants that are described in the indenture ("Covenant Defeasance") and thereafter any omission to comply with such obligations shall not constitute a Default or Event of Default with respect to the notes. In the event Covenant Defeasance occurs, certain events (not including non-payment, bankruptcy, receivership, reorganization and insolvency events) described under "Events of Default" will no longer constitute an Event of Default with respect to the notes. In order to exercise either Legal Defeasance or Covenant Defeasance: (1) Pacer International must irrevocably deposit with the Trustee, in trust, for the benefit of the holders of notes, cash in U.S. dollars, non- callable U.S. government obligations, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest on the notes on the stated date for payment thereof or on the applicable redemption date, as the case may be; (2) in the case of Legal Defeasance, Pacer International shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that: (a) Pacer International has received from, or there has been published by, the Internal Revenue Service a ruling; or (b) since the date of the execution of the indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of counsel shall confirm that, the holders of notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (3) in the case of Covenant Defeasance, Pacer International shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that the holders of notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (4) no Default or Event of Default shall have occurred and be continuing on the date of such deposit or insofar as Events of Default from bankruptcy or insolvency events are concerned, at any time in the period ending on the 91st day after the date of deposit; (5) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under the indenture, the Credit Agreement or any other material agreement or instrument to which Pacer International or any of its Subsidiaries is a party or by which Pacer International or any of its Subsidiaries is bound; (6) Pacer International shall have delivered to the Trustee an officers' certificate stating that the deposit was not made by Pacer International with the intent of preferring the holders of notes over any 119 other creditors of Pacer International or with the intent of defeating, hindering, delaying or defrauding any other creditors of Pacer International or others; (7) Pacer International shall have delivered to the Trustee an officers' certificate and an opinion of counsel, each stating that all conditions precedent hereunder provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with; (8) Pacer International shall have delivered to the Trustee an opinion of counsel to the effect that: (a) the trust funds will not be subject to any rights of holders of Senior Debt, including, without limitation, those arising under the indenture; and (b) assuming no intervening bankruptcy of Pacer International between the date of deposit and the 91st day following the date of the deposit and that no holder of notes is an insider of Pacer International, after the 91st day following the date of the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; and (9) certain other customary conditions precedent are satisfied. Notwithstanding the foregoing, the opinion of counsel required by clause (2) above need not be delivered if all Notes not theretofore delivered to the Trustee for cancellation (x) have become due and payable, (y) will become due and payable on the maturity date within one year or (z) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of Pacer International. Satisfaction and Discharge The indenture will be discharged and will cease to be of further effect (except as to surviving rights of registration or transfer or exchange of the notes, as expressly provided for in the indenture) as to all outstanding Notes when: (1) either (a) all the notes theretofore authenticated and delivered (except lost, stolen or destroyed notes which have been replaced or paid and notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by Pacer International and thereafter repaid to Pacer International or discharged from such trust) have been delivered to the Trustee for cancellation or (b) all Notes not theretofore delivered to the Trustee for cancellation have become due and payable and Pacer International has irrevocably deposited or caused to be deposited with the Trustee funds in an amount sufficient to pay and discharge the entire Indebtedness on the notes not theretofore delivered to the Trustee for cancellation, for principal of, premium, if any, and interest on the notes to the date of deposit together with irrevocable instructions from Pacer International directing the Trustee to apply such funds to the payment thereof at maturity or redemption, as the case may be; (2) Pacer International has paid all other sums payable under the indenture by Pacer International; and (3) Pacer International has delivered to the Trustee an officers' certificate and an opinion of counsel stating that all conditions precedent under the indenture relating to the satisfaction and discharge of the indenture have been complied with. Modification of the Indenture From time to time, Pacer International, the Guarantors and the Trustee, without the consent of the holders of notes, may amend the indenture for certain specified purposes, including curing ambiguities, defects or inconsistencies, so long as such change does not, in the opinion of the Trustee, adversely affect the rights of any of the holders of notes in any material respect. In formulating its opinion on such matters, the Trustee will be entitled to rely on such evidence as it deems appropriate, including, without limitation, solely on an opinion 120 of counsel. Other modifications and amendments of the indenture may be made with the consent of the holders of a majority in principal amount of the then outstanding notes issued under the indenture, except that, without the consent of each holder of notes affected thereby, no amendment may: (1) reduce the amount of notes whose holders must consent to an amendment; (2) reduce the rate of or change or have the effect of changing the time for payment of interest, including defaulted interest, on any notes; (3) reduce the principal of or change or have the effect of changing the fixed maturity of any notes, or change the date on which any notes may be subject to redemption or repurchase, or reduce the redemption or repurchase price therefor; (4) make any notes payable in money other than that stated in the notes; (5) make any change in provisions of the indenture protecting the right of each holder of notes to receive payment of principal of and interest on such note on or after the due date thereof or to bring suit to enforce such payment, or permitting holders of a majority in principal amount of notes to waive Defaults or Events of Default; (6) amend, change or modify in any material respect the obligation of Pacer International to make and consummate a Change of Control Offer in the event of a Change of Control which has occurred or make and consummate a Net Proceeds Offer with respect to any Asset Sale that has been consummated or modify any of the provisions or definitions with respect thereto after a Change of Control has occurred or the subject Asset Sale has been consummated; (7) modify or change any provision of the indenture or the related definitions affecting the subordination or ranking of the notes or any Guarantee in a manner which adversely affects the holders of notes; (8) release any Guarantor that is a Significant Subsidiary from any of its obligations under its Guarantee or the indenture otherwise than in accordance with the terms of the indenture; or (9) make any change in the foregoing amendment provisions which require each noteholder's consent or in the waiver provisions. Governing Law The indenture provides that it, the notes and the Guarantees will be governed by, and construed in accordance with, the laws of the State of New York but without giving effect to applicable principles of conflicts of law to the extent that the application of the law of another jurisdiction would be required thereby. The Trustee The indenture provides that, except during the continuance of an Event of Default, the Trustee will perform only such duties as are specifically set forth in the indenture. During the existence of an Event of Default, the Trustee will exercise such rights and powers vested in it by the indenture, and use the same degree of care and skill in its exercise as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. The indenture and the provisions of the Trust Indenture Act contain certain limitations on the rights of the Trustee, should it become a creditor of Pacer International, to obtain payments of claims in certain cases or to realize on certain property received in respect of any such claim as security or otherwise. Subject to the Trust Indenture Act, the Trustee will be permitted to engage in other transactions; provided that if the Trustee acquires any conflicting interest as described in the Trust Indenture Act, it must eliminate such conflict or resign. 121 Certain Definitions Set forth below is a summary of certain of the defined terms used in the Indenture. Reference is made to the indenture for the full definition of all such terms, as well as any other terms used herein for which no definition is provided. "Acquired Indebtedness" means Indebtedness of a Person or any of its Subsidiaries (1) existing at the time such Person becomes a Restricted Subsidiary of Pacer International or at the time it merges or consolidates with Pacer International or any of its Restricted Subsidiaries or (2) assumed in connection with the acquisition of assets from such Person, in each case not incurred by such Person in connection with, or in anticipation or contemplation of, such Person becoming a Restricted Subsidiary of Pacer International or such acquisition, merger or consolidation. "Affiliate" means, with respect to any specified Person, any other Person who directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative of the foregoing. "Apollo" means Apollo Management, L.P. and its Affiliates. "Applicable Premium" means, with respect to a note, the greater of (i) 1.0% of the then outstanding principal amount of such note and (ii) (a) the present value of all remaining required interest and principal payments due on such note and all premium payments relating thereto assuming a redemption date of June 1, 2003, computed using a discount rate equal to the Treasury Rate plus 50 basis points minus (b) the then outstanding principal amount of such note minus (c) accrued interest paid on the date of redemption. "Asset Acquisition" means: (1) an Investment by Pacer International or any Restricted Subsidiary of Pacer International in any other Person pursuant to which such Person shall become a Restricted Subsidiary of Pacer International or any Restricted Subsidiary of Pacer International, or shall be merged with or into or consolidated with Pacer International or any Restricted Subsidiary of Pacer International; or (2) the acquisition by Pacer International or any Restricted Subsidiary of Pacer International of the assets of any Person (other than a Restricted Subsidiary of Pacer International) which constitute all or substantially all of the assets of such Person or comprise any division or line of business of such Person or any other properties or assets of such Person other than in the ordinary course of business. "Asset Sale" means any direct or indirect sale, issuance, conveyance, transfer, lease (other than operating leases entered into in the ordinary course of business), assignment or other transfer for value by Pacer International or any of its Restricted Subsidiaries (including any Sale and Leaseback Transaction) to any Person other than Pacer International or a Wholly Owned Restricted Subsidiary of Pacer International of (a) any Capital Stock of any Restricted Subsidiary of Pacer International; or (b) any other property or assets of Pacer International or any Restricted Subsidiary of Pacer International other than in the ordinary course of business; provided, however, that Asset Sales shall not include: (1) a transaction or series of related transactions for which Pacer International or its Restricted Subsidiaries receive aggregate consideration of less than $1.5 million; (2) the sale or exchange of equipment in connection with the purchase or other acquisition of other equipment, in each case used in the business of Pacer International and its Restricted Subsidiaries; (3) the sale, lease, conveyance, disposition or other transfer of all or substantially all of the assets of Pacer International as permitted under "Merger, Consolidation and Sale of Assets"; (4) disposals of equipment in connection with the reinvestment in or the replacement of its equipment and disposals of worn-out or obsolete equipment, in each case in the ordinary course of business of Pacer International or its Restricted Subsidiaries; 122 (5) the sale of accounts receivable pursuant to a Qualified Receivable Transaction; (6) any Restricted Payment permitted by the covenant described under "Limitations on Restricted Payments" or that constitutes a Permitted Investment; and (7) one or more Sale and Leaseback Transactions for which Pacer International or any Restricted Subsidiary of Pacer International receives aggregate consideration from all such Sale and Leaseback Transactions of less than $15.0 million. "Board Resolution" means, with respect to any Person, a copy of a resolution certified by the Secretary or an Assistant Secretary of such Person to have been duly adopted by the board of directors of such Person and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Capitalized Lease Obligation" means, as to any Person, the obligations of such Person under a lease that are required to be classified and accounted for as capital lease obligations under GAAP and, for purposes of this definition, the amount of such obligations at any date shall be the capitalized amount of such obligations at such date, determined in accordance with GAAP. "Capital Stock" means: (1) with respect to any Person that is a corporation, any and all shares, interests, participations or other equivalents (however designated and whether or not voting) of corporate stock, including each class of Common Stock and Preferred Stock of such Person or options to purchase the same; and (2) with respect to any Person that is not a corporation, any and all partnership or other equity interests of such Person. "Cash Equivalents" means: (1) marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition thereof; (2) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either Standard & Poor's Corporation ("S&P") or Moody's Investors Service, Inc. ("Moody's"); (3) commercial paper maturing no more than one year from the date of creation thereof and, at the time of acquisition, having a rating of at least A-1 from S&P or at least P-1 from Moody's; (4) certificates of deposit or bankers' acceptances maturing within one year from the date of acquisition thereof issued by any bank organized under the laws of the United States of America or any state thereof or the District of Columbia or any U.S. branch of a foreign bank having at the date of acquisition thereof combined capital and surplus of not less than $250.0 million; (5) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (1) above entered into with any bank meeting the qualifications specified in clause (4) above; and (6) investments in money market funds which invest substantially all their assets in securities of the types described in clauses (1) through (5) above. 123 "Change of Control" means the occurrence of one or more of the following events: (1) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of Pacer International to any Person or group of related Persons for purposes of Section 13(d) of the Exchange Act (a "Group"), together with any Affiliates thereof (whether or not otherwise in compliance with the provisions of the indenture) other than Permitted Holders; (2) the approval by the holders of Capital Stock of Pacer International of any plan or proposal for the liquidation or dissolution of Pacer International (whether or not otherwise in compliance with the provisions of the Indenture); (3) any Person or Group (other than the Permitted Holders) shall become the owner, directly or indirectly, beneficially or of record, of shares representing more than 50% of the aggregate ordinary voting power represented by the issued and outstanding Capital Stock of Pacer International; or (4) the replacement of a majority of the board of directors of Pacer International over a two-year period from the directors who constituted the board of directors of Pacer International at the beginning of such period, and such replacement shall not have been approved by the Permitted Holders or a vote of at least a majority of the board of directors of Pacer International then still in office who either were members of such board of directors at the beginning of such period or whose election as a member of such board of directors was previously so approved. "Common Stock" of any Person means any and all shares, interests or other participations in, and other equivalents (however designated and whether voting or non-voting) of such Person's common stock, whether outstanding on the Issue Date or issued after the Issue Date, and includes, without limitation, all series and classes of such common stock. "Consolidated EBITDA" means, with respect to any Person, for any period, the sum (without duplication) of: (1) Consolidated Net Income; and (2) to the extent Consolidated Net Income has been reduced thereby, (a) all income taxes of such Person and its Restricted Subsidiaries paid or accrued in accordance with GAAP for such period (other than income taxes attributable to extraordinary, unusual or nonrecurring gains or losses), (b) Consolidated Interest Expense, and (c) Consolidated Non-cash Charges less any noncash items increasing Consolidated Net Income for such period, all as determined on a consolidated basis for such Person and its Restricted Subsidiaries in accordance with GAAP as applicable. "Consolidated Fixed Charge Coverage Ratio" means, with respect to any Person, the ratio of Consolidated EBITDA of such Person during the four full fiscal quarters (the "Four Quarter Period") ending on or prior to the date of the transaction giving rise to the need to calculate the Consolidated Fixed Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of such Person for the Four Quarter Period. In addition to and without limitation of the foregoing, for purposes of this definition, "Consolidated EBITDA" and "Consolidated Fixed Charges" shall be calculated after giving effect on a pro forma basis (consistent with the provisions below) for the period of such calculation to: (1) the incurrence or repayment of any Indebtedness of such Person or any of its Restricted Subsidiaries (and the application of the proceeds thereof) giving rise to the need to make such calculation and any incurrence or repayment of other Indebtedness (and the application of the proceeds thereof), other than the incurrence or repayment of Indebtedness in the ordinary course of business for working capital purposes pursuant to working capital facilities, occurring during the Four Quarter Period or at any time 124 subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such incurrence or repayment, as the case may be (and the application of the proceeds thereof), occurred on the first day of the Four Quarter Period; (2) any asset sales or other dispositions or Asset Acquisitions (including, without limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of such Person or one of its Restricted Subsidiaries (including any Person who becomes a Restricted Subsidiary as a result of the Asset Acquisition) incurring, assuming or otherwise being liable for Acquired Indebtedness and also including any Consolidated EBITDA (including any pro forma expense and cost reductions, adjustments and other operating improvements or synergies both achieved by such Person during such period and to be achieved by such Person and with respect to the acquired assets, all as determined in good faith by a responsible financial or accounting officer of Pacer International and as reported on or otherwise confirmed, consistent with applicable standards of the American Institute of Certified Public Accountants, to Pacer International by an independent accounting firm) attributable to the assets which are the subject of the Asset Acquisition or asset sale or other dispositions during the Four Quarter Period) occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such asset sale or other dispositions or Asset Acquisition (including the incurrence, assumption or liability for any such Acquired Indebtedness) occurred on the first day of the Four Quarter Period. If such Person or any of its Restricted Subsidiaries directly or indirectly guarantees Indebtedness of a third Person, the preceding sentence shall give effect to the incurrence of such guaranteed Indebtedness as if such Person or any Restricted Subsidiary of such Person had directly incurred or otherwise assumed such guaranteed Indebtedness; and (3) all adjustments used in connection with the calculation of adjusted EBITDA as set forth in the Offering Memorandum dated May 24, 1999 relating to the issuance of the Notes on the Issue Date to the extent such adjustments are not fully reflected in such Four Quarter Period and continue to be applicable. Furthermore, in calculating "Consolidated Fixed Charges" for purposes of determining the denominator (but not the numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1) interest on outstanding Indebtedness determined on a fluctuating basis as of the Transaction Date and which will continue to be so determined thereafter shall be deemed to have accrued at a fixed rate per annum equal to the rate of interest on such Indebtedness in effect on the Transaction Date; and (2) notwithstanding clause (1) above, interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by agreements relating to Interest Swap Obligations, shall be deemed to accrue at the rate per annum resulting after giving effect to the operation of such agreements. "Consolidated Fixed Charges" means, with respect to any Person for any period, the sum, without duplication, of: (1) Consolidated Interest Expense (excluding amortization or write-off of deferred financing costs), plus (2) the product of (x) the amount of all dividend payments on any series of Preferred Stock of such Person (other than dividends paid in Qualified Capital Stock) paid, accrued or scheduled to be paid or accrued during such period times (y) a fraction, the numerator of which is one and the denominator of which is one minus the then current effective consolidated federal, state and local tax rate of such Person, expressed as a decimal. "Consolidated Interest Expense" means, with respect to any Person for any period, the sum of, without duplication: (1) the aggregate of the interest expense of such Person and its Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP, including without limitation, (a) any amortization of debt discount and amortization or write-off of deferred financing costs (including the amortization of costs relating to interest rate caps or other similar agreements), (b) the net costs under 125 Interest Swap Obligations, (c) all capitalized interest and (d) the interest portion of any deferred payment obligation; and (2) the interest component of Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such Person and its Restricted Subsidiaries during such period as determined on a consolidated basis in accordance with GAAP, minus interest income for such period. "Consolidated Net Income" means, with respect to any Person, for any period, the aggregate net income (or loss) of such Person and its Restricted Subsidiaries for such period on a consolidated basis, determined in accordance with GAAP; provided that there shall be excluded therefrom: (1) after-tax gains or losses from Asset Sales (without regard to the $1.5 million limitation set forth in the definition thereof) or abandonments or reserves relating thereto; (2) after-tax items classified as extraordinary or nonrecurring gains or losses; (3) the net income of any Person acquired in a "pooling of interests" transaction accrued prior to the date it becomes a Restricted Subsidiary of the referent Person or is merged or consolidated with the referent Person or any Restricted Subsidiary of the referent Person; (4) the net income (but not loss) of any Restricted Subsidiary of the referent Person to the extent that the declaration of dividends or similar distributions by that Restricted Subsidiary of that income is prohibited by contract, operation of law or otherwise; (5) the net income of any Person, other than a Restricted Subsidiary of the referent Person, except to the extent of cash dividends or distributions paid to the referent Person or to a Wholly Owned Restricted Subsidiary of the referent Person by such Person; (6) income or loss attributable to discontinued operations (including, without limitation, operations disposed of during such period whether or not such operations were classified as discontinued); and (7) in the case of a successor to the referent Person by consolidation or merger or as a transferee of the referent Person's assets, any earnings of the successor corporation prior to such consolidation, merger or transfer of assets. "Consolidated Non-cash Charges" means, with respect to any Person, for any period, the aggregate depreciation, amortization and other non-cash expenses of such Person and its Restricted Subsidiaries reducing Consolidated Net Income of such Person and its Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP. "Credit Agreement" means the Credit Agreement to be dated as of the Issue Date, among Pacer International, the lenders party thereto in their capacities as lenders thereunder and Bankers Trust Company, as administrative agent, together with the related documents thereto (including, without limitation, any guarantee agreements and security documents), in each case as such agreements may be amended (including any amendment and restatement thereof), supplemented or otherwise modified from time to time, including any agreement extending the maturity of, refinancing, replacing or otherwise restructuring (including increasing the amount of available borrowings thereunder or adding Restricted Subsidiaries of Pacer International as additional borrowers or guarantors thereunder) all or any portion of the Indebtedness under such agreement or any successor or replacement agreement and whether by the same or any other agent, lender or group of lenders. "Currency Agreement" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect Pacer International or any Restricted Subsidiary of Pacer International against fluctuations in currency values. "Default" means an event or condition the occurrence of which is, or with the lapse of time or the giving of notice or both would be, an Event of Default. 126 "Designated Senior Debt" means: (1) Indebtedness under or in respect of the Credit Agreement; and (2) any other Indebtedness constituting Senior Debt which, at the time of determination, has an aggregate principal amount of at least $25.0 million and is specifically designated in the instrument evidencing such Senior Debt as "Designated Senior Debt" by Pacer International. "Disqualified Capital Stock" means that portion of any Capital Stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder thereof), or upon the happening of any event (other than an event which would constitute a Change of Control or Asset Sale), matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the sole option of the holder thereof (except, in each case, upon the occurrence of a Change of Control or Asset Sale) on or prior to the final maturity date of the Notes; provided that the Pacer Preferred Stock and any Capital Stock having substantially the same terms issued in exchange therefor shall be deemed not to be Disqualified Capital Stock. "Domestic Restricted Subsidiary" means a Restricted Subsidiary incorporated or otherwise organized or existing under the laws of the United States, any state thereof or any territory or possession of the United States. "Equity Investment" means the equity investment (in the form of the issuance, rollover and exchange of Pacer International, Inc.'s and Pacer Logistics, Inc.'s equity securities) in Pacer International of approximately $133.0 million. "fair market value" means, with respect to any asset or property, the price which could be negotiated in an arm's-length, free market transaction, for cash, between a willing seller and a willing and able buyer, neither of whom is under undue pressure or compulsion to complete the transaction. Fair market value shall be determined by the board of directors of Pacer International acting reasonably and in good faith and shall be evidenced by a Board Resolution of the board of directors of Pacer International delivered to the Trustee. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States, which are in effect as of the Issue Date. "Guarantor" means: (1) each of Pacer International's Domestic Restricted Subsidiaries on the Issue Date; and (2) each of Pacer International's Domestic Restricted Subsidiaries that in the future executes a supplemental indenture in which such Restricted Subsidiary agrees to be bound by the terms of the indenture as a Guarantor; provided that any Person constituting a Guarantor as described above shall cease to constitute a Guarantor when its respective Guarantee is released in accordance with the terms of the indenture. "Guarantor Senior Debt" means, with respect to any Guarantor, the principal of, premium, if any, and interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on any Indebtedness of a Guarantor, whether outstanding on the Issue Date or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same 127 or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Guarantee of such Guarantor. Without limiting the generality of the foregoing, "Guarantor Senior Debt" shall also include the principal of, premium, if any, interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on, and all other amounts owing by any Guarantor in respect of, (x) all monetary obligations of every nature of a Guarantor under, or with respect to, the Credit Agreement, including, without limitation, obligations to pay principal and interest, reimbursement obligations under letters of credit, fees, expenses and indemnities (including guarantees thereof); (y) all Interest Swap Obligations (including guarantees thereof); and (z) all obligations under Currency Agreements (including guarantees thereof), in each case whether outstanding on the Issue Date or thereafter incurred. Notwithstanding the foregoing, "Guarantor Senior Debt" shall not include: (1) any Indebtedness of such Guarantor to a Restricted Subsidiary of such Guarantor; (2) Indebtedness to, or guaranteed on behalf of, any director, officer or employee of such Guarantor or any Restricted Subsidiary of such Guarantor (including, without limitation, amounts owed for compensation); (3) Indebtedness to trade creditors and other amounts incurred in connection with obtaining goods, materials or services; (4) Indebtedness represented by Disqualified Capital Stock; (5) any liability for federal, state, local or other taxes owed or owing by such Guarantor; (6) that portion of any Indebtedness incurred in violation of the indenture provisions set forth under "Limitation on Incurrence of Additional Indebtedness" (but, as to any such obligation, no such violation shall be deemed to exist for purposes of this clause (6) if the holder(s) of such obligation or their representative shall have received an officers' certificate of Pacer International to the effect that the incurrence of such Indebtedness does not (or, in the case of revolving credit Indebtedness, that the incurrence of the entire committed amount thereof at the date on which the initial borrowing thereunder is made would not) violate such provisions of the indenture); (7) any Indebtedness which, when incurred and without respect to any election under Section 1111(b) of Title 11, United States Code, is without recourse to Pacer International or any Guarantor; and (8) any Indebtedness which is, by its express terms, subordinated in right of payment to any other Indebtedness of such Guarantor. "Indebtedness" means with respect to any Person, without duplication: (1) all Obligations of such Person for borrowed money, including, without limitation, Senior Debt; (2) all Obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (3) all Capitalized Lease Obligations of such Person; (4) all Obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations and all Obligations under any title retention agreement (but excluding trade accounts payable and other accrued liabilities arising in the ordinary course of business); (5) all Obligations for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction; (6) guarantees and other contingent Obligations in respect of Indebtedness referred to in clauses (1) through (5) above and clause (8) below; 128 (7) all Obligations of any other Person of the type referred to in clauses (1) through (6) which are secured by any lien on any property or asset of such Person, the amount of such Obligation being deemed to be the lesser of the fair market value of such property or asset or the amount of the Obligation so secured; (8) all Obligations under currency agreements and interest swap agreements of such Person; and (9) all Disqualified Capital Stock issued by such Person with the amount of Indebtedness represented by such Disqualified Capital Stock being equal to the greater of its voluntary or involuntary liquidation preference and its maximum fixed repurchase price, but excluding accrued dividends, if any. For purposes hereof, the "maximum fixed repurchase price" of any Disqualified Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Capital Stock as if such Disqualified Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to the Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Capital Stock, such fair market value shall be determined reasonably and in good faith by the board of directors of the issuer of such Disqualified Capital Stock. For purposes of the covenant described above under the caption "Limitation on Incurrence of Additional Indebtedness," in determining the principal amount of any Indebtedness to be incurred by Pacer International or a Guarantor or which is outstanding at any date, the principal amount of any Indebtedness which provides that an amount less than the principal amount thereof shall be due upon any declaration of acceleration thereof shall be the accreted value thereof at the date of determination. "Independent Financial Advisor" means a firm: (1) which does not, and whose directors, officers and employees or Affiliates do not, have a direct or indirect financial interest in Pacer International; and (2) which, in the judgment of the board of directors of Pacer International, is otherwise independent and qualified to perform the task for which it is to be engaged. "Interest Swap Obligations" means the obligations of any Person pursuant to any arrangement with any other Person, whereby, directly or indirectly, such Person is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made by such other Person calculated by applying a fixed or a floating rate of interest on the same notional amount and shall include, without limitation, interest rate swaps, caps, floors, collars and similar agreements. "Investment" means, with respect to any Person, any direct or indirect loan or other extension of credit (including, without limitation, a guarantee) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition by such Person of any Capital Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by, any Person. "Investment" shall exclude extensions of trade credit by Pacer International and its Restricted Subsidiaries on commercially reasonable terms in accordance with normal trade practices of Pacer International or such Restricted Subsidiary, as the case may be. For purposes of the "Limitation on Restricted Payments" covenant: (1) "Investment" shall include and be valued at the fair market value of the net assets of any Restricted Subsidiary of Pacer International at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary of Pacer International and shall exclude the fair market value of the net assets of any Unrestricted Subsidiary of Pacer International at the time that such Unrestricted Subsidiary is designated a Restricted Subsidiary of Pacer International; and (2) the amount of any Investment shall be the original cost of such Investment plus the cost of all additional Investments by Pacer International or any of its Restricted Subsidiaries, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such 129 Investment, reduced by the payment of dividends or distributions in connection with such Investment or any other amounts received in respect of such Investment; provided that no such payment of dividends or distributions or receipt of any such other amounts shall reduce the amount of any Investment if such payment of dividends or distributions or receipt of any such amounts would be included in Consolidated Net Income. If Pacer International or any Restricted Subsidiary of Pacer International sells or otherwise disposes of any Common Stock of any direct or indirect Restricted Subsidiary of Pacer International such that, after giving effect to any such sale or disposition, Pacer International no longer owns, directly or indirectly, 100.0% of the outstanding Common Stock of such Restricted Subsidiary, Pacer International shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Common Stock of such Restricted Subsidiary not sold or disposed of. "Issue Date" means the date of original issuance of the old notes in connection with the private offering thereof. "Lien" means any lien, mortgage, deed of trust, pledge, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof and any agreement to give any security interest). "Management Agreement" means the Management Agreement to be dated as of the Issue Date between Pacer International and Apollo. "Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in the form of cash or Cash Equivalents including payments in respect of deferred payment obligations when received in the form of cash or Cash Equivalents (other than the portion of any such deferred payment constituting interest) received by Pacer International or any of its Restricted Subsidiaries from such Asset Sale net of: (1) reasonable out-of-pocket expenses and fees relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees and sales commissions); (2) taxes paid or payable after taking into account any reduction in consolidated tax liability due to available tax credits or deductions and any tax sharing arrangements; (3) repayment of Indebtedness that is required to be repaid in connection with such Asset Sale; and (4) appropriate amounts to be provided by Pacer International or any Restricted Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against any liabilities associated with such Asset Sale and retained by Pacer International or any Restricted Subsidiary, as the case may be, after such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale. "Obligations" means all obligations for principal, premium, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Option Plan" means Pacer International's 1999 Stock Option Plan with respect to an aggregate of no more than 1.8 million shares of Pacer International's Common Stock and Pacer Preferred Stock. "Pacer Preferred Stock" means the Perpetual Participating Exchangeable Preferred Stock of Pacer Logistics, Inc. as in effect on the Issue Date. "Permitted Holders" means (i) Apollo and (ii) members of senior management of Pacer International and its Subsidiaries. "Permitted Indebtedness" means, without duplication, each of the following: 130 (1) Indebtedness under the notes and the Guarantees issued in the private offering of the old notes; (2) Indebtedness incurred pursuant to the Credit Agreement in an aggregate principal amount at any time outstanding not to exceed $235.0 million less the amount of all repayments of term debt and permanent commitment reductions under the Credit Agreement with Net Cash Proceeds of Asset Sales applied thereto as required by the "Limitation on Asset Sales" covenant; provided, that the aggregate principal amount of Indebtedness permitted to be incurred from time to time under this clause (2) shall be reduced dollar for dollar by the amount of any Indebtedness then outstanding under clause (12) below; (3) other Indebtedness of Pacer International and its Restricted Subsidiaries outstanding on the Issue Date reduced by the amount of any scheduled amortization payments or mandatory prepayments when actually paid or permanent reductions thereon; (4) Interest Swap Obligations of the Pacer International covering Indebtedness of Pacer International or any of its Restricted Subsidiaries and Interest Swap Obligations of any Restricted Subsidiary of Pacer International covering Indebtedness of Pacer International or such Restricted Subsidiary; provided, however, that such Interest Swap Obligations are entered into to protect Pacer International and its Restricted Subsidiaries from fluctuations in interest rates on Indebtedness incurred in accordance with the indenture to the extent the notional principal amount of such Interest Swap Obligation does not exceed the principal amount of the Indebtedness to which such Interest Swap Obligation relates; (5) Indebtedness under Currency Agreements; provided that in the case of Currency Agreements which relate to Indebtedness, such Currency Agreements do not increase the Indebtedness of Pacer International and its Restricted Subsidiaries outstanding other than as a result of fluctuations in foreign currency exchange rates or by reason of fees, indemnities and compensation payable thereunder; (6) Indebtedness of a Restricted Subsidiary of Pacer International to Pacer International or to a Wholly Owned Restricted Subsidiary of Pacer International for so long as such Indebtedness is held by Pacer International, a Wholly Owned Restricted Subsidiary of Pacer International or the lenders or collateral agent under the Credit Agreement, in each case subject to no Lien held by a Person other than Pacer International, a Wholly Owned Restricted Subsidiary of Pacer International or the lenders or collateral agent under the Credit Agreement; provided that if as of any date any Person other than Pacer International, a Wholly Owned Restricted Subsidiary of Pacer International or the lenders or collateral agent under the Credit Agreement owns or holds any such Indebtedness or holds a Lien in respect of such Indebtedness, such date shall be deemed the incurrence of Indebtedness not constituting Permitted Indebtedness by the issuer of such Indebtedness; (7) Indebtedness of Pacer International to a Wholly Owned Restricted Subsidiary of Pacer International for so long as such Indebtedness is held by a Wholly Owned Restricted Subsidiary of Pacer International or the lenders or the collateral agent under the Credit Agreement and is subject to no Lien other than a Lien in favor of the lenders or collateral agent under the Credit Agreement; provided that (a) any Indebtedness of Pacer International to any Wholly Owned Restricted Subsidiary of Pacer International is unsecured and subordinated, pursuant to a written agreement, to Pacer International's obligations under the indenture and the notes and (b) if as of any date any Person other than a Wholly Owned Restricted Subsidiary of Pacer International owns or holds any such Indebtedness or any Person holds a Lien other than a Lien in favor of the lenders or collateral agent under the Credit Agreement in respect of such Indebtedness, such date shall be deemed the incurrence of Indebtedness not constituting Permitted Indebtedness by Pacer International; (8) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; provided, however, that such Indebtedness is extinguished within two business days of incurrence; (9) Indebtedness of Pacer International or any of its Restricted Subsidiaries in respect of performance bonds, bankers' acceptances, workers' compensation claims, surety or appeal bonds, payment obligations in connection with self-insurance or similar obligations, and bank overdrafts (and letters of credit in respect thereof); 131 (10) Indebtedness represented by Capitalized Lease Obligations, Purchase Money Indebtedness or Acquired Indebtedness of Pacer International and its Restricted Subsidiaries incurred in the ordinary course of business not to exceed $25.0 million at any one time outstanding; provided that all or a portion of the $25.0 million permitted to be incurred under this clause (10) may, at the option of the Company, be incurred under the Credit Agreement or pursuant to clause (14) below (in addition to the $25.0 million set forth therein) instead of pursuant to Capitalized Lease Obligations, Purchase Money Indebtedness or Acquired Indebtedness; (11) Indebtedness arising from agreements of Pacer International or a Restricted Subsidiary of Pacer International providing for indemnification, adjustment of purchase price or similar obligations, in each case, incurred or assumed in connection with the disposition of any business, assets or a Subsidiary, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or a Subsidiary for the purpose of financing such acquisition; provided, however, that: (a) such Indebtedness is not reflected on the balance sheet of Pacer International or any Restricted Subsidiary of Pacer International (contingent obligations referred to in a footnote to financial statements and not otherwise reflected on the balance sheet will not be deemed to be reflected on such balance sheet for purposes of this clause (a)); and (b) the maximum assumable liability in respect of all such Indebtedness shall at no time exceed the gross proceeds including noncash proceeds (the fair market value of such noncash proceeds being measured at the time it is received and without giving effect to any subsequent changes in value) actually received by Pacer International and its Restricted Subsidiaries in connection with such disposition; (12) the incurrence by a Receivables Subsidiary of Indebtedness in a Qualified Receivables Transaction that is without recourse to Pacer International or to any Restricted Subsidiary of Pacer International or their assets (other than such Receivables Subsidiary and its assets), and is not guaranteed by any such Person; provided that any outstanding Indebtedness incurred under this clause (12) shall reduce (for so long as, and to the extent that, the Indebtedness referred to in this clause (12) remains outstanding) the aggregate amount permitted to be incurred under clause (2) above to the extent set forth therein; (13) Refinancing Indebtedness; and (14) additional Indebtedness of Pacer International and its Restricted Subsidiaries in an aggregate principal amount not to exceed $25.0 million at any one time outstanding (which amount may, but need not, be incurred in whole or in part under the Credit Agreement) plus up to an additional $25.0 million as contemplated by, and to the extent not incurred under, clause (10) above. For purposes of determining compliance with the "Limitation on Incurrence of Additional Indebtedness" covenant, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Indebtedness described in clauses (1) through (14) above or is entitled to be incurred pursuant to the Consolidated Fixed Charge Coverage Ratio provisions of such covenant, Pacer International shall, in its sole discretion, classify (or later reclassify) such item of Indebtedness in any manner that complies with such covenant. Accrual of interest, accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the payment of dividends on Disqualified Capital Stock in the form of additional shares of the same class of Disqualified Capital Stock will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Capital Stock for purposes of the "Limitation on Incurrence of Additional Indebtedness" covenant. "Permitted Investments" means: (1) Investments by Pacer International or any Restricted Subsidiary of Pacer International in any Person that is or will become immediately after such Investment a Wholly Owned Restricted Subsidiary of Pacer International or that will merge or consolidate into Pacer International or a Wholly Owned 132 Restricted Subsidiary of Pacer International; provided that such Wholly Owned Restricted Subsidiary of Pacer International is not restricted from making dividends or similar distributions by contract, operation of law or otherwise; (2) Investments in Pacer International by any Restricted Subsidiary of Pacer International; provided that any Indebtedness evidencing such Investment is unsecured and subordinated, pursuant to a written agreement, to Pacer International's obligations under the notes and the indenture; (3) Investments in cash and Cash Equivalents; (4) loans and advances to employees and officers of Pacer International and its Restricted Subsidiaries in the ordinary course of business for bona fide business purposes not to exceed $4.0 million at any one time outstanding; (5) Currency Agreements and Interest Swap Obligations entered into in the ordinary course of Pacer International's or its Restricted Subsidiaries' businesses and otherwise in compliance with the indenture; (6) additional Investments (including joint ventures) not to exceed $25.0 million at any one time outstanding; (7) Investments in securities of trade creditors or customers received (a) pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers or (b) in settlement of delinquent obligations of, and other disputes with, customers, suppliers and others, in each case arising in the ordinary course of business or otherwise in satisfaction of a judgment; (8) Investments (a) made by Pacer International or its Restricted Subsidiaries as a result of consideration received in connection with an Asset Sale made in compliance with the "Limitation on Asset Sales" covenant; or (b) acquired in exchange for, or out of the proceeds of, a substantially concurrent offering of Capital Stock (other than Disqualified Stock) of Pacer International (which proceeds of any such offering of Capital Stock of Pacer International shall not have been, and shall not be, included in clause (3)(b) of the first paragraph of the "Limitation on Restricted Payments" covenant); (9) Investments of a Person or any of its Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of Pacer International or at the time such Person merges or consolidates with Pacer International or any of its Restricted Subsidiaries, in either case in compliance with the indenture; provided that such Investments were not made by such Person in connection with, or in anticipation or contemplation of, such Person becoming a Restricted Subsidiary of Pacer International or such merger or consolidation; and (10) Investments in the notes or Pacer Preferred Stock. "Permitted Liens" means the following types of Liens: (1) Liens for taxes, assessments or governmental charges or claims either (a) not delinquent or (b) contested in good faith by appropriate proceedings and as to which Pacer International or its Restricted Subsidiaries shall have set aside on its books such reserves as may be required pursuant to GAAP; (2) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen, customs and revenue authorities and other Liens imposed by law incurred in the ordinary course of business for sums not yet delinquent or being contested in good faith, if such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made in respect thereof; (3) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, including any Lien securing letters of credit issued in the ordinary course of business consistent with past practice in connection therewith, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, 133 leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); (4) judgment Liens not giving rise to an Event of Default so long as such Lien is adequately bonded and any appropriate legal proceedings which may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which such proceedings may be initiated shall not have expired; (5) easements, rights-of-way, zoning restrictions and other similar charges or encumbrances in respect of real property not interfering in any material respect with the ordinary conduct of the business of the Company or any of its Restricted Subsidiaries; (6) any interest or title of a lessor under any Capitalized Lease Obligation; provided that such Liens do not extend to any property or assets which is not leased property subject to such Capitalized Lease Obligation; (7) Liens securing Indebtedness permitted pursuant to clause (10) of the definition of "Permitted Indebtedness"; provided, however, that in the case of Purchase Money Indebtedness (a) the Indebtedness shall not exceed the cost of such property or assets and shall not be secured by any property or assets of Pacer International or any Restricted Subsidiary of Pacer International other than the property and assets so acquired or constructed and (b) the Lien securing such Indebtedness shall be created within 180 days of such acquisition or construction or, in the case of a refinancing of any Purchase Money Indebtedness, within 180 days of such refinancing; (8) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person's obligations in respect of bankers' acceptances or similar credit transactions issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods; (9) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other property relating to such letters of credit and products and proceeds thereof; (10) Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual, or warranty requirements of Pacer International or any of its Restricted Subsidiaries, including rights of offset and set-off; (11) Liens securing Interest Swap Obligations which Interest Swap Obligations relate to Indebtedness that is otherwise permitted under the Indenture; (12) Liens in the ordinary course of business not exceeding $5.0 million at any one time outstanding that (a) are not incurred in connection with borrowing of money and (b) do not materially detract from the value of the property or materially impair its use; (13) Liens by reason of judgment or decree not otherwise resulting in an Event of Default; (14) Liens securing Indebtedness permitted to be incurred pursuant to clauses (12) and (14) of the definition of "Permitted Indebtedness"; (15) Liens securing Indebtedness under Currency Agreements permitted under the indenture; and (16) Liens securing Acquired Indebtedness incurred in accordance with the "Limitation on Incurrence of Additional Indebtedness" covenant (including, without limitation, clause (10) of the definition of Permitted Indebtedness); provided that: (a) such Liens secured such Acquired Indebtedness at the time of and prior to the incurrence of such Acquired Indebtedness by Pacer International or a Restricted Subsidiary of Pacer International and were not granted in connection with, or in anticipation of, the incurrence of such Acquired Indebtedness by the Company or a Restricted Subsidiary of Pacer International; and 134 (b) such Liens do not extend to or cover any property or assets of Pacer International or of any of its Restricted Subsidiaries other than the property or assets that secured the Acquired Indebtedness prior to the time such Indebtedness became Acquired Indebtedness of Pacer International or a Restricted Subsidiary of Pacer International and are no more favorable to the lienholders than those securing the Acquired Indebtedness prior to the incurrence of such Acquired Indebtedness by Pacer International or a Restricted Subsidiary of Pacer International. "Person" means an individual, partnership, corporation, limited liability company, unincorporated organization, trust or joint venture, or a governmental agency or political subdivision thereof. "Preferred Stock" of any Person means any Capital Stock of such Person that has preferential rights to any other Capital Stock of such Person with respect to dividends or redemptions or upon liquidation. "Purchase Money Indebtedness" means Indebtedness of Pacer International and its Restricted Subsidiaries incurred in the normal course of business for the purpose of financing all or any part of the purchase price, or the cost of installation, construction or improvement, of property or equipment and any Refinancing thereof. "Qualified Capital Stock" means any Capital Stock that is not Disqualified Capital Stock. "Qualified Receivables Transaction" means any transaction or series of transactions that may be entered into by Pacer International or any of its Restricted Subsidiaries pursuant to which Pacer International or any of its Restricted Subsidiaries may sell, convey or otherwise transfer to (1) a Receivables Subsidiary (in the case of a transfer by Pacer International or any of its Restricted Subsidiaries) and (2) any other person (in the case of a transfer by a Receivables Subsidiary), or may grant a security interest in, any accounts receivable (whether now existing or arising in the future) of Pacer International or any of its Restricted Subsidiaries, and any assets related thereto including, without limitation, all collateral securing such accounts receivable, all contracts and all guarantees or other obligations in respect of such accounts receivable, proceeds of such accounts receivable and other assets which are customarily transferred or in respect of which security interests are customarily granted in connection with asset securitization transactions involving accounts receivable. "Receivables Subsidiary" means a Wholly Owned Restricted Subsidiary of Pacer International that engages in no activities other than in connection with the financing of accounts receivable and that is designated by the Board of Directors of Pacer International (as provided below) as a Receivables Subsidiary: (1) no portion of the Indebtedness or any other Obligations (contingent or otherwise) of which (a) is guaranteed by Pacer International or any Restricted Subsidiary of Pacer International (excluding guarantees of Obligations (other than the principal of, and interest on, Indebtedness) pursuant to representations, warranties, covenants and indemnities entered into in the ordinary course of business in connection with a Qualified Receivables Transaction), (b) is recourse to or obligates Pacer International or any Restricted Subsidiary of Pacer International in any way other than pursuant to representations, warranties, covenants and indemnities entered into in the ordinary course of business in connection with a Qualified Receivables Transaction or (c) subjects any property or asset of Pacer International or any Restricted Subsidiary of Pacer International, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to representations, warranties, covenants and indemnities entered into in the ordinary course of business in connection with a Qualified Receivables Transaction; (2) with which neither Pacer International nor any Restricted Subsidiary of Pacer International has any material contract, agreement, arrangement or understanding other than on terms no less favorable to Pacer International or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of Pacer International, other than fees payable in the ordinary course of business in connection with servicing accounts receivable; and (3) with which neither Pacer International nor any Restricted Subsidiary of Pacer International has any obligation to maintain or preserve such Restricted Subsidiary's financial condition or cause such Restricted Subsidiary to achieve certain levels of operating results. 135 Any such designation by the board of directors of Pacer International shall be evidenced to the Trustee by filing with the Trustee a Board Resolution giving effect to such designation and an officers' certificate certifying that such designation complied with the foregoing conditions. "Refinance" means, in respect of any security or Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a security or Indebtedness in exchange or replacement for, such security or Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have correlative meanings. "Refinancing Indebtedness" means any Refinancing by Pacer International or any Restricted Subsidiary of Pacer International of (A) for purposes of clause (13) of the definition of Permitted Indebtedness, Indebtedness incurred or existing in accordance with the "Limitation on Incurrence of Additional Indebtedness" covenant (other than pursuant to clause (2), (4), (5), (6), (7), (8), (9), (10), (11), (12) or (14) of the definition of Permitted Indebtedness) or (B) for any other purpose, Indebtedness incurred in accordance with the "Limitation on Incurrence of Additional Indebtedness" covenant, in each case that does not: (1) result in an increase in the aggregate principal amount of Indebtedness of such Person as of the date of such proposed Refinancing (plus the amount of any premium required to be paid under the terms of the instrument governing such Indebtedness and plus the amount of reasonable expenses incurred by Pacer International in connection with such Refinancing); or (2) create Indebtedness with (a) a Weighted Average Life to Maturity that is less than the Weighted Average Life to Maturity of the Indebtedness being Refinanced or (b) a final maturity earlier than the final maturity of the Indebtedness being Refinanced; provided that (x) if such Indebtedness being Refinanced is Indebtedness solely of Pacer International, then such Refinancing Indebtedness shall be Indebtedness solely of Pacer International and (y) if such Indebtedness being Refinanced is subordinate or junior to the notes, then such Refinancing Indebtedness shall be subordinate to the notes at least to the same extent and in the same manner as the Indebtedness being Refinanced. "Representative" means the indenture trustee or other trustee, agent or representative in respect of any Designated Senior Debt; provided that if, and for so long as, any Designated Senior Debt lacks such a representative, then the Representative for such Designated Senior Debt shall at all times constitute the holders of a majority in outstanding principal amount of such Designated Senior Debt in respect of any Designated Senior Debt. "Restricted Subsidiary" of any Person means any Subsidiary of such Person which at the time of determination is not an Unrestricted Subsidiary. "Sale and Leaseback Transaction" means any direct or indirect arrangement with any Person or to which any such Person is a party, providing for the leasing to Pacer International or a Restricted Subsidiary of any property, whether owned by Pacer International or any Restricted Subsidiary at the Issue Date or later acquired, which has been or is to be sold or transferred by Pacer International or such Restricted Subsidiary to such Person or to any other Person from whom funds have been or are to be advanced by such Person on the security of such Property. "Senior Debt" means the principal of, premium, if any, and interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on any Indebtedness of Pacer International, whether outstanding on the Issue Date or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the notes. Without limiting the generality of the foregoing, "Senior Debt" shall also include the principal of, premium, if any, interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on, and all other amounts owing by Pacer International in respect of, 136 (x) all monetary obligations of every nature of Pacer International under, or with respect to, the Credit Agreement, including, without limitation, obligations to pay principal and interest, reimbursement obligations under letters of credit, fees, expenses and indemnities; (y) all Interest Swap Obligations (including guarantees thereof); and (z) all obligations under Currency Agreements (including guarantees thereof), in each case whether outstanding on the Issue Date or thereafter incurred. Notwithstanding the foregoing, "Senior Debt" shall not include: (1) any Indebtedness of Pacer International to a Subsidiary of Pacer International; (2) Indebtedness to, or guaranteed on behalf of, any director, officer or employee of Pacer International or any Subsidiary of Pacer International (including, without limitation, amounts owed for compensation); (3) Indebtedness to trade creditors and other amounts incurred in connection with obtaining goods, materials or services; (4) Indebtedness represented by Disqualified Capital Stock; (5) any liability for federal, state, local or other taxes owed or owing by Pacer International; (6) that portion of any Indebtedness incurred in violation of the indenture provisions set forth under "Limitation on Incurrence of Additional Indebtedness" (but, as to any such obligation, no such violation shall be deemed to exist for purposes of this clause (6) if the holder(s) of such obligation or their representative shall have received an officers' certificate of Pacer International to the effect that the incurrence of such Indebtedness does not (or, in the case of revolving credit Indebtedness, that the incurrence of the entire committed amount thereof at the date on which the initial borrowing thereunder is made would not) violate such provisions of the indenture); (7) Indebtedness which, when incurred and without respect to any election under Section 1111(b) of Title 11, United States Code, is without recourse to Pacer International; and (8) any Indebtedness which is, by its express terms, subordinated in right of payment to any other Indebtedness of Pacer International. "Shareholder Agreement" means the Shareholders Agreement to be dated as of the Issue Date among certain affiliates of Apollo Management, L.P., APL Limited and APL Land Transport Services, Inc. "Significant Subsidiary," with respect to any Person, means any Restricted Subsidiary of such Person that satisfies the criteria for a "significant subsidiary" set forth in Rule 1.02(w) of Regulation S-X under the Securities Act. "Subsidiary," with respect to any Person, means: (1) any corporation of which the outstanding Capital Stock having at least a majority of the votes entitled to be cast in the election of directors under ordinary circumstances shall at the time be owned, directly or indirectly, by such Person; or (2) any other Person of which at least a majority of the voting interest under ordinary circumstances is at the time, directly or indirectly, owned by such Person. "Transactions" means the offering of the notes, the recapitalization of Pacer International, the Equity Investment and the related borrowings under the Credit Agreement on the Issue Date. "Treasury Rate" means the rate per annum equal to the yield to maturity at the time of computation of United States Treasury securities with a constant maturity selected by the Calculation Agent (which shall 137 initially be the Trustee) most nearly equal to the period from such date of redemption to June 1, 2003; provided, however, that if the period from such date of redemption to June 1, 2003 is not equal to the constant maturity of the United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the period from such date of redemption to June 1, 2003 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used. "Unrestricted Subsidiary" of any Person means (1) any Subsidiary of such Person that at the time of determination shall be or continue to be designated an Unrestricted Subsidiary by the board of directors of such Person in the manner provided below and (2) any Subsidiary of an Unrestricted Subsidiary. The board of directors may designate any Subsidiary (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property of, Pacer International or any other Subsidiary of Pacer International that is not a Subsidiary of the Subsidiary to be so designated; provided that (x) Pacer International certifies to the Trustee in an officers' certificate that such designation complies with the "Limitation on Restricted Payments" covenant and (y) each Subsidiary to be so designated and each of its Subsidiaries has not at the time of designation, and does not thereafter, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to any Indebtedness pursuant to which the lender has recourse to any of the assets of Pacer International or any of its Restricted Subsidiaries. The board of directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary only if (x) immediately after giving effect to such designation, Pacer International is able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with the "Limitation on Incurrence of Additional Indebtedness" covenant and (y) immediately before and immediately after giving effect to such designation, no Default or Event of Default shall have occurred and be continuing. Any such designation by the board of directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the Board Resolution giving effect to such designation and an officers' certificate certifying that such designation complied with the foregoing provisions. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (1) the then outstanding aggregate principal amount of such Indebtedness into (2) the sum of the total of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) which will elapse between such date and the making of such payment. "Wholly Owned Restricted Subsidiary" of any Person means any Restricted Subsidiary of such Person of which all the outstanding voting securities (other than in the case of a foreign Restricted Subsidiary, directors' qualifying shares or an immaterial amount of shares required to be owned by other Persons pursuant to applicable law) are owned by such Person or any Wholly Owned Restricted Subsidiary of such Person. 138 BOOK-ENTRY; DELIVERY AND FORM Except as set forth below, the exchange notes will initially be issued in the form of one or more fully registered notes in global form without coupons (each a "Global Note"). Each Global Note shall be deposited with the trustee, as custodian for, and registered in the name of DTC or a nominee thereof. The old notes to the extent validly tendered and accepted and directed by their holders in their letters of transmittal, will be exchanged through book-entry electronic transfer for the Global Note. The Global Notes We expect that pursuant to procedures established by DTC (1) upon the issuance of the Global Notes, DTC or its custodian will credit, on its internal system, the principal amount of the individual beneficial interests represented by such Global Notes to the respective accounts of persons who have accounts with such depository and (2) ownership of beneficial interests in the Global Notes will be shown on, and the transfer of such ownership will be effected only through: . records maintained by DTC or its nominee with respect to interests of persons who have accounts with DTC ("participants") and . the records of participants with respect to interests of persons other than participants. Such accounts initially will be designated by or on behalf of the initial purchasers and ownership of beneficial interests in the Global Notes will be limited to participants or persons who hold interests through participants. So long as DTC, or its nominee, is the registered owner or holder of the notes, DTC or such nominee, as the case may be, will be considered the sole owner or holder of the notes represented by such Global Notes for all purposes under the Indenture. No beneficial owner of an interest in the Global Notes will be able to transfer that interest except in accordance with DTC's procedures, in addition to those provided for under the indenture with respect to the notes. Payments of the principal of, premium, if any, and interest on, the Global Notes will be made to DTC or its nominee, as the case may be, as the registered owner thereof. None of us, the trustee or any paying agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the Global Notes or for maintaining, supervising or reviewing any records relating to such beneficial ownership interest. We expect that DTC or its nominee, upon receipt of any payment of principal, premium, if any, or interest in respect of the Global Notes, will credit participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal of the Global Notes as shown on the records of DTC or its nominee. We also expect that payments by participants to owners of beneficial interests in the Global Notes held through such participants will be governed by standing instructions and customary practice, as is now the case with securities held for the accounts of customers registered in the names of nominees for such customers. Such payments will be the responsibility of such participants. Transfers between participants in DTC will be effected in the ordinary way through DTC's same-day funds system in accordance with DTC rules and will be settled in same day funds. If a holder requires physical delivery of a Certificated Note for any reason, including to sell notes to persons in jurisdictions which require physical delivery of the notes, or to pledge such securities, such holder must transfer its interest in a Global Note, in accordance with the normal procedures of DTC and with the procedures set forth in the Indenture. Consequently, the ability to transfer notes or to pledge notes as collateral will be limited to such extent. Notes that are issued as described below under "Certificated Notes," will be issued in registered definitive form without coupons (each, a "Certificated Note"). Upon the transfer of Certificated Notes, such Certificated 139 Notes may, unless the Global Note has previously been exchanged for Certificated Notes, be exchanged for an interest in the Global Note representing the principal amount of notes being transferred. DTC has advised us that it will take any action permitted to be taken by a holder of notes, including the presentation of notes for exchange as described below, only at the direction of one or more participants to whose account the DTC interest in the Global Notes are credited and only in respect of such portion of the aggregate principal amount of notes as to which such participant or participants has or have given such direction. However, if there is an event of default under the Indenture, DTC will exchange the Global Notes for Certificated Notes, which it will distribute to its participants. DTC has advised us as follows: (1) DTC is a limited purpose trust company organized under the laws of the State of New York, (2) a member of the Federal Reserve System, (3) a "clearing corporation" within the meaning of the Uniform Commercial Code and (4) a "Clearing Agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for its participants and facilitate the clearance and settlement of securities transactions between participants through electronic book-entry changes in accounts of its participants, thereby eliminating the need for physical movement of certificates. Participants include securities brokers and dealers, banks, trust companies and clearing corporations and certain other organizations. Indirect access to the DTC system is available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly ("indirect participants"). Although DTC has agreed to the foregoing procedures in order to facilitate transfers of interests in the Global Notes among participants of DTC, it is under no obligation to perform such procedures, and such procedures may be discontinued at any time. Neither the issuers nor the trustee will have any responsibility for the performances by DTC or its participants or indirect participants of their respective obligations under the rules and procedures governing their operations. Certificated Notes If DTC is at any time unwilling or unable to continue as a depositary for the Global Notes and a successor depositary is not appointed by us within 90 days, Certificated Notes will be issued in exchange for the Global Notes. 140 MATERIAL FEDERAL INCOME TAX CONSIDERATIONS The following is a discussion of the material U.S. federal income tax considerations relevant to the exchange of notes for the exchange notes pursuant to the exchange offer. This discussion is based upon currently existing provisions of the Internal Revenue Code of 1986, as amended, Treasury regulations promulgated thereunder, and administrative and judicial interpretations thereof, all as in effect on the date hereof and all of which are subject to change, possibly on a retroactive basis. There can be no assurance that the Internal Revenue Service will not take positions contrary to those taken in this discussion, and no ruling from the Internal Revenue Service has been or will be sought. This discussion does not address all of the U.S. federal income tax considerations that may be relevant to particular holders of notes in light of their individual circumstances, nor does it address all of the U.S. federal income tax considerations that may be relevant to holders subject to special rules, including, for example, banks and other financial institutions, insurance companies, tax-exempt entities, dealers in securities, and persons holding notes as part of a hedging or conversion transaction or a straddle. Holders are urged to consult their own tax advisors as to the particular U.S. federal income tax consequences to them of exchanging notes for exchange notes, as well as the tax consequences under state, local, foreign and other tax laws, and the possible effects of changes in tax laws. Exchange of Notes for Exchange Notes The exchange of notes for the exchange notes pursuant to the exchange offer should not be treated as an "exchange" for U.S. federal income tax purposes. Consequently, a holder that exchanges notes for exchange notes pursuant to the exchange offer should not recognize taxable gain or loss on such exchange, such holder's adjusted tax basis in the exchange notes should be the same as its adjusted tax basis in the notes exchanged therefor immediately before such exchange, and such holder's holding period for the exchange notes should include the holding period for the notes exchanged therefor. 141 PLAN OF DISTRIBUTION Each Participating Broker-Dealer that receives exchange notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of exchange notes received in exchange for notes where such notes were acquired as a result of market-making activities or other trading activities. We have agreed that, for a period of 180 days after the expiration date, it will make this prospectus, as amended or supplemented, available to any Participating Broker-Dealer for use in connection with any such resale. We will not receive any proceeds from any sale of exchange notes by Participating Broker-Dealers. Exchange notes received by Participating Broker- Dealers for their own account pursuant to the exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the exchange notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or at negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such Participating Broker-Dealer or the purchasers of any such exchange notes. Any Participating Broker-Dealer that resells exchange notes that were received by it for its own account pursuant to the exchange offer and any broker or dealer that participates in a distribution of such exchange notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of exchange notes and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a Participating Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the expiration date, we will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any Participating Broker-Dealer that requests such documents in the letter of transmittal. We have agreed to pay all expenses incident to the exchange offer, including the expenses of one counsel for the holders of the notes, other than commissions or concessions of any Participating Broker- Dealers and will indemnify the holders of the notes, including any Participating Broker-Dealers, against certain liabilities, including liabilities under the Securities Act. LEGAL MATTERS The validity of the exchange notes offered hereby will be passed upon for us by Dewey Ballantine LLP, New York, New York. CHANGE IN ACCOUNTANT Pacer International, with the approval of its board of directors, on changed its independent accountants from Arthur Andersen LLP to PricewaterhouseCoopers LLP. Arthur Andersen's report on the financial statements of Pacer International (formerly America President Lines Stacktrain Services) as of December 25, 1998 and December 26, 1997 and for the fiscal year ended December 25, 1998 and the period from November 13, 1997 to December 26, 1997 and the financial statements of American President Lines Stacktrain Services' predecessor as of December 27, 1996 and for the period from December 28, 1996 through November 12, 1997 and the fiscal year ended December 27, 1996 included in this prospectus was not qualified or modified as to uncertainty, audit scope, or accounting principles. During Arthur Andersen LLP's appointment as independent accountants, there were no disagreements on any matter of accounting principles or practices, financial statement disclosure or auditing scope of procedure which if not resolved to Arthur Andersen LLP's satisfaction would have caused Arthur Andersen LLP to make reference to the subject matter of the disagreement in connection with Arthur Andersen LLP's reports on Pacer International financial statements for the periods indicated above. 142 EXPERTS The financial statements of American President Lines Stacktrain Services, a division of APL Land Transport Services, Inc., currently known as Pacer International, Inc., as of December 25, 1998 and December 26, 1997 and for the fiscal year ended December 25, 1998 and the period from November 13, 1997 to December 26, 1997 and the financial statements of American President Lines Stacktrain Services' predecessor as of December 27, 1996 and for the period from December 28, 1996 through November 12, 1997 and the fiscal year ended December 27, 1996 included in this prospectus and elsewhere in this requisition statement to the extent and for the periods indicated in their report have been audited by Arthur Andersen LLP, independent public accountants, and are included herein in reliance upon the authority of said firm as experts in accounting and auditing. The consolidated financial statements of Pacer International, Inc., now known as Pacer Logistics, Inc., and its subsidiaries as of December 31, 1998 and 1997 and for the year ended December 31, 1998 and the period from March 31, 1997 through December 31, 1997 and the financial statements of Pacer International, Inc.'s predecessor as of March 31, 1997 and for the period from January 1, 1997 through March 31, 1997 and for the year ended December 31, 1996, included in this prospectus and elsewhere in this registration statement to the extent and for the periods indicated in their report have been audited by Arthur Andersen LLP, independent public accountants, and are included herein in reliance upon the authority of said firm as experts in accounting and auditing. Arthur Andersen LLP has not audited any financial statements or individual transactions of American President Lines Stacktrain Services, Pacer International, Inc. or their predecessors or successors subsequent to the periods stated above. 143 INDEX TO FINANCIAL STATEMENTS AMERICAN PRESIDENT LINES STACKTRAIN SERVICES--A DIVISION OF APL LAND TRANSPORT SERVICES, INC. (currently known as Pacer International, Inc. )* HISTORICAL AUDITED FINANCIAL STATEMENTS Report of Independent Public Accountants................................ F-2 Statements of Operations for the fiscal year ended December 25, 1998, the period November 13, 1997 through December 26, 1997, the period December 28, 1996 through November 12, 1997 and the fiscal year ended December 27, 1996...................................................... F-3 Statements of Assets, Liabilities and Divisional Control Account as of December 25, 1998, December 26, 1997 and December 27, 1996............. F-4 Statements of Cash Flows for the fiscal year ended December 25, 1998, the period November 13, 1997 through December 26, 1997, the period December 28, 1996 through November 12, 1997 and the fiscal year ended December 27, 1996...................................................... F-5 Notes to Consolidated Financial Statements.............................. F-6 UNAUDITED INTERIM FINANCIAL STATEMENTS Statements of Assets, Liabilities and Divisional Control Account as of April 2, 1999 and December 25, 1998.................................... F-15 Statements of Operations for the three months ended April 2, 1999 and April 3, 1998.......................................................... F-16 Statements of Cash Flows for the three months ended April 2, 1999 and April 3, 1998.......................................................... F-17 Notes to Financial Statements........................................... F-18 PACER INTERNATIONAL, INC. (currently known as Pacer Logistics, Inc. )* HISTORICAL AUDITED FINANCIAL STATEMENTS Report of Independent Public Accountants................................ F-19 Consolidated Balance Sheets as of December 31, 1998 and 1997 and March 31, 1997............................................................... F-20 Consolidated Statements of Operations for the year ended December 31, 1998, the period from inception (March 31, 1997) through December 31, 1997, the period from January 1, 1997 through March 31, 1997 and the year ended December 31, 1996........................................... F-21 Consolidated Statements of Changes in Stockholders' Equity for the year ended December 31, 1998, the period from inception (March 31, 1997) through December 31, 1997, the period from January 1, 1997 through March 31, 1997 and the year ended December 31, 1996.................... F-22 Consolidated Statements of Cash Flows for the year ended December 31, 1998, the period from inception (March 31, 1997) through December 31, 1997, the period from January 1, 1997 through March 31, 1997 and the year ended December 31, 1996........................................... F-23 Notes to Consolidated Financial Statements.............................. F-24 UNAUDITED INTERIM FINANCIAL STATEMENTS Consolidated Balance Sheets as of March 31, 1999 and December 31, 1998.. F-41 Consolidated Statements of Operations for the three months ended March 31, 1999 and March 31, 1998............................................ F-42 Consolidated Statements of Cash Flows for the three months ended March 31, 1999 and March 31, 1998............................................ F-43 Notes to Consolidated Financial Statements.............................. F-44
- -------- * Explanatory Note: In connection with the transactions described elsewhere in this prospectus under "Our Recapitalization", APL Land Transport Services, Inc. was renamed Pacer International, Inc. and Pacer International was renamed Pacer Logistics, Inc. F-1 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To APL Limited: We have audited the accompanying statements of assets, liabilities and divisional control account (as revised--see Note 3) of American President Lines Stacktrain Services (a division of APL Land Transport Services, Inc., a Tennessee corporation and a wholly-owned subsidiary of APL Limited) as of December 25, 1998 and December 26, 1997 and the related statements of operations and cash flows (as revised--see Note 3) for the fiscal year ended December 25, 1998, and the period from November 13, 1997 through December 26, 1997. We have also audited the accompanying statements of assets, liabilities and divisional control account (as revised--see Note 3) of the Predecessor (identified in Note 1) as of December 27, 1996 and the related statements of operations and cash flows (as revised--see Note 3) for the period from December 28, 1996 through November 12, 1997, and for the fiscal year ended December 27, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of American President Lines Stacktrain Services as of December 25, 1998 and December 26, 1997 and the results of its operations and cash flows for the fiscal year ended December 25, 1998 and the period from November 13, 1997 through December 26, 1997, and the financial position of the Predecessor as of December 27, 1996 and the results of the Predecessor's operations and cash flows for the period from December 28, 1996 through November 12, 1997 and the fiscal year ended December 27, 1996, in conformity with generally accepted accounting principles. Memphis, Tennessee, January 29, 1999 F-2 AMERICAN PRESIDENT LINES STACKTRAIN SERVICES, a division of APL Land Transport Services, Inc. STATEMENTS OF OPERATIONS The financial statements of the Company and the Predecessor are not comparable in certain respects. (See Note 1)
The Company The Predecessor ----------------------------------- ----------------------------------- November 13, 1997 December 28, 1996 Fiscal Year Ended through through Fiscal Year Ended December 25, 1998 December 26, 1997 November 12, 1997 December 27, 1996 ----------------- ----------------- ----------------- ----------------- (In millions) (In millions) Revenues Freight Revenues................................... $566.1 $57.7 $498.4 $526.6 Avoided Reposition................................. 20.0 1.9 15.8 15.7 Other Revenue...................................... 4.7 0.4 2.9 5.7 ------ ----- ------ ------ Total Revenues................................. 590.8 60.0 517.1 548.0 Expenses Variable Expenses Terminal/Cargo Handling............................ 4.0 0.4 2.7 2.0 Rail Linehaul...................................... 438.1 43.8 383.7 401.3 Trucks and Others.................................. 11.0 1.2 10.1 7.2 Empty Reposition................................... 13.2 2.0 11.0 13.2 Equipment Maintenance and Repair................... 18.3 1.8 14.6 15.1 Other.............................................. (13.1) (0.7) (6.7) (16.7) ------ ----- ------ ------ Total Variable Expenses........................ 471.5 48.5 415.4 422.1 ------ ----- ------ ------ Variable Contribution................................ $119.3 $11.5 $101.7 $125.9 Fixed Expenses Terminal/Cargo Handling............................ 1.7 0.3 1.5 0.6 Fixed Equipment Rail Cars........................................ 6.5 0.5 3.3 3.4 Containers/Chassis............................... 44.9 4.9 33.5 31.6 Other............................................ 4.1 0.6 3.2 3.4 ------ ----- ------ ------ Total Fixed Equipment.......................... 55.5 6.0 40.0 38.4 General and Administrative Expenses Direct Expenses.................................. 15.7 1.8 13.0 15.2 Other Overhead................................... 0.9 -- 0.1 0.1 Corporate Headquarters........................... 5.7 0.5 4.2 6.1 IT Systems....................................... 7.3 0.9 6.7 4.2 ------ ----- ------ ------ Total General and Administrative............... 29.6 3.2 24.0 25.6 Total Fixed Expenses........................... 86.8 9.5 65.5 64.6 Other Income......................................... 0.7 -- 2.6 0.2 ------ ----- ------ ------ Operating Income..................................... 33.2 2.0 38.8 61.5 Interest Expense..................................... -- (0.3) (2.0) -- ------ ----- ------ ------ Income Before Taxes.................................. 33.2 1.7 36.8 61.5 Charge in Lieu of Income Taxes....................... (12.6) (0.7) (13.9) (23.4) ------ ----- ------ ------ Net Income........................................... $ 20.6 $ 1.0 $ 22.9 $ 38.1 - -------------------------------------------------- ====== ===== ====== ======
The accompanying notes are an integral part of these financial statements. F-3 AMERICAN PRESIDENT LINES STACKTRAIN SERVICES, a division of APL Land Transport Services, Inc. STATEMENTS OF ASSETS, LIABILITIES AND DIVISIONAL CONTROL ACCOUNT The financial statements of the Company and the Predecessor are not comparable in certain respects. (See Note 1)
The Company The Predecessor ------------------------- --------------- December 25, December 26, December 27, 1998 1997 1996 ------------ ------------ --------------- (In millions) (In millions) ASSETS Current Assets Trade and Other Receivables, Net.................................................. $ 43.9 $ 33.4 $ 39.7 Intercompany Trade Receivables.................................................... 3.4 2.4 2.4 Deferred Tax Asset................................................................ -- 0.1 0.1 Prepaid Expenses and Other Current Assets......................................... 0.1 -- 0.4 ------ ------ ------ Total Current Assets.......................................................... 47.4 35.9 42.6 ------ ------ ------ Property and Equipment Rail Cars....................................................................... 66.5 27.6 33.2 Containers and Chassis.......................................................... 27.6 26.9 57.2 Leasehold Improvements and Other................................................ 1.3 2.0 3.5 ------ ------ ------ 95.4 56.5 93.9 Accumulated Depreciation and Amortization......................................... (6.6) (0.6) (67.9) ------ ------ ------ Property and Equipment, Net..................................................... 88.8 55.9 26.0 Goodwill and Other Intangibles, Net............................................... 19.2 19.8 -- Other Assets...................................................................... 0.7 0.3 2.8 ------ ------ ------ Total Assets.................................................................. $156.1 $111.9 $ 71.4 ====== ====== ====== LIABILITIES AND DIVISIONAL CONTROL ACCOUNT Current Liabilities Accounts Payable and Accrued Liabilities.......................................... $ 84.6 $ 68.4 $ 68.7 ------ ------ ------ Total Current Liabilities..................................................... 84.6 68.4 68.7 ------ ------ ------ Deferred Tax Liability............................................................ 15.4 13.2 2.0 Other Liabilities................................................................. 0.5 0.7 0.8 Commitments and Contingencies (Note 9) Divisional Control Account...................................................... 55.6 29.6 (0.1) ------ ------ ------ Total Liabilities and Divisional Control Account.............................. $156.1 $111.9 $ 71.4 ====== ====== ======
The accompanying notes are an integral part of these financial statements. F-4 AMERICAN PRESIDENT LINES STACKTRAIN SERVICES, a division of APL Land Transport Services, Inc. STATEMENTS OF CASH FLOWS The financial statements of the Company and the Predecessor are not comparable in certain respects. (See Note 1)
The Company The Predecessor ------------------------- ------------------------- Fiscal Year November 13, December 28, Fiscal Year Ended 1997 through 1996 through Ended December 25, December 26, November 12, December 27, 1998 1997 1997 1996 ------------ ------------ ------------ ------------ (In millions) (In millions) Cash Flows from Operating Activities Net Income............................................................... $ 20.6 $ 1.0 $ 22.9 $ 38.1 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and Amortization.......................................... 6.6 0.7 3.0 4.1 Gain on Sale of Property and Equipment................................. (0.4) -- (2.6) (1.0) Deferred Taxes......................................................... 1.0 1.7 (3.4) 0.3 Change in Current Assets and Liabilities: Trade and Other Receivables.......................................... (10.5) 5.5 0.7 (27.9) Intercompany Trade Receivables....................................... (1.0) 0.3 (0.3) 12.5 Prepaid Expenses and Other Current Assets............................ (0.1) 4.3 (3.8) -- Accounts Payable and Accrued Liabilities............................. 16.2 (2.4) 2.1 (8.3) Other................................................................ (0.6) 1.6 (0.4) (0.4) ------ ------ ------ ------ Net Cash Provided by Operating Activities.......................... 31.8 12.7 18.2 17.4 ------ ------ ------ ------ Cash Flows from Investing Activities Capital Expenditures..................................................... (39.7) -- -- (0.2) Proceeds from Sales of Property and Equipment............................ 1.2 -- 3.6 1.1 ------ ------ ------ ------ Net Cash Provided by (Used in) Investing Activities................ (38.5) -- 3.6 0.9 ------ ------ ------ ------ Cash Flows from Financing Activities Intercompany Funding, Net................................................ 6.7 (12.7) (21.8) (15.6) Repayment of Capital Lease Obligations................................... -- -- -- (2.7) ------ ------ ------ ------ Net Cash Provided by (Used in) Financing Activities................ 6.7 (12.7) (21.8) (18.3) ------ ------ ------ ------ Net Increase (Decrease) in Cash and Cash Equivalents..................... -- -- -- -- ------ ------ ------ ------ Cash and Cash Equivalents at Beginning of Year/Period.................... -- -- -- -- ------ ------ ------ ------ Cash and Cash Equivalents at End of Year/Period.......................... -- -- -- -- ------ ------ ------ ------
The accompanying notes are an integral part of these financial statements. F-5 AMERICAN PRESIDENT LINES STACKTRAIN SERVICES, a division of APL Land Transport Services, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. BASIS OF PRESENTATION AND NATURE OF OPERATIONS Acquisition Of Parent Company APL Land Transport Services, Inc. ("APLLTS") is a Tennessee corporation and a wholly-owned subsidiary of APL Limited ("Parent"). On November 12, 1997 APL Limited was acquired by Neptune U.S.A., Inc., a Delaware corporation and an indirect, wholly-owned subsidiary of Neptune Orient Lines Limited ("NOL"), a Singapore corporation. In the acquisition, Neptune U.S.A., Inc. merged with and into APL Limited. The surviving company, APL Limited, is a subsidiary of NOL. The transaction was accounted for by the Parent using the purchase method of accounting. The purchase price exceeded the fair market value of the underlying net assets acquired by approximately $165 million which was allocated to goodwill and other intangible assets and is being amortized on a straight line basis over various periods, none in excess of 40 years. The Parent has pushed down the fair value adjustments arising in the purchase to its subsidiaries, including the American President Lines Stacktrain Services division of APLLTS. Principles of Consolidation and Fiscal Year Until November 1998, APLLTS was comprised of two operating divisions: American President Lines Stacktrain Services Division (the "Company") and American President Lines Automotive Division (the "Automotive Division"). Prior to May 1996, APLLTS had a third operating division, American President Lines Distribution Services ("Distribution Services"). Effective November 20, 1998, the Automotive Division and remaining assets related to the 1996 sale of Distribution Services were transferred to the Parent. The financial statements subsequent to November 12, 1997 include the accounts of the Company and include the 'push down' effect of the purchase price allocation. Prior to November 13, 1997, the financial statements include the accounts of the Stacktrain Services division (the "Predecessor") of APLLTS. The Company's fiscal year ends on the last Friday in December. All fiscal years presented in the Statements of Operations contained 52 weeks. Nature of Operations The Company provides transportation services for containerized cargo in the North American markets, primarily through contracts with other transportation companies. The Company provides wholesale intermodal transportation services to North American and international shippers, including the Parent and its subsidiaries/divisions. These services are provided through an integrated system of rail and truck transportation, the primary element of which is a train system utilizing double-stack rail cars. The revenues earned from the Parent and subsidiaries/divisions are significant to the Company. Certain Significant Risks and Uncertainties Service Instability--Recent rail carrier consolidations and increases in volumes through rail carrier terminals have led to rail service instability in the U.S. Continued service instability, if extensive, could have a material adverse impact on the Company's results of operations. Year 2000 Remediation (Unaudited)--The Company has assessed and continues to assess the impact of the Year 2000 issue on its reporting systems and operations. The Year 2000 issue exists because many computer systems and applications currently use 2-digit date fields to designate a year. As the century date F-6 AMERICAN PRESIDENT LINES STACKTRAIN SERVICES, a division of APL Land Transport Services, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) occurs, the date sensitive systems will recognize the year 2000 as 1900 or not at all. This inability to recognize or properly treat the year 2000 may cause systems to process critical financial and operational information incorrectly. The Company has a remediation plan and if it is not successful, there could be a significant disruption of the Company's ability to transact business with its major customers and suppliers. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Preparation of Financial Statements The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Intercompany Funding The Company's excess cash from operations is remitted to the Parent. Additionally, APL Limited provides administrative and other services to the Company. All such activity is reflected in the divisional control account in the Company's Statements of Assets, Liabilities and Divisional Control Account. Therefore, the Company does not reflect any separate cash or cash equivalents. Supplemental Disclosure of Cash Flow Information :
The Company The Predecessor ------------------------- ------------------------- Fiscal Year November 13, December 28, Fiscal Year Ended 1997 through 1996 through Ended December 25, December 26, November 12, December 27, 1998 1997 1997 1996 ------------ ------------ ------------ ------------ (In millions) (In millions) Cash Paid to Parent for: Interest................... $ -- $0.3 $ 2.0 $ -- Income Taxes............... $3.4 $0.6 $12.2 $18.1
Allowance for Doubtful Accounts The provision for doubtful accounts for the period ended November 12, 1997 was $0.3 million. The provision for doubtful accounts was less than $0.1 million for all other periods presented in the Statements of Operations. At December 25, 1998, December 26, 1997 and December 27, 1996, the allowance for doubtful accounts was $0.7 million, $0.9 million and $0.7 million, respectively. Concentration of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of trade accounts receivable. Receivables arising from services provided to customers are generally not collateralized and accordingly, the Company performs ongoing credit evaluations of its customers to reduce the risk of loss. The Company has two third party customers who account for about 25% to 30% of revenues. The receivables from these customers were $12.6 million at December 25, 1998. Property and Equipment Property and Equipment at November 12, 1997, as adjusted by the Parent in connection with the purchase by NOL, was stated at fair value as prescribed by the purchase method of accounting. Prior to and after the F-7 AMERICAN PRESIDENT LINES STACKTRAIN SERVICES, a division of APL Land Transport Services, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) purchase, property and equipment is recorded at historical cost. For assets financed under capital leases, the present value of the future minimum lease payments is recorded at the date of acquisition as Property and Equipment with a corresponding amount recorded as a capital lease obligation. Depreciation and amortization are computed using the straight-line method based upon the following estimated useful lives:
Classification Estimated Useful Life -------------- --------------------- Containers and Chassis.......................................... 5 to 20 Years Rail Cars....................................................... 5 to 30 Years Other Property and Equipment.................................... Various Assets Under Capital Lease Arrangements......................... Term of Lease
Depreciation and Amortization of property and equipment was $6.0 million, $0.7 million, $3.0 million and $4.1 million for the fiscal year ended December 25, 1998, the periods ended December 26, 1997 and November 12, 1997, and the fiscal year ended December 27, 1996, respectively. Maintenance and repair expense of $18.3 million, $1.8 million, $14.6 million and $15.1 million was incurred for the fiscal year ended December 25, 1998, the periods ended December 26, 1997 and November 12, 1997, and the fiscal year ended December 27, 1996, respectively. At December 26, 1997, the balance of deferred costs for major rail car overhauls, which are amortized over four years, was eliminated as a result of the purchase accounting performed in conjunction with the merger. At December 25, 1998 and December 27, 1996, the balance of $0.4 million and $2.5 million, respectively, was included in Other Assets in the accompanying Statements of Assets, Liabilities and Divisional Control Account. On December 27, 1996, the Company adopted Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS 121"). SFAS 121 requires that long- lived assets, certain identifiable intangible assets and goodwill be reviewed for impairment when expected future undiscounted cash flows are less than the carrying value of the asset. No charges were recorded pursuant to this statement in any of the periods presented in the Statements of Operations. Intangible Assets Goodwill, representing the excess of the cost over the net tangible and identifiable intangible assets acquired, is stated at cost. Other Intangibles consists of systems technology. Goodwill and other intangibles of $19.2 million, including systems technology of $0.8 million, are recorded at December 25, 1998 net of accumulated amortization of $0.6 million and are amortized on a straight-line basis using the following estimated useful lives:
Estimated Classification Useful Life -------------- ----------- Goodwill............................................................... 40 Years Other Intangibles...................................................... 10 Years
The Company's policy is to evaluate the excess of cost over the net assets acquired based on an evaluation of such factors as the occurrence of a significant adverse event or change in the environment in which the business operates or if the expected future net cash flows (undiscounted and without interest) would become less than the carrying amount of the asset. An impairment loss would be recorded in the period such determination is made, based on the fair value at that time. F-8 AMERICAN PRESIDENT LINES STACKTRAIN SERVICES, a division of APL Land Transport Services, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Revenues and Expenses The Company recognizes revenues on a percentage-of-completion basis and expenses as incurred. Detention revenue is recognized when cash is received. Income Taxes The Company's operating results are included in the consolidated income tax returns of APL Limited. A charge in lieu of income taxes has been provided using the separate return method, as if the Company were a separate taxpayer. Deferred income taxes represent the future tax consequences relating to the reversal of differences in the recognition of assets and liabilities for financial reporting and income tax purposes. NOTE 3. RESTATEMENT Error Correction The financial statements of the Company as of December 26, 1997 and of the Predecessor as of December 27, 1996, and for each of the periods in the fiscal years then ended, have been revised for the correction of an error in Property and Equipment. The previously issued financial statements inadvertently reflected certain leasehold improvements at a terminal facility of one of the Parent's other divisions as assets of the Company. The effect of this revision on Property and Equipment, Net and the Divisional Control Account at December 26, 1997 was approximately $9.1 million and at December 27, 1996 was approximately $10.5 million. The effect on operations for the periods ended December 26, 1997 and November 12, 1997, and the fiscal year ended December 27, 1996, was an increase to previously reported net income of $0.1 million, $1.4 million and $1.7 million, respectively. Income Statement Reclassification The Statements of Operations of the Company for the fiscal year ended December 25, 1998 and the period from November 13, 1997 through December 26, 1997, and of the Predecessor for the period from December 28, 1996 through November 12, 1997 and for the fiscal year ended December 27, 1996, have been revised to reclassify the intermodal services provided to American President Lines, Ltd. ("APL"), a related party and wholly-owned subsidiary of the Parent (see Note 8). The previously issued financial statements reflected equal amounts of revenues and expenses for these services. The revised Statements of Operations reflect the costs of these services netted against related revenues. The effect of the reclassification on operations was a decrease of revenues and expenses of $276.7 million, $22.3 million, $154.1 million, and $173.0 million for the fiscal year ended December 25, 1998, the periods ended December 26, 1997 and November 12, 1997, and the fiscal year ended December 27, 1996, respectively. This reclassification had no effect on the previously reported net income. NOTE 4. INCOME TAXES The Company records its charge in lieu of income taxes using the liability method, considering known changes in income tax rates and other statutory provisions that will be in effect in subsequent years. F-9 AMERICAN PRESIDENT LINES STACKTRAIN SERVICES, a division of APL Land Transport Services, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The reconciliation of the net effective income tax rate to the U.S. federal statutory income tax rate is as follows:
The Company The Predecessor ------------------------- ------------------------- Fiscal Year November 13, December 28, Fiscal Year Ended 1997 through 1996 through Ended December 25, December 26, November 12, December 27, 1998 1997 1997 1996 ------------ ------------ ------------ ------------ U.S. Federal Statutory Rate.............................................. 35.0% 35.0% 35.0% 35.0% Increases (Decreases) in Rate Resulting from: State Taxes, Net of Federal Benefit.................................... 2.2% 2.7% 2.7% 2.8% Permanent Book/Tax Differences and Other............................... 0.8% 2.0% 0.2% 0.2% ----- ----- ----- ----- Net Effective Tax Rate................................................... 38.0% 39.7% 37.9% 38.0% ===== ===== ===== ===== The following is a summary of the charge in lieu of income taxes: The Company The Predecessor ------------------------- ------------------------- Fiscal Year November 13, December 28, Fiscal Year Ended 1997 through 1996 through Ended December 25, December 26, November 12, December 27, 1998 1997 1997 1996 ------------ ------------ ------------ ------------ (In millions) (In millions) Current Federal................................................................ $10.6 $(1.1) $15.9 $21.2 State.................................................................. 1.0 (0.1) 1.2 1.5 Foreign................................................................ -- 0.2 0.2 0.4 ----- ----- ----- ----- Total Current........................................................ 11.6 (1.0) 17.3 23.1 ----- ----- ----- ----- Deferred Federal................................................................ 1.0 1.6 (3.2) 0.3 State.................................................................. -- 0.1 (0.2) -- ----- ----- ----- ----- Total Deferrals...................................................... 1.0 1.7 (3.4) 0.3 ----- ----- ----- ----- Total Provision.......................................................... $12.6 $ 0.7 $13.9 $23.4 ===== ===== ===== =====
The following table shows the tax effects of the Company's and Predecessor's cumulative temporary differences included in the Statements of Assets, Liabilities, and Divisional Control Account at December 25, 1998, December 26, 1997 and December 27, 1996:
The Company The Predecessor -------------- --------------- 1998 1997 1996 ------ ------ --------------- (In millions) (In millions) Property and Equipment................................................................... $(17.1) $(17.2) $(5.0) Allowance for Doubtful Accounts.......................................................... 0.7 1.1 1.1 Accrued Liabilities...................................................................... 0.4 1.9 0.9 Other.................................................................................... 0.6 1.1 1.1 ------ ------ ----- Total Net Deferred Tax Liability......................................................... $(15.4) $(13.1) $(1.9) ====== ====== =====
F-10 AMERICAN PRESIDENT LINES STACKTRAIN SERVICES, a division of APL Land Transport Services, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The amount of deferred tax assets and liabilities at December 25, 1998, December 26, 1997 and December 27, 1996 were as follows:
The Company The Predecessor -------------- --------------- 1998 1997 1996 ------ ------ --------------- (In millions) (In millions) Deferred Tax Assets........................................................................ $ 1.9 $ 3.4 $ 2.4 Deferred Tax Liabilities................................................................... (17.3) (16.5) (4.3) ------ ------ ----- Total Net Deferred Tax Liability......................................................... (15.4) (13.1) (1.9) Less Net Current Deferred Tax Asset........................................................ -- (0.1) (0.1) ------ ------ ----- Deferred Tax Liability..................................................................... $(15.4) $(13.2) $(2.0) ====== ====== ===== NOTE 5. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Accounts Payable and Accrued Liabilities at December 25, 1998, December 26, 1997 and December 27, 1996 were as follows: The Company The Predecessor -------------- --------------- 1998 1997 1996 ------ ------ --------------- (In millions) (In millions) Accounts Payable........................................................................... $ 14.2 $ 7.4 $11.2 Accrued Liabilities........................................................................ 69.8 60.2 56.2 Unearned Revenue........................................................................... 0.6 0.8 1.3 ------ ------ ----- Total Accounts Payable and Accrued Liabilities........................................... $ 84.6 $ 68.4 $68.7 -------------------------------------------------- ====== ====== =====
NOTE 6. LEASES The Company leases equipment under operating leases. The following is a schedule of future minimum lease payments required under the Company's operating leases that have initial noncancelable terms in excess of one year at December 25, 1998:
Operating Leases ------------- (In millions) 1999........................................................... 22.9 2000........................................................... 18.8 2001........................................................... 16.1 2002........................................................... 13.5 2003........................................................... 14.0 Later Years.................................................... 37.3 ------ Total Minimum Lease Payments Required........................ $122.6 ======
Total rental expense for operating leases and short-term rentals was $49.7 million, $5.5 million, $37.1 million and $35.2 million for the fiscal year ended December 25, 1998, the periods ended December 26, 1997 and November 12, 1997, and the fiscal year ended December 27, 1996, respectively. F-11 AMERICAN PRESIDENT LINES STACKTRAIN SERVICES, a division of APL Land Transport Services, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) NOTE 7. EMPLOYEE BENEFIT PLANS Pension Plans There are defined benefit pension plans covering certain domestic shoreside employees of the Parent and its majority-owned subsidiaries, which generally call for benefits to be paid to eligible employees. The defined benefit retirement plan was replaced with a Cash Balance plan on June 1, 1997. The present value of the accrued benefit at the conversion date was converted to a starting retirement account balance. The account receives a credit each year based on the employee's age, years of service and annual eligible earnings. Interest is also earned each year. The retirement account can be paid out upon termination or payment can be deferred until retirement age. After termination interest is earned annually. The Parent also has grandfathered retirement benefits for certain employees. The general policy is to fund pension costs at no less than the statutory requirement. Certain non-qualified plans are secured through a grantor trust. The Company participates in the Parent's domestic plans and represents approximately 10% of the total wage base of the Parent and its majority-owned subsidiaries. The Parent's domestic plans had total plan assets in excess of the projected benefit obligation of $20.8 million at December 25, 1998. The total domestic net pension cost of the Parent for the fiscal year ended December 25, 1998, the periods ended December 26, 1997 and November 12, 1997, and the fiscal year ended December 27, 1996, was $2.7 million, $0.6 million, $4.4 million, and $8.3 million, respectively. These costs and benefits are allocated by the Parent to the Company and are included in general and administrative expenses. Postretirement Benefits Other Than Pensions The Parent and its majority-owned subsidiaries share the cost of its health care benefits with the majority of its domestic shoreside retired employees and recognize the cost of providing health care and other benefits to retirees over the term of employee service. The postretirement obligation is unfunded. The Company participates in the Parent's postretirement plan and represents approximately 10% of the total wage base of the Parent and its majority-owned subsidiaries. The Parent's plan had a total benefit obligation of $14.5 million at December 25, 1998. The total net postretirement benefit cost of the Parent for the fiscal year ended December 25, 1998, the periods ended December 26, 1997 and November 12, 1997, and the fiscal year ended December 27, 1996, was $1.6 million, $0.1 million, $0.5 million and $1.7 million, respectively. These costs and benefits are allocated by the Parent to the Company and are included in general and administrative expenses. Profit-Sharing Plans The Parent and its majority-owned subsidiaries have defined contribution profit-sharing plans covering certain non-union employees. Under the terms of these plans, the Parent has agreed to make matching contributions equal to those made by the participating employees up to a maximum of 6% of each employee's base salary. Effective January 1, 1997, the base company matching contribution for active employees was $0.75 for each dollar contributed up to 6% of each employee's base salary. Additional matching contributions, up to $0.50 for each dollar contributed, may also be made when the Parent achieves certain financial results. The Parent's total contributions to the plans were approximately $3.5 million, $0.4 million, $2.7 million and $5.1 million for the fiscal year ended December 25, 1998, the periods ended December 26, 1997 and November 12, 1997, and the fiscal year ended December 27, 1996, respectively. These costs and benefits are allocated by the Parent to the Company and are included in general and administrative expenses. F-12 AMERICAN PRESIDENT LINES STACKTRAIN SERVICES, a division of APL Land Transport Services, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) NOTE 8. RELATED PARTY TRANSACTIONS In the ordinary course of business, the Company provides intermodal services to APL. These services include moving containers from ports to inland points, moving containers from inland points to ports, and repositioning empty containers. These transactions are performed on a cost reimbursement basis. Thus, no revenues or expenses are recognized for financial reporting purposes. Reimbursements amounted to $276.7 million, $22.3 million, $154.1 million, and $173.0 million for the fiscal year ended December 25, 1998, and the periods ended December 26, 1997 and November 12, 1997, and the fiscal year ended December 27, 1996, respectively. In addition, the Company receives a credit from APL for the repositioning expense that APL has avoided due to the Company using APL's containers in surplus locations. The total amount of revenue recognized for these services was $20.0 million, $1.9 million, $15.8 million, and $15.7 million for the fiscal year ended December 25, 1998, the periods ended December 26, 1997 and November 12, 1997, and the fiscal year ended December 27, 1996, respectively. The Company also provides services to the Automotive Division. These services include moving containers primarily in the U.S.--Mexico trade. Total amount of revenue recognized for these services was $38.7 million, $5.0 million, $38.4 million and $62.5 million for the fiscal year ended December 25, 1998, the periods ended December 26, 1997 and November 12, 1997, and the fiscal year ended December 27, 1996, respectively. The Parent and its subsidiaries share certain expenses with the Company. These expenses include systems support, office space, salaries, and other corporate services. These expenses were $14.4 million, $1.6 million, $12.0 million and $11.0 million for the fiscal year ended December 25, 1998, the periods ended December 26, 1997 and November 12, 1997, and the fiscal year ended December 27, 1996, respectively. The Company also receives an allocation for lease and maintenance and repair expenses from APL. These expenses were $19.5 million, $1.9 million, $14.1 million and $13.6 million for the fiscal year ended December 25, 1998, the periods ended December 26, 1997 and November 12, 1997, and the fiscal year ended December 27, 1996, respectively. In 1997, in connection with NOL's acquisition of APL Limited, the Parent incurred certain merger related costs totaling approximately $61 million. These non-operating costs do not relate to the ongoing operations of the Company and have not been allocated to the Company's results of operations. APL de Mexico, S.A. de C.V. (APL Mexico), a wholly owned Mexican subsidiary of the Parent, provides various agency services to the Company with respect to its bills of lading in Mexico. Expenses recorded by the Company from APL Mexico were $0.5 million, $0.1 million, $0.3 million and $0.4 million for the fiscal year ended December 25, 1998, the periods ended December 26, 1997 and November 12, 1997, and the fiscal year ended December 27, 1996, respectively. NOTE 9. COMMITMENTS AND CONTINGENCIES Commitments Rail Transportation Certain of the rail contracts which the Company holds are held jointly with American President Lines, Ltd., some of which are not assignable. One or more of the contracting railroads may seek to either renegotiate and/or terminate the contract if the Company or American President Lines, Ltd. takes an action that would cause a material adverse effect on such railroad. F-13 AMERICAN PRESIDENT LINES STACKTRAIN SERVICES, a division of APL Land Transport Services, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) In May 1996, the Parent sold a portion of Distribution Services to a third party purchaser. In connection with this sale, the Company and the purchaser entered into a 10-year agreement to provide stacktrain services to the purchaser. The remaining portion of Distribution Services was transferred to the Parent. Contingencies In June 1995, the Parent sold the assets of its trucking company, American President Trucking ("APT"), to Burlington Motor Carriers ("BMC"). The sale included the sublease of terminal real estate to BMC and the sublease of tractor units to Stoops Freightliner, which in turn entered into a use agreement with BMC. BMC and the Company entered into a service agreement whereby the Company guaranteed certain levels of traffic to BMC. Under new ownership from a 1995 bankruptcy proceeding, BMC advised the Parent and the Company that it believed the Company breached the service agreement when APLLTS sold its Distribution Services unit, and demanded $800,000 in compensation. The Company disputed the claim. BMC and Stoops Freightliner filed subsequent complaints in BMC bankruptcy proceedings demanding unspecified damages. The Parent and the Company filed motions to dismiss both complaints. On November 13, 1998, the Parent and the Company's motions were granted; BMC has filed an appeal; Stoops Freightliner has not. The Company does not believe that the ultimate outcome, if unfavorable, will have a material adverse impact on the financial position of the Parent or the Company, and has not reserved for this contingency. The Company is a party to various legal proceedings, claims and assessments arising in the course of its business activities. Based upon information presently available, and in light of legal and other defenses and insurance coverage and other potential sources of payment available to the Company, management does not expect these legal proceedings, claims and assessments, individually or in the aggregate, to have a material adverse impact on the Company's financial position or results of operations. NOTE 10. EVENTS SUBSEQUENT TO DATE OF AUDITORS' REPORT As of May 28, 1999, APL Limited sold approximately 93% of its interest in the Company to an affiliate of Apollo Management, L.P. (together with its affiliates, Apollo). The transaction value comprised $292.5 million paid upon closing plus an additional payment of up to $15 million if the Company achieves a specific earnings target for financial year 1999. As part of the agreement, APL Limited and APL continue to use the services of the Company under a 20-year agreement and have agreed to provide to the buyer administrative, systems and equipment services, at cost, for varying periods, none in excess of 20 years. In connection with the transaction, the buyer changed the name of the Company to Pacer International, Inc. F-14 AMERICAN PRESIDENT LINES STACKTRAIN SERVICES a division of APL Land Transport Services, Inc. STATEMENT OF ASSETS, LIABILITIES AND DIVISIONAL CONTROL ACCOUNT
April 2, 1999 December 25, 1998 ------------- ----------------- (Unaudited) (In millions) ASSETS Current assets Trade and Other Receivables, Net......... $ 45.1 $ 43.9 Intercompany Trade Receivables........... 15.6 3.4 Prepaid Expenses and Other Current Assets.................................. 1.0 0.1 ------ ------ Total Current Assets.................... 61.7 47.4 ------ ------ Property and Equipment Rail Cars................................ 66.6 66.5 Containers and Chassis................... 27.6 27.6 Leasehold Improvements and Other......... 1.3 1.3 ------ ------ 95.5 95.4 Accumulated Depreciation and Amortization.. (8.4) (6.6) ------ ------ Property and Equipment, Net.............. 87.1 88.8 Goodwill and Other Intangibles, Net........ 19.1 19.2 Other Assets............................... 2.8 0.7 ------ ------ Total Assets............................ $170.7 $156.1 ====== ====== LIABILITIES AND DIVISIONAL CONTROL ACCOUNT Current Liabilities Accounts Payable and Accrued Liabilities............................. $ 95.5 $ 84.6 ------ ------ Total Current Liabilities............... 95.5 84.6 ------ ------ Deferred Tax Liability..................... 15.7 15.4 Other Liabilities.......................... 0.5 0.5 Commitments and Contingencies (Note 3) Divisional Control Account................. 59.0 55.6 ------ ------ Total Liabilities and Divisional Control Account................................ $170.7 $156.1 ====== ======
The accompanying notes are an integral part of the financial statements. F-15 AMERICAN PRESIDENT LINES STACKTRAIN SERVICES a division of APL Land Transport Services, Inc. STATEMENTS OF OPERATIONS
Three Months Ended Three Months Ended April 2, 1999 April 3, 1998 ------------------ ------------------ (Unaudited) (Unaudited) (In millions) Revenues Freight Revenues........................ $156.9 $143.9 Avoided Reposition...................... 5.5 5.0 Other Revenue........................... 1.2 1.3 ------ ------ Total Revenues............................ 163.6 150.2 Expenses Variable Expenses Terminal/Cargo Handling................. 1.0 1.1 Rail Linehaul........................... 122.1 113.5 Trucks and Other........................ 3.1 2.7 Empty Reposition........................ 3.6 2.3 Equipment Maintenance and Repair........ 5.2 4.8 Other................................... (2.6) (2.9) ------ ------ Total Variable Expense................ 132.4 121.5 ------ ------ Variable Contribution..................... 31.2 28.7 Fixed Expenses Terminal/Cargo Handling................. 0.5 0.4 Fixed Equipment Rail Cars.............................. 1.4 2.0 Containers/Chassis..................... 12.7 11.6 Other.................................. 0.9 1.3 ------ ------ Total Fixed Equipment................. 15.0 14.9 General and Administrative Expenses Direct Expenses........................ 4.3 4.2 Other Overhead......................... 0.2 0.2 Corporate Headquarters................. 1.6 1.5 IT Systems............................. 2.0 2.0 ------ ------ Total General and Administrative...... 8.1 7.9 Total Fixed Expenses................ 23.6 23.2 ------ ------ Operating Income.......................... 7.6 5.5 Charge in Lieu of Income Taxes............ (2.8) (2.0) ------ ------ Net Income................................ $ 4.8 $ 3.5 ====== ======
The accompanying notes are an integral part of the financial statements. F-16 AMERICAN PRESIDENT LINES STACKTRAIN SERVICES a division of APL Land Transport Services, Inc. STATEMENTS OF CASH FLOWS
Three Months Ended Three Months Ended April 2, 1999 April 3, 1998 ------------------ ------------------ (Unaudited) (Unaudited) (In millions) Cash Flows from Operating Activities Net Income.............................. $ 4.8 $ 3.5 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and Amortization......... 1.9 1.7 Gain on Sale of Property and Equipment............................ -- (0.3) Deferred Taxes........................ 0.3 (0.3) Change in Current Assets and Liabilities: Trade and Other Receivables.......... (1.2) (68.6) Intercompany Trade Receivables....... (12.2) (9.6) Prepaid Expenses and Other Current Assets.............................. (0.9) (1.3) Accounts Payable and Accrued Liabilities......................... 10.9 15.2 Other................................ (2.1) (0.9) ------ ------ Net Cash Provided by (Used in) Operating Activities............... 1.5 (60.6) Cash Flows from Investing Activities Capital Expenditures.................... -- (16.3) Proceeds from Sales of Property and Equipment.............................. -- 0.3 ------ ------ Net Cash Used in Investing Activities......................... -- (16.0) Cash flows from Financing Activities Intercompany Funding, Net............... (1.5) 76.6 ------ ------ Repayment of Capital Lease Obligations Net Cash (Used in) Provided by Financing Activities............... (1.5) 76.6 Net Increase (Decrease) in Cash and Cash Equivalents............................ -- -- Cash and Cash Equivalents at Beginning of Period.............................. -- -- ------ ------ Cash and Cash Equivalents at End of Period................................. $ -- $ -- ====== ======
The accompanying notes are an integral part of the financial statements. F-17 AMERICAN PRESIDENT LINES STACKTRAIN SERVICES, a division of APL Land Transport Services, Inc. NOTES TO FINANCIAL STATEMENTS (In millions) NOTE 1. BASIS OF INTERIM PERIOD PRESENTATION The unaudited interim financial statements as of April 2, 1999 and for the three months ended April 2, 1999 and April 3, 1998 are condensed and do not contain all information required by generally accepted accounting principles to be included in a full set of financial statements. In the opinion of management, all adjustments (consisting of only normal recurring adjustments) that are necessary for fair presentation have been included. The results of operations for any interim period are not necessarily indicative of the results of operations to be expected for any full fiscal year. The audited financial statements of American President Lines Stacktrain Services, presented elsewhere in this prospectus, include a summary of significant accounting policies and should be read in conjunction with these interim financial statements. NOTE 2. SUBSEQUENT EVENTS Neptune Orient Lines Limited ("NOL") through a wholly-owned subsidiary, APL Limited ("Parent") has entered into an agreement dated March 15, 1999 with Apollo Management L.P. ("Apollo") through a wholly-owned subsidiary, Coyote Acquisition, Inc. ("Coyote") in which Apollo agreed to acquire a controlling interest in American President Lines Stacktrain Services (the "Company"), a division of APL Land Transport Services, a wholly-owned subsidiary of APL Limited in exchange for $292.5 plus contingent consideration of up to $15.0. The transaction closed on May 28, 1999. In connection with this transaction, the Company was renamed Pacer International, Inc. NOTE 3. CONTINGENCIES In June 1995, the Parent sold the assets of its trucking company, American President Trucking ("APT") to Burlington Motor Carriers ("BMC"). The sale included the sublease of terminal real estate to BMC and the sublease of tractor units to Stoops Freightliner, which in turn entered into a use agreement with BMC. BMC and the Company entered into a service agreement whereby the Company guaranteed certain levels of traffic to BMC. Under new ownership from a 1995 bankruptcy proceeding, BMC advised the Parent and the Company that it believed the Company breached the service agreement when LTS sold its Distribution Services unit, and demanded $0.8 million in compensation. The Company disputed the claim. BMC and Stoops Freightliner filed subsequent complaints in BMC bankruptcy proceedings demanding unspecified damages. The Parent and the Company filed motions to dismiss both complaints. On November 13, 1998, the Parent and the Company's motions were granted; BMC has filed an appeal; Stoop Freightliners has not. The Company does not believe that the ultimate outcome, if unfavorable, will have a material adverse impact on the financial position of the Parent or the Company, and has not reserved for this contingency. The Company is a party to various legal proceedings, claims and assessments arising in the course of its business activities. Based upon information presently available, and in light of legal and other defenses and insurance coverage and other potential sources of payment available to the Company, management does not expect these legal proceedings, claims and assessments, individually or in the aggregate, to have a material adverse impact on the Company's financial position or results of operations. F-18 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders and Board of Directors of Pacer International, Inc.: We have audited the accompanying consolidated balance sheets of Pacer International, Inc. (a Delaware corporation) and Subsidiaries (the Company) as of December 31, 1998 and 1997, and the related consolidated statements of operations, stockholders' equity and cash flows for the year ended December 31, 1998, and for the period from inception, March 31, 1997, through December 31, 1997. We have also audited the accompanying balance sheet of the Predecessor (business identified in Note 1) as of March 31, 1997, and the related statements of operations, stockholders' equity and cash flows for the period from January 1, 1997 through March 31, 1997, and for the year ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Pacer International, Inc. and Subsidiaries as of December 31, 1998 and 1997, and the results of their consolidated operations and their cash flows for the year ended December 31, 1998, and for the period from inception, March 31, 1997, through December 31, 1997, and the financial position of the Predecessor as of March 31, 1997, and the result of its operations and its cash flows for the period from January 1, 1997, through March 31, 1997, and for the year ended December 31, 1996, in conformity with generally accepted accounting principles. San Francisco, California February 10, 1999 F-19 PACER INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share data) The consolidated financial statements of the Company and the Predecessor are not comparable in certain respects.
The The Company Predecessor ------------------------- ----------- December 31, December 31, March 31, 1998 1997 1997 ------------ ------------ ----------- ASSETS CURRENT ASSETS: Cash and cash equivalents............................................................... $ 10 $ 86 $ 1,623 Accounts receivable, net of allowances of $2,032, $763 and $800, respectively........... 41,566 20,729 7,852 Prepaid expenses and other.............................................................. 1,644 765 647 Deferred income taxes................................................................... 597 -- 947 -------- ------- ------- Total current assets.................................................................... 43,817 21,580 11,069 -------- ------- ------- PROPERTY AND EQUIPMENT: Property and equipment, at cost......................................................... 7,926 1,880 716 Accumulated depreciation................................................................ (852) (146) (464) -------- ------- ------- Property and equipment, net............................................................. 7,074 1,734 252 -------- ------- ------- OTHER ASSETS: Intangible assets, net.................................................................. 61,788 32,717 -- Deferred income taxes................................................................... 73 43 -- Other assets............................................................................ 1,119 993 29 -------- ------- ------- Total assets............................................................................ $113,871 $57,067 $11,350 ======== ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt and capital leases................................. $ 2,803 $ 1,810 $ -- Accounts payable........................................................................ 23,429 10,068 4,063 Accrued expenses........................................................................ 17,179 9,447 4,323 Income taxes payable.................................................................... -- 389 -- Deferred income taxes................................................................... -- 177 -- -------- ------- ------- Total current liabilities............................................................... 43,411 21,891 8,386 LONG-TERM LIABILITIES: Employee benefits....................................................................... 672 672 -- Long-term debt and capital leases....................................................... 50,456 25,045 -- -------- ------- ------- Total liabilities....................................................................... 94,539 47,608 8,386 -------- ------- ------- STOCKHOLDERS' EQUITY: Preferred stock at December 31, 1998 and 1997: $0.01 par value, 600,000 shares authorized, 350,000 shares issued and outstanding; at March 31, 1997: no shares authorized or outstanding.............................................................. 4 4 -- Common stock at December 31, 1998: $0.0001 par value, 20,000,000 shares authorized, 5,437,392 shares issued and outstanding; at December 31, 1997: $0.01 par value, 5,700,000 shares authorized, 4,678,750 shares issued and outstanding; at March 31, 1997:$100.00 par value, 47,500 shares authorized, 48 shares issued and outstanding..... 1 5 1 Warrants at December 31, 1998 and 1997: 18,421 outstanding.............................. 53 53 -- Additional paid-in capital.............................................................. 14,201 7,981 2,998 Retained earnings (accumulated deficit)................................................. 5,073 1,416 (35) -------- ------- ------- Total stockholders' equity.............................................................. 19,332 9,459 2,964 -------- ------- ------- Total liabilities and stockholders' equity.............................................. $113,871 $57,067 $11,350 ======== ======= =======
The accompanying notes are an integral part of these consolidated financial statements. F-20 PACER INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share data) The consolidated financial statements of the Company and the Predecessor are not comparable in certain respects.
The Company The Predecessor -------------------------- -------------------------- March 31, January 1, Year Ended 1997, through 1997, through Year Ended December 31, December 31, March 31, December 31, 1998 1997 1997 1996 ------------ ------------- ------------- ------------ REVENUES............................................................... $ 252,762 $ 81,102 $19,538 $86,766 COST OF TRANSPORTATION AND SERVICES.................................... 211,222 68,713 16,498 73,116 --------- --------- ------- ------- Net revenues........................................................... 41,540 12,389 3,040 13,650 OPERATING EXPENSES: Selling, general and administrative expenses......................... 27,684 8,799 2,300 10,037 Depreciation and amortization........................................ 2,033 403 37 93 Transaction costs.................................................... 1,500 -- 510 -- --------- --------- ------- ------- Income from operations............................................... 10,323 3,187 193 3,520 INTEREST EXPENSE (INCOME).............................................. 2,867 659 -- (1,376) --------- --------- ------- ------- Income before income tax provision and extraordinary loss.............. 7,456 2,528 193 4,896 INCOME TAX PROVISION................................................... 3,182 983 74 1,888 --------- --------- ------- ------- Income before extraordinary loss....................................... 4,274 1,545 119 3,008 EXTRAORDINARY LOSS, net of tax benefit of $150 and $86, respectively... 239 129 -- -- --------- --------- ------- ------- Net income............................................................. $ 4,035 $ 1,416 $ 119 $ 3,008 ========= ========= ======= ======= PREFERRED STOCK DIVIDEND............................................... $ 378 $ -- $ -- $ -- ========= ========= ======= ======= NET INCOME APPLICABLE TO COMMON STOCK.................................. $ 3,657 $ 1,416 $ 119 $ 3,008 ========= ========= ======= ======= INCOME PER SHARE: Basic: Income before extraordinary loss..................................... $ 0.76 $ 0.45 Extraordinary loss................................................... (0.05) (0.04) --------- --------- Net income........................................................... $ 0.71 $ 0.41 ========= ========= Weighted average shares outstanding.................................. 5,143,212 3,403,480 ========= ========= Diluted: Income before extraordinary loss..................................... $ 0.63 $ 0.37 Extraordinary loss................................................... (0.04) (0.03) --------- --------- Net income........................................................... $ 0.59 $ 0.34 ========= ========= Weighted average shares outstanding.................................... 6,165,554 4,141,041 ========= =========
The accompanying notes are an integral part of these consolidated financial statements. F-21 PACER INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (in thousands) The consolidated financial statements of the Company and the Predecessor are not comparable in certain respects.
The Predecessor --------------------------------------------------------------- Retained Additional Earnings Preferred Common Paid-in (Accumulated Stockholders' Stock Stock Warrants Capital Deficit) Equity --------- ------ -------- ---------- ------------ ------------- DECEMBER 31, 1995....... $ -- $ 1 $ -- $ 2,998 $20,060 $23,059 Net income............ -- -- -- -- 3,008 3,008 ---- ---- ---- ------- ------- ------- DECEMBER 31, 1996....... -- 1 -- 2,998 23,068 26,067 Dividend.............. -- -- -- -- (23,222) (23,222) Net income............ -- -- -- -- 119 119 ---- ---- ---- ------- ------- ------- MARCH 31, 1997.......... $ -- $ 1 $ -- $ 2,998 $ (35) $ 2,964 ==== ==== ==== ======= ======= ======= The Company --------------------------------------------------------------- Additional Preferred Common Paid-in Retained Stockholders' Stock Stock Warrants Capital Earnings Equity --------- ------ -------- ---------- ------------ ------------- Elimination of Predecessor............ $ -- $ (1) $ -- $(2,998) $ 35 $(2,964) Formation of the Company: Issuance of common stock................ -- 4 -- 346 -- 350 Issuance of preferred stock................ 4 -- -- 3,146 -- 3,150 Issuance of warrants.. -- -- 53 -- -- 53 Issuance of common stock to acquire Interstate........... -- 1 -- 4,489 -- 4,490 Net income............ -- -- -- -- 1,416 1,416 ---- ---- ---- ------- ------- ------- DECEMBER 31, 1997....... 4 5 53 7,981 1,416 9,459 Preferred stock dividend............. -- -- -- -- (378) (378) Issuance of common stock to acquire Stutz and Cross Con.. -- 1 -- 6,215 -- 6,216 Change in par value... -- (5) -- 5 -- -- Net income............ -- -- -- -- 4,035 4,035 ---- ---- ---- ------- ------- ------- DECEMBER 31, 1998....... $ 4 $ 1 $ 53 $14,201 $ 5,073 $19,332 ==== ==== ==== ======= ======= =======
The accompanying notes are an integral part of these consolidated financial statements. F-22 PACER INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) The consolidated financial statements of the Company and the Predecessor are not comparable in certain respects.
The Company The Predecessor -------------------------- ----------------------- January 1, March 31, 1997, Year Ended 1997, through through Year Ended December 31, December 31, March 31, December 31, 1998 1997 1997 1996 ------------ ------------- ---------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income................................................................ $ 4,035 $ 1,416 $ 119 $ 3,008 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization............................................. 2,033 403 37 93 Extraordinary loss, net................................................... 239 129 -- -- Deferred income taxes..................................................... (475) 152 218 347 Changes in operating assets and liabilities: Decrease (increase) in accounts receivable, net of allowances............. (2,008) (3,870) 3,515 (1,028) Decrease (increase) in prepaid expenses and other......................... (369) 232 (335) (282) Decrease (increase) in other assets....................................... (324) (595) (10) (17) Increase (decrease) in accounts payable................................... (3,557) 43 (1,165) 1,653 Increase (decrease) in accrued expenses................................... 1,647 (745) 346 (535) Increase (decrease) in income taxes payable............................... (397) 157 (949) (84) Increase (decrease) in employee benefits.................................. -- -- (1,361) 265 -------- -------- -------- ------- Net cash provided by (used in) operating activities....................... 824 (2,678) 415 3,420 -------- -------- -------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of businesses, net of cash of acquired companies................. (18,625) (9,616) -- -- Purchases of property and equipment....................................... (1,709) (420) (71) (167) -------- -------- -------- ------- Net cash used in investing activities..................................... (20,334) (10,036) (71) (167) -------- -------- -------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Cash overdrafts........................................................... 1,497 1,632 -- -- Proceeds on long-term debt................................................ 92,377 20,654 -- -- Principal payments on long-term debt...................................... (74,062) (14,259) -- -- Proceeds from issuance of common stock.................................... -- 315 -- -- Proceeds from issuance of preferred stock................................. -- 2,835 -- -- Decrease (increase) in advances to affiliates............................. -- -- 21,865 (630) Dividend paid............................................................. (378) -- (23,222) -- -------- -------- -------- ------- Net cash provided by (used in) financing activities....................... 19,434 11,177 (1,357) (630) -------- -------- -------- ------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS...................... (76) (1,537) (1,013) 2,623 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.......................... 86 1,623 2,636 13 -------- -------- -------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD................................ $ 10 $ 86 $ 1,623 $ 2,636 ======== ======== ======== ======= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the year for: Interest.................................................................. $ 2,729 $ 568 $ -- $ -- ======== ======== ======== ======= Income taxes.............................................................. $ 3,806 $ 588 $ 1,125 $ 1,626 ======== ======== ======== ======= SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Promissory notes issued for acquisitions.................................. $ -- $ 19,983 $ -- $ -- ======== ======== ======== ======= Stock issued for acquisitions............................................. $ 6,216 $ 4,490 $ -- $ -- ======== ======== ======== =======
The accompanying notes are an integral part of these consolidated financial statements. F-23 PACER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION AND NATURE OF OPERATIONS: The Company PMT Holdings, Inc. (PMT Holdings), a Delaware corporation, was formed on March 5, 1997 (inception), to acquire all of the capital stock of Pacific Motor Transport Company (PMT) in a management buyout that was funded in part by Eos Partners, L.P. (Eos). On March 31, 1997, PMT Holdings acquired all issued and outstanding shares of PMT from Union Pacific Railroad Company and its subsidiaries (UP) for approximately $13 million in cash and warrants to purchase 18,421 units of PMT Holdings stock. Each unit represents nine and one- half shares of common stock and one share of preferred stock and may be purchased by UP for $10 per unit. The purchase of PMT was accounted for using the purchase method of accounting. Prior to acquisition, PMT was a provider of truckload freight services and intermodal marketing services. On December 16, 1997, PMT Holdings acquired all of the capital stock of Interstate Consolidation, Inc. (ICI) and Interstate Consolidation Service, Inc. (ICSI) and its wholly owned subsidiary, Intermodal Container Service, Inc. (IMCS) (ICI, ICSI and IMCS, collectively, Interstate) by issuing $20 million in promissory notes and 1,353,750 shares of PMT Holdings common stock. The acquisition of Interstate was accounted for using the purchase method of accounting. Interstate is a multipurpose provider of transportation services, including intermodal marketing, cartage, and freight consolidation and handling. In May 1998, PMT Holdings was renamed Pacer International, Inc. (Pacer International). The name change has been given retroactive application in these consolidated financial statements. In addition, earnings per share for all periods and all share data reflect the Company's 9.5 to 1 stock split, which occurred in December 1998. On April 3, 1998, Pacer International acquired all the stock of Intraco, Inc. (Stutz) for $.5 million in cash plus 217,142 shares of Pacer International common stock. On June 5, 1998, Pacer International acquired all of the capital stock of Cross Con Transport, Inc., and Cross Con Terminals, Inc. (collectively, Cross Con) for $11 million in cash plus 541,500 shares of Pacer International common stock. On July 25, 1998, Pacer International acquired substantially all the assets of Professional Logistics Management Co., Inc. and 3PL Corporation (collectively, PLMC), for $2.9 million in cash. On December 9, 1998, Pacer International acquired all of the capital stock of Manufacturers Consolidation Service, Inc. and its subsidiary, Levcon, Inc., MCS of Kansas, Inc., and Manufacturers Consolidation Service of Canada Inc. (collectively, MCS) for $4.9 million in cash. All of these acquisitions were accounted for using the purchase method of accounting. Both Cross Con and MCS are multipurpose providers of transportation services, including intermodal marketing and cartage. PLMC is a provider of logistics services, and Stutz is involved in the transportation of equipment primarily for railroads. The consolidated balance sheets as of December 31, 1998 and 1997, include the accounts of Pacer International and its wholly owned subsidiaries (the Company). At December 31, 1998, the wholly owned subsidiaries are PMT, Cross Con, Pacer International Rail Services LLC, Pacer Rail Services LLC, Pacer International Consulting LLC, Pacer Logistics, Inc. (which holds the stock of Interstate), Pacer Integrated Logistics, f/k/a Stutz, PLM Acquisition Corporation (PLMC) and MCS. The consolidated statements of operations, changes in stockholders' equity and cash flows include the accounts of Pacer International from March 31, 1997, the results and cash flows of PMT since its purchase on March 31, 1997, Interstate since its purchase on December 16, 1997, Stutz since its purchase on April 3, 1998, Cross Con since its purchase on June 5, 1998, PLMC since its purchase on July 23, 1998, and MCS since its purchase on December 9, 1998. The Predecessor The balance sheet as of March 31, 1997, and the statements of operations, changes in stockholders' equity and cash flows for the period from January 1, 1997, through March 31, 1997, include the accounts of PMT (the Predecessor), with its two operating divisions, Pacer and ABL-Trans. F-24 PACER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Nature of Operations The Company's business consists primarily of (i) intermodal marketing, which involves the provision of brokerage and logistics services by coordinating the transportation of goods by truck and rail, (ii) specialized trucking services, including flatbed heavy-haul trucking, drayage and cartage, and (iii) other transportation services, such as freight consolidation and handling. As a nonasset-based service provider, the Company is able to focus its efforts on providing value-added logistics solutions for its customers through its network of sales personnel and third-party brokerage partnerships. The Company primarily provides services to numerous global, national and regional manufacturers and retailers. Reliance on Agents and Independent Contractors The Company relies upon the services of independent commission agents to market its transportation services, to act as intermediaries with customers, and to recruit independent contractors. Contracts with agents and independent contractors are, in most cases, terminable upon short notice by either party. Although the Company believes its relationships with agents and independent contractors are good, there can be no assurance that the Company will continue to be successful in retaining its agents and independent contractors or that agents and independent contractors who terminate their contracts can be replaced by equally qualified persons. Furthermore, since agents have the primary relationship with customers and independent contractors, the loss of an agent can result in the loss of customers or independent contractors. Dependence on Railroads and Equipment and Services Availability The Company is dependent upon the major railroads in the United States for substantially all of the intermodal services provided by the Company. In many markets, rail service is limited to a few railroads or even a single railroad. Consequently, a reduction in or elimination of rail service to a particular market is likely to adversely affect the Company's ability to provide intermodal transportation services to some of the Company's customers. Furthermore, significant rate increases, work stoppage or adverse weather conditions can impact the railroads and therefore the Company's ability to provide cost-effective services to its customers. In addition, the Company is dependent in part on the availability of truck, rail, ocean and air services provided by independent third parties. If the Company were unable to secure sufficient equipment or other transportation services to meet its customers' needs, its results of operations could be materially adversely affected on a temporary or permanent basis. Concentration of Business on Intermodal Marketing A significant portion of the Company's revenues is derived from intermodal marketing. As a result, a decrease in demand for intermodal transportation services relative to other transportation services could have a material adverse effect on the Company's results of operations. Concentration of Credit Risk and Customer Concentration Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of trade accounts receivable. The Company sells primarily on net 30-day terms, performs credit evaluation procedures on its customers and generally does not require collateral on its accounts receivable. The Company maintains an allowance for potential credit losses and insures certain of its receivables at Interstate through a third-party insurance provider. Sales to the Company's ten largest customers constituted 33 percent of gross revenues for the year ended December 31, 1998, and 31 percent of gross revenues for the nine months ended December 31, 1997. Receivables from the ten largest customers constituted 20 percent and 33 percent of total receivables at December 31, 1998 and 1997, respectively. No customer constituted more than 10 percent of revenues or receivables at December 31, 1998 or 1997. The sales and receivable trends are representative of prior periods. F-25 PACER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The Year 2000 Issue The Year 2000 Issue arises because many computerized systems use two digits rather than four to identify a year. The effects of the Year 2000 Issue may be experienced before, on or after January 1, 2000, and, if not addressed, the impact on operations and financial reporting may range from minor errors to significant systems failure, which could affect an entity's ability to conduct normal business operations. While the Company is in the process of remediating its affected hardware and software, it is not possible to be certain that all aspects of the Year 2000 Issue affecting an entity, including those related to the efforts of customers, suppliers, or other third parties, will be fully resolved. If the Company, its customers or suppliers, or other third parties do not successfully remedy their Year 2000 Issue, the Company's results of operations could be materially adversely affected. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Principles of Consolidation The consolidated financial statements of the Company include the accounts of Pacer International and its wholly owned subsidiaries. All material intercompany amounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents Cash and cash equivalents include highly liquid investments with an original maturity of three months or less. Accounts Receivable Trade accounts receivable are reflected net of allowances for doubtful accounts. Additionally, the Company records receivables for contractually negotiated rail volume incentives in the period earned. Rail volume incentives receivable were $1.9 million at December 31, 1998 and 1997, and $0.3 million at March 31, 1997. Property and Equipment Property, plant and equipment purchased in acquisitions are recorded at fair value as prescribed by the purchase method of accounting. Subsequent purchases of property, plant and equipment are recorded at cost. For assets financed under capital leases, the present value of the future minimum lease payments is recorded at the date of acquisition as property and equipment, with a corresponding amount recorded as a capital lease obligation. F-26 PACER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Depreciation is computed on a straight-line basis over the following estimated useful lives:
Estimated Asset Classification Useful Life -------------------- ------------- Office equipment and furniture................................. 3 to 10 years Transportation equipment....................................... 3 to 15 years Communications system.......................................... 15 years Computer hardware and software................................. 3 to 5 years Leasehold improvements......................................... Term of lease Assets under capital lease..................................... Term of lease
Software Purchases of software are capitalized and amortized over three to five years using the straight-line method. Costs related to internal development of software are expensed as incurred. Intangible Assets Amortization is computed on a straight-line basis over the shorter of estimated useful lives or contract periods. The Company amortizes goodwill over periods ranging from 15 to 40 years and loan fees over the term of the underlying debt. Goodwill represents the excess of cost over the estimated fair value of the net tangible and intangible assets of acquired businesses. Should events or circumstances occur subsequent to any business acquisition that bring into question the realizable value or impairment of any component of goodwill, the Company will evaluate the remaining useful life and balance of goodwill and make appropriate adjustments. The Company's principal considerations in determining impairment include the strategic benefit to the Company of the particular business related to the questioned component of goodwill as measured by undiscounted current and expected future operating income levels of that particular business and expected undiscounted future cash flows. The company expenses the costs of start-up activities as incurred. Financial Instruments The carrying amounts for cash, receivables and accounts payable approximate fair value due to the short-term nature of these instruments. Other fair-value disclosures are in the respective notes. In order to decrease its exposure to unfavorable interest rate movements, the Company has from time to time purchased interest rate protection agreements to cap the interest rates on its floating rate obligations. The purchase price of the interest rate protection agreements is capitalized and amortized over the life of the agreement. Amortization of the purchase price is charged to interest expense. Accident and Cargo Claims The Company is self-insured or maintains high deductible insurance policies for a significant portion of its accident and cargo claims. Reserves are provided for uninsured cargo claims and for the uninsured costs of personal injury and property damage as a result of vehicle accidents involving the network of independent owner-operator drivers. Reserves are based on the Company's best estimate of its expected loss. Actual losses, if not covered by insurance, at amounts significantly greater than the recorded amounts could have a material adverse impact on the Company's financial position and results of operations. F-27 PACER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Revenue Recognition Revenues and related expenses are recognized when shipment is complete. Net Revenues Net revenues represent transportation and service revenues net of associated transportation and service costs. Transaction Costs For the year ended December 31, 1998, the Company incurred approximately $1.5 million of costs associated with the preparation and filing of a registration statement on Form S-1 related to an initial public offering (IPO) of common stock. The IPO was not completed due to uncertainties in the equity markets at the time of the proposed offering; accordingly, the costs were charged off in 1998. The Company may consider an IPO in the future, but has no plans for such an offering at this time. The Predecessor incurred transaction costs of $0.5 million in connection with the sale of PMT primarily related to legal and financial advisory services. Income Taxes Income taxes are recognized utilizing the asset and liability method, under which deferred income taxes are recognized for the consequences of temporary differences by applying currently enacted statutory rates to differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. Earnings per Share Basic earnings per share were calculated by dividing net income available for common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share include the impact of common stock options and warrants outstanding. Earnings per share for all periods and all share data reflect the Company's 9.5-to-1 stock split, which occurred in December 1998. Accounting for Stock-Based Compensation In October 1995, the Financial Accounting Standards Board (the FASB) issued Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation." As permitted by SFAS No. 123, the Company adopted the disclosure provisions of this statement in 1997. Comprehensive Income Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards to measure all changes in equity that result from transactions and other economic events other than transactions with owners. Comprehensive income is the total of net income and all other nonowner changes in equity. Except for net income, the Company does not have any transactions and other economic events that qualify as comprehensive income as defined under SFAS No. 130. New Accounting Pronouncements In 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 modifies the method of accounting for derivative instruments. The Company will adopt SFAS No. 133 in 2000. The adoption of SFAS No. 133 will require the Company to modify its accounting for its interest rate hedging activities. Based on information currently available, the Company does not expect the adoption of SFAS No. 133 to have a significant impact on its financial position or results of operations. F-28 PACER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) In 1998, the AICPA issued Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." The Company will adopt SOP 98-1 in 1999. The adoption of SOP 98-1 will require the Company to modify its method of accounting for software developed or obtained for internal use. 3. PROPERTY AND EQUIPMENT: Property and equipment consisted of the following:
The The Company Predecessor ------------------------- -------------- December 31, December 31, March 31, 1998 1997 1997 ------------ ------------ -------------- (in thousands) (in thousands) Computer hardware and software....................................................... $1,753 $ 350 $ 494 Office furniture and equipment....................................................... 937 289 35 Transportation equipment............................................................. 4,831 988 187 Communications equipment............................................................. 252 253 -- Leasehold improvements............................................................... 153 -- -- ------ ------ ----- 7,926 1,880 716 Less: Accumulated depreciation....................................................... (852) (146) (464) ------ ------ ----- Property and equipment............................................................... $7,074 $1,734 $ 252 ====== ====== =====
Depreciation expense of the Company for the year ended December 31, 1998, and for the period from inception through December 31, 1997, was $0.7 million and $0.1 million, respectively, and of the Predecessor for the period from January 1, 1997, through March 31, 1997, was $0.1 million. 4. ADVANCES TO AFFILIATES: Advances to affiliates represented cash generated by the Predecessor and advanced to UP. Advances earned interest at a rate ranging from 5.2 percent to 6.0 percent based on monthly commercial paper rates, and interest income was $1.4 million for the year ended December 31, 1996. For the period from January 1, 1997, through March 31, 1997, UP did not pay interest to the Predecessor. On March 31, 1997, the Predecessor declared a dividend of $23.2 million, which was partially used by UP to repay the Predecessor's advances. 5. INTANGIBLE ASSETS: Intangible assets consisted of the following:
The Company ------------------------- December 31, December 31, 1998 1997 ------------ ------------ (in thousands) Goodwill.............................................. $62,878 $32,479 Financing costs....................................... 407 430 Organizational costs.................................. -- 65 ------- ------- 63,285 32,974 Less: Accumulated amortization........................ (1,497) (257) ------- ------- Total intangible assets............................... $61,788 $32,717 ======= =======
Amortization expense for the year ended December 31, 1998, and for the period from inception through December 31, 1997, was $1.3 million and $0.3 million, respectively. F-29 PACER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 6. ACQUISITIONS: During 1998, the Company effected four acquisitions. The acquisition of Stutz occurred on April 3, 1998, the acquisition of Cross Con occurred on June 5, 1998, the acquisition of PLMC occurred on July 23, 1998, and the acquisition of MCS occurred on December 9, 1998. The purchase price, certain costs related to the acquisitions, and the allocation of the purchase price to the underlying net assets acquired in the acquisitions were as follows:
Stutz PLMC April Cross Con July MCS 3, June 5, 25, December 9, 1998 1998 1998 1998 ------ --------- ------- ----------- (in thousands) Purchase price......................... $1,771 $15,807 $ 2,733 $ 4,500 Acquisition costs...................... 109 559 170 391 ------ ------- ------- -------- Total purchase price................... 1,880 16,366 2,903 4,891 ------ ------- ------- -------- Less: Value assigned to assets and liabilities: Current assets......................... 468 7,013 518 12,516 Long-term assets....................... 312 97 215 3,904 Current liabilities.................... (464) (4,097) (1,572) (18,796) Long-term liabilities.................. (78) -- -- (2,370) ------ ------- ------- -------- 238 3,013 (839) (4,746) ------ ------- ------- -------- Goodwill............................... $1,642 $13,353 $ 3,742 $ 9,637 ====== ======= ======= ========
The Company accounted for these acquisitions under the purchase method of accounting. The allocation of the purchase price to the underlying net assets acquired is based upon estimates of the fair value of the net assets, which may be revised at a later date. It is anticipated that any purchase price allocation adjustments will be made within one year from the date of acquisition. Management does not believe that the final allocations of the purchase prices will have a material effect on the Company's financial position or results of operations. From inception through December 31, 1997, the Company effected two acquisitions. The initial acquisition of PMT by PMT Holdings occurred on March 31, 1997, and the acquisition of Interstate occurred on December 16, 1997. The purchase price, certain costs related to the acquisitions, and the allocation of the purchase price to the underlying net assets acquired in the acquisitions were as follows:
PMT Interstate March 31, December 16, 1997 1997 --------- ------------ (in thousands) Purchase price........................................... $13,215 $ 24,598 Acquisition costs........................................ -- 851 ------- -------- Total purchase price..................................... 13,215 25,449 Less: Value assigned to assets and liabilities: Current assets........................................... 9,803 13,011 Long-term assets......................................... 281 2,222 Current liabilities...................................... (8,386) (11,687) Long-term liabilities.................................... -- (1,084) ------- -------- 1,698 2,462 ------- -------- Goodwill................................................. $11,517 $ 22,987 ======= ========
F-30 PACER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) In connection with the Interstate, Stutz and Cross Con acquisitions, the Company issued 1,353,750 shares, 217,142 shares and 541,500 shares of common stock, respectively, which were valued at $3.32, $6.32 and $8.95 per share, respectively. The Company issued warrants to purchase 18,421 units in connection with the PMT acquisition. Warrants were valued at their estimated fair value using the Black-Scholes model. Results of operations of the entities acquired are included in the consolidated financial statements subsequent to their purchase dates. Pro forma operating results of the Company, assuming that the 1998 acquisitions occurred on April 1, 1997, and that the March 31, 1997, and December 16, 1997, acquisitions occurred on January 1, 1996, are presented below (unaudited).
January 1, January 1, January 1, 1998, April 1, 1997, 1997, 1996, through through through through December 31, December 31, March 31, December 31, 1998 1997 1997 1996 ------------ -------------- ---------- ------------ (in thousands, except per share data) Revenues.................. $ 383,552 $ 289,289 $ 38,488 $ 155,328 ========= ========= ========= ========= Income before extraordinary loss....... $ 5,877 $ 3,349 $ 517 $ 2,858 ========= ========= ========= ========= Earnings per share before extraordinary loss: Basic................... $ 1.01 $ 0.62 $ 0.11 $ 0.61 ========= ========= ========= ========= Diluted................. $ 0.84 $ 0.51 $ 0.09 $ 0.52 ========= ========= ========= ========= Weighted average shares outstanding: Basic................... 5,437,392 5,437,392 4,678,750 4,678,750 ========= ========= ========= ========= Diluted................. 6,532,448 6,532,448 5,471,934 5,471,934 ========= ========= ========= =========
Pro forma adjustments were made to reflect interest expense on cash consideration, amortization of goodwill, elimination of IPO and other transaction costs, compensation differentials, and income taxes as if the entities were combined and subject to the Company's effective tax rate for the periods presented. The pro forma results were further adjusted by the elimination of a business line at MCS and employee cost savings that occurred in connection with the MCS acquisition. 7. ACCRUED EXPENSES: Accrued expenses consisted of the following:
The Company The Predecessor ----------------------------------- --------------- December 31, 1998 December 31, 1997 March 31, 1997 ----------------- ----------------- --------------- (in thousands) (in thousands) Accident and cargo claims................... $ 3,369 $2,134 $1,951 Bank overdrafts........... 3,129 1,632 -- Accrued compensation...... 2,758 1,212 223 Other..................... 7,923 4,469 2,149 ------- ------ ------ Total accrued expenses.. $17,179 $9,447 $4,323 ======= ====== ======
F-31 PACER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 8. DEBT AND CAPITAL LEASES: Debt and capital leases of the Company consisted of the following (in thousands):
December 31, December 31, 1998 1997 ------------ ------------ Revolving line of credit in an amount up to $38,000 ($6.9 million was available at December 31, 1998); advances under the line accrue interest at the Company's option, at the higher of the bank corporate rate or the federal funds rate plus 50 basis points, plus the applicable margin, or the Eurodollar rate plus the applicable margin (8.28 percent at December 31, 1998); the line is secured by substantially all of the Company's assets and expires on December 31, 2003, at which time the balance is due..................................... $18,220 $ -- Term loan in the amount of $32,000 requiring 27 consecutive quarterly installment payments, with all unpaid principal and interest due December 31, 2005; the loan bears interest, at the Company's option, at the higher of the bank corporate rate or the federal funds rate plus 50 basis points, plus the applicable margin, or the Eurodollar rate plus the applicable margin (8.81 percent at December 31, 1998); the loan is secured by substantially all of the Company's assets............................... 32,000 -- Capital leases...................................... 294 477 Notes payable....................................... 2,745 -- Revolving line of credit in an amount up to $12,000; advances under the line accrue interest, at the Company's option, at the prime rate (8.5 percent at December 31, 1997) or LIBOR plus 2.25 percent (7.97 percent at December 31, 1997); the line is secured by substantially all of the Company's assets and expires on October 31, 2002; repaid December 7, 1997............................................... -- 6,395 Promissory note to shareholders..................... -- 19,983 ------- ------- Total debt and capital leases....................... 53,259 26,855 Less: Current maturities............................ 2,803 1,810 ------- ------- Long-term portion................................... $50,456 $25,045 ======= =======
On December 7, 1998, the Company entered into a new term loan of $32 million and revolving credit facility of $38 million. The purpose of the new term loan and revolving credit facility was to finance acquisitions, to provide for letters of credit, and for working capital and other general corporate purposes. In conjunction with the issuance of the term loan of $32 million and revolving credit facility, the amounts outstanding under the term loan of $20 million and the $12 million revolving line of credit were repaid (see Note 13). As of December 31, 1998, the Company had $17.6 million of unused commitments under its revolving credit facility. Interest expense was $2.9 million and $0.7 million for the year ended December 31, 1998, and the nine months ended December 31, 1997, respectively. The term loan and revolving credit facility agreements require that the Company meet certain covenants that, among other things, require maintenance of ratios related to fixed charges and leverage, require a minimum consolidated net worth, and limit the level of capital expenditures. At December 31, 1998, the Company was in compliance with the covenants of the agreements. The promissory note to shareholders represents the cash portion of the purchase price of the Interstate acquisition owed to the former owners of Interstate, who became shareholders of PMT Holdings on December 16, 1997. The amount was paid to these shareholders on January 2, 1998, and was financed by a term loan of $20 million. During the first half of 1998, the Company amended its term loan of $20 million and the revolving F-32 PACER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) line of credit primarily by increasing the amount available for borrowing in order to complete the acquisitions of Stutz and Cross Con. The $2.7 million notes payable were assumed in connection with the MCS acquisition and were secured by certain equipment. The notes were paid in full in February 1999 (see Note 17). Maturities of debt and capital leases are as follows:
Debt Leases Total ------- ------ ------- (in thousands) 1999................................................. $ 2,605 $218 $ 2,823 2000................................................. 4,551 101 4,652 2001................................................. 4,601 -- 4,601 2002................................................. 5,555 -- 5,555 2003................................................. 24,153 -- 24,153 Thereafter........................................... 11,500 -- 11,500 Amount representing interest......................... -- (25) (25) ------- ---- ------- $52,965 $294 $53,259 ======= ==== =======
The fair value of long-term debt, including the current portion, approximates fair value because all amounts outstanding at December 31, 1998, were issued in the current year and are representative of the terms and interest rates that would be available to the Company at December 31, 1998. As a hedge against exposure to interest rate risk, the Company entered into an interest rate swap agreement effective July 8, 1998, to exchange the variable interest rate obligations for fixed rate obligations on a portion of the outstanding principal balance of the $32 million term loan described above. The fixed rate under the swap is 5.9 percent. Net payments or receipts under the agreement are included in interest expense. The Company is exposed to credit losses in the event of counterparty nonperformance, but does not currently anticipate any such losses because the counterparties are established, reputable financial institutions. The agreement terminates on January 10, 2000. 9. INCOME TAXES: The provision for income taxes from continuing operations consists of the following:
The Company The Predecessor --------------------------- -------------------------- April 1, 1997, January 1, Year Ended through 1997, through Year Ended December 31, December 31, March 31, December 31, 1998 1997 1997 1996 ------------ -------------- ------------- ------------ (in thousands) (in thousands) Current: Federal............... $2,992 $706 $(144) $1,277 State and local....... 665 125 -- 264 ------ ---- ----- ------ 3,657 831 (144) 1,541 ------ ---- ----- ------ Deferred: Federal............... (387) 128 206 291 State and local....... (88) 24 12 56 ------ ---- ----- ------ (475) 152 218 347 ------ ---- ----- ------ Total provision..... $3,182 $983 $ 74 $1,888 ====== ==== ===== ====== F-33 PACER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The reconciliation of income tax from continuing operations computed at the U.S. federal statutory tax rate to the Company's effective income tax rate is as follows:
The Company The Predecessor --------------------------- -------------------------- April 1, 1997, January 1, Year Ended through 1997, through Year Ended December 31, December 31, March 31, December 31, 1998 1997 1997 1996 ------------ -------------- ------------- ------------ Federal statutory income tax rate............... 34.0% 34.0% 34.0% 34.0% State income tax, net of federal benefit........ 4.6 4.0 3.8 4.3 Amortization of goodwill............... 3.5 -- -- -- Other items............. 0.6 0.9 0.5 0.3 ---- ---- ---- ---- Effective tax rate...... 42.7% 38.9% 38.3% 38.6% ==== ==== ==== ====
Deferred tax assets and liabilities are composed of the following:
The The Company Predecessor ------------------------- -------------- December 31, December 31, March 31, 1998 1997 1997 ------------ ------------ -------------- (in thousands) (in thousands) Current deferred tax assets (liabilities): Accounts receivable............................................................. $(203) $(460) $190 Accrued expenses................................................................ 800 283 757 ----- ----- ---- Total current deferred tax assets (liabilities)............................... $ 597 $(177) $947 ===== ===== ==== Noncurrent deferred tax assets (liabilities): Depreciation and amortization................................................... $(218) $(175) $ -- Deferred compensation........................................................... 291 218 -- ----- ----- ---- Total noncurrent deferred tax assets.......................................... $ 73 $ 43 $ -- ===== ===== ====
The Predecessor was included in the federal and state consolidated tax returns of UP and its subsidiaries prior to inception. The Company believes that tax expense recorded by the Predecessor approximates what would have been recorded had the Predecessor filed separate tax returns. 10. STOCKHOLDERS' EQUITY: Preferred Stock The Company has one class of $0.01 par value Series A Preferred Stock (preferred stock). Holders of the preferred stock are entitled to receive dividends in cash at the per annum rate of 12 percent of the original issuance price of a preferred share as, if and when declared by the Board of Directors of the Company at its sole discretion. So long as any shares of preferred stock are outstanding, the Company may not pay or declare any dividend on or with respect to any shares of common stock. Upon liquidation, the holders of preferred stock are entitled to receive, prior and in preference to any distribution to any holder of common stock, for each share of preferred stock, an amount per share equal to the original issuance price of such share, plus the aggregate amount of all dividends declared, if any, less the aggregate amount of all distributions, including payments of dividends. In general, the holders of preferred stock are not entitled to vote on any matters submitted to the vote of stockholders except as set forth in the Company's Certificate of Incorporation. Additionally, upon the closing of an initial public offering by the Company, each share of preferred stock automatically converts to shares of common stock based on the ratio of preferred stock original issuance price divided by the initial public offering price of common stock. F-34 PACER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Common Stock The Company has one class of $0.0001 par value common stock. Each holder of the Company's common stock is entitled to one vote for every share of common stock owned. During 1998, in connection with the acquisitions of Stutz and Cross Con, the Company issued 217,142 shares and 541,500 shares, respectively, of common stock. The shares of Stutz and Cross Con were valued at $6.32 per share and $8.95 per share, respectively. During 1997, in connection with the purchase of ICI and ICS, the Company issued 1,353,750 shares of common stock, which were valued at $3.32 per share by independent appraisal. Earnings per share for all periods and all share data reflect the Company's 9.5 to 1 stock split, which occurred in December 1998. Stockholders' Agreement The common and preferred stockholders and warrant holder are parties to an Amended and Restated Stockholders' Agreement that, among other items, places restrictions upon the transfer of securities, gives the Company and other then- existing stockholders the right of first refusal to purchase securities offered for sale, and includes other rights (including Eos's right to elect a majority of the directors of the Company and its subsidiaries). The common stockholders and warrant holder are also parties to a Registration Rights Agreement that, among other things, entitles such holders to require the Company after an initial public offering to register their common shares in certain circumstances, subject to limitations contained in such agreement. Warrants The Company issued 18,421 warrants to UP in connection with the acquisition of PMT on March 31, 1997. The exercise price is $10 per warrant, and each warrant entitles UP to purchase one share of preferred stock and nine and one- half shares of common stock. The warrants expire on March 31, 2007. The warrants were valued using the Black-Scholes model. Dividends On June 29, 1998, the Company declared a dividend of $0.4 million on preferred stock. On March 31, 1997, prior to the acquisition by PMT Holdings, the Predecessor declared a dividend of $23.2 million. 11. STOCK OPTION PLANS: The 1998 Plan In August 1998, the Company adopted the 1998 Stock Option Plan (the 1998 Plan). The 1998 Plan enables employees and directors of and consultants to the Company and its subsidiaries to acquire shares of common stock. Under the 1998 Plan, 26,695 options were granted at $9.47 per option during 1998 and 57,500 options were granted at $11 per option subsequent to December 31, 1998. One- third of the options granted prior to year-end vested immediately, and the other two-thirds vest ratably on April 1 of each of 1999 and 2000. Options granted after year-end vest ratably on April 1 of each of 1999, 2000 and 2001. All options granted under the 1998 Plan, if not previously exercised, expire ten years from the date of grant.
1998 ----------------------- Weighted Average Exercise Shares Price ------ ---------------- Outstanding at beginning of period................... -- $ -- Granted during period................................ 26,695 9.47 ------ ----- Outstanding at end of period......................... 26,695 $9.47 ====== ===== Options exercisable at year-end...................... 8,898 $9.47 ====== =====
No options were exercised, forfeited or expired during the year. F-35 PACER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The following summarizes information about stock options outstanding at December 31, 1998, for the 1998 Plan:
Options Weighted Average Weighted Average Outstanding at Remaining Fair Value of Exercise Price December 31, 1998 Contractual Life Options Granted -------------- ----------------- ---------------- ---------------- $9.47 26,695 6 years $3.83
The fair value of options granted under the 1998 Plan was estimated on the date of the grant using the Black-Scholes option-pricing model. An expected life of seven years, a risk-free interest rate of 4.65 percent, no expected dividends, and no volatility were assumed. Had compensation costs for the 1998 Plan been determined based upon the fair value at grant date for awards under the plan consistent with the method prescribed by SFAS No. 123, the Company's net income would have been reduced by $34,000 for the year ended December 31, 1998. The Option and Supplemental Option Plans On March 31, 1997, the Company adopted the Service Stock Option Agreement (the Option Plan). The Option Plan assigned eligible employees options to purchase shares of the Company's common and preferred stock at a price generally not less than the fair value of the common and preferred stock on the date of grant. Under the Option Plan, 70,000 options were granted at $11.24 per option unit (each option unit allows the holder to purchase nine and one-half shares of common stock and one share of preferred stock). The combined fair value of the preferred and common stock on the date of grant was $10.00, the price paid in formation of the Company on March 31, 1997. Options under the Option Plan vest and become exercisable ratably on April 1 of each of 1998, 1999, 2000 and 2001 (25 percent of the options may be exercised each year). Options, if not previously exercised, expire ten years from the date of grant. On March 31, 1997, the Company also adopted the Supplemental Stock Option Agreement (the Supplemental Option Plan). This plan assigned eligible employees options to purchase shares of the Company's common and preferred stock at a price generally not less than the fair value of the common and preferred stock on the date of the grant. Under the Supplemental Option Plan, 40,000 options were granted at $40.00 per option unit (each option unit allows the holder to purchase nine and one-half shares of common stock and one share of preferred stock). Combined fair value of the preferred and common stock on the date of grant was $10.00, the price paid in formation of the Company on March 31, 1997. All options under the Supplemental Option Plan fully vested on March 31, 1997, and expire six years from that date.
1998 1997 ------------------------ ------------------------ Weighted Weighted Average Exercise Average Exercise Options Price Options Price ------- ---------------- ------- ---------------- Outstanding at beginning of period..................... 110,000 $21.70 -- $ -- Granted during period....... -- -- 110,000 21.70 ------- ------ ------- ------ Outstanding at end of period..................... 110,000 $21.70 110,000 $21.70 ======= ====== ======= ====== Options exercisable at year- end........................ 57,500 $31.25 40,000 $40.00 ======= ====== ======= ======
No options were exercised, forfeited or expired from inception through December 31, 1998. F-36 PACER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The following summarizes information about stock options outstanding at December 31, 1998, for the Option Plan and the Supplemental Option Plan:
Options Weighted Average Weighted Average Outstanding at Remaining Fair Value of Exercise Price December 31, 1998 Contractual Life Options Granted -------------- ----------------- ---------------- ---------------- $11.24 70,000 2.5 years $0.47 $40.00 40,000 6.0 years $ --
The fair value of each option granted was estimated on the date of the grant using the Black-Scholes option-pricing model. For the Option Plan, an expected life of four years, a risk-free interest rate of 6.60 percent and no expected dividends were assumed. For the Supplemental Option Plan, an expected life of six years, a risk-free interest rate of 6.83 percent and no expected dividends were assumed. Had compensation costs for the Company's stock-based compensation plans been determined based upon the fair value at grant dates for awards under those plans consistent with the method prescribed by SFAS No. 123, the Company's net income would have been reduced by $8,000 for the year ended December 31, 1998, and $6,000 for the nine months ended December 31, 1997. 12. EARNINGS PER SHARE: Earnings per share are as follows:
Nine Months Year Ended Ended December 31, December 31, 1998 1997 ------------ ------------ (in thousands, except per share amounts) Income available to common stockholders before extraordinary item................................. $3,896 $1,545 ====== ====== Basic weighted-average shares....................... 5,143 3,404 Dilutive effect of options.......................... 850 573 Dilutive effect of warrants......................... 173 164 ------ ------ Diluted weighted-average shares..................... 6,166 4,141 ====== ====== Basic earnings per share before extraordinary item.. $ 0.76 $ 0.45 ====== ====== Diluted earnings per share before extraordinary item............................................... $ 0.63 $ 0.37 ====== ======
Options to purchase 26,695 and 40,000 common shares were excluded from the computation of diluted earnings per share for the periods ended December 31, 1998 and 1997, respectively, because the options' exercise price was greater than the average market price of the common shares. Subsequent to December 31, 1998, options were granted for the purchase of 57,500 shares. As a result of the acquisition of the Predecessor by the Company, earnings per share are not comparable and have therefore not been presented for the Predecessor. 13. EXTRAORDINARY LOSS: The Company refinanced its debt in connection with the acquisition of MCS on December 9, 1998. The term loan fees of $0.4 million, net of income taxes of $0.2 million, were recorded in the accompanying statement of operations for the year ended December 31, 1998, as an extraordinary loss. F-37 PACER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) In connection with the acquisition of Interstate on December 16, 1997, loan fees of $0.2 million were written off in connection with the early extinguishment of debt. The loan fees, net of income taxes of $0.1 million, were recorded in the accompanying statement of operations for the nine months ended December 31, 1997, as an extraordinary loss. 14. RELATED-PARTY TRANSACTIONS: During the period from inception through December 31, 1997, the Company paid $75,000 in management fees and $100,000 in acquisition-related consulting fees to Eos. Under an Amended and Restated Management Consulting Agreement dated as of December 16, 1997, between the Company and Eos Management, Inc. (EMI), the Company pays EMI a monthly management fee of $10,417 for management consulting services rendered to the Company. The management fee is payable whether or not EMI has performed any services during the term of the agreement. The Company provided over-the-road transportation services and purchased linehaul transportation services from UP and its subsidiaries of $6.1 million and $5.8 million, respectively, for the nine months ended December 31, 1997, and $13.0 million and $16.6 million, respectively, for the year ended December 31, 1998. All services are provided and purchased at quoted market rates. The Predecessor provided over-the-road transportation services and purchased linehaul transportation services from UP and its subsidiaries. During the three-month period ended March 31, 1997, and the year ended December 31, 1996, revenues earned by the Predecessor from UP and its subsidiaries related to over-the-road transportation services were $2.2 million and $4.8 million, respectively. Purchased transportation costs from UP and its subsidiaries were $2.7 million for the three-month period ended March 31, 1997, and $13.5 million for the year ended December 31, 1996. Prior to its acquisition, the Predecessor participated in benefit plans and the other employee benefit services provided by UP and its affiliates (see Note 15). UP and its affiliates also provided tax advice; tax return preparation services; corporate secretarial services; legal advice; treasury, banking, cash management and accounting services; services involving the acquisition of insurance coverage and related services, all at no cost to the Predecessor. Additionally, the Predecessor from time to time advanced excess cash to UP (Note 4). The Company leases a facility consisting of office, warehousing and trucking space from A&G Investments, a California general partnership of which Messrs. Goldfein and Steiner are the only partners. Mr. Goldfein is a stockholder and a Director and Executive Vice President of the Company. Mr. Steiner is a stockholder and an Executive Vice President of the Company. Lease payments were $0.5 million for the year ended December 31, 1998, and $17,000 for the nine months ended December 31, 1997. Cross Con leases a facility consisting of office space from Richard P. Hyland, a stockholder and an Executive Vice President of the Company. Such lease is pursuant to an oral agreement and is on a month-to-month basis. Lease payments were $0.1 million for the year ended December 31, 1998. Pursuant to an Operations Agency Agreement, TEK, Incorporated (TEK) is entitled to 65 percent of the gross profit on Terminals' Detroit office. TEK is owned by a brother of Richard Hyland, a stockholder and an Executive Vice President of the Company. In 1998, TEK received $0.6 million pursuant to such agreement. Pursuant to an oral Commission/Bonus Agreement with a brother of Richard Hyland, such brother is entitled to 30 percent of the net profits before tax of the California office of Cross Con. In 1998, $0.1 million was paid pursuant to such agreement. F-38 PACER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 15. EMPLOYEE BENEFITS: Prior to its acquisition, eligible employees of the Predecessor participated in the pension and postretirement benefit plans of its parent. The Predecessor recorded benefit charges related to these plans of $0 for the period ended March 31, 1997, and $266,000 for the year ended December 31, 1996, for its proportionate share of the benefit plans as directed by its parent. In connection with the purchase of PMT by PMT Holdings, active participants of the plans became fully vested in their benefits accrued to date and the obligation was assumed by UP. The Company adopted two 401(k) plans (the Plans) in 1997. A plan was adopted for PMT employees in July 1997 and for rail service employees in October 1997. All employees who meet certain service requirements are eligible to participate. The Company matched 100 percent of the first 3 percent contributed by employees to the Plans during the years ended December 31, 1998 and 1997. In addition, the Company maintains a 401(k) plan for Interstate employees. The Company matched 25 percent of the first 4 percent contributed by Interstate employees to the plan during the year ended December 31, 1998, and the nine months ended December 31, 1997. Total expense related to these plans was $0.2 million for the year ended December 31, 1998, and for the nine months ended December 31, 1997. 16. COMMITMENTS AND CONTINGENCIES: Legal Proceedings and Contingencies The Company is a party to various legal proceedings, claims and assessments arising in the normal course of its business activities. Interstate is a named defendant in a class action filed in July 1997 in the State of California, Los Angeles Superior Court, Central District, alleging, among other things, breach of fiduciary duty, unfair business practices, conversion and money had and received in connection with monies allegedly wrongfully deducted from truck drivers' earnings. Plaintiffs have demanded in excess of $8.8 million, together with unspecified punitive damages, costs and interest, as well as equitable relief. Interstate has entered into a Judge Pro Tempore Submission Agreement dated as of October 9, 1998, pursuant to which the plaintiffs and defendants have waived their rights to a jury trial, stipulated to a certified class, and agreed to a minimum and a maximum judgment amount. The Company intends to defend this action vigorously and believes that its defenses are meritorious. Based upon information presently available and in light of legal and other defenses and insurance coverage, management does not expect these legal proceedings, claims and assessments, individually or in the aggregate, to have a material adverse impact on the Company's consolidated financial position or results of operations. Operating Lease Commitments The Company leases office space and equipment under noncancellable lease agreements that expire at various dates. The rental expense under these lease agreements was $1.8 million for the year ended December 31, 1998. F-39 PACER INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The following is a schedule of future minimum lease payments required under the Company's leases at December 31, 1998 (in thousands):
Operating Leases --------- 1999............................................................... $1,650 2000............................................................... 1,389 2001............................................................... 1,071 2002............................................................... 970 2003............................................................... 934 Thereafter......................................................... 2,745 ------ Total minimum lease payments..................................... $8,759 ======
Employment Agreements The Company has entered into employment agreements with certain of its executive officers, with remaining service periods ranging from 1 to 2.5 years. The agreements provide for certain payments to each officer upon termination of employment, other than as a result of death, disability in most cases or justified cause, as defined. The aggregate estimated commitment under these agreements was $3.9 million and $2.8 million at December 31, 1998 and 1997, respectively. Under the employment agreements, the Board of Directors may award an annual bonus to certain of the executives in an amount up to $0.1 million each based on the attainment of certain operating income targets. 17. SUBSEQUENT EVENTS: On February 2, 1999, the Company entered into an Equipment Purchase Agreement and a Bill of Sale and Assignment with Comtrak, Inc. to sell fifty 1999 Model 9400 International tractors purchased as part of the MCS acquisition. The proceeds from the sale of $3.0 million were used to pay off the note payable of $2.8 million described in Note 8. There was no gain or loss recorded on the sale. EVENTS SUBSEQUENT TO DATE OF AUDITORS' REPORT As of May 28, 1999, the Company and its stockholders entered into an Agreement and Plan of Merger with an affiliate of Apollo Management L.P. (together with its affiliates, Apollo) pursuant to which, among other things, Apollo acquired all of the outstanding Company common stock held by Eos and a portion of the outstanding Company common stock held by the other stockholders of the Company, constituting in the aggregate approximately 60 percent of the outstanding Company common stock, in exchange for cash paid to such selling stockholders. The consummation of the merger was subject to the satisfaction of various conditions, including Apollo's obtainment of sufficient financing. Upon consummation of the merger, the Company was renamed Pacer Logistics, Inc. On April 20, 1999, the Company acquired certain assets of Keystone Terminals, Inc. (DE) and Keystone Terminals, Inc. (NJ) ("Keystone") for $8.25 million. Keystone, which was established in 1964, is an intermodal marketing company with strong westbound traffic flow that originates in northeastern United States. The acquisition was financed through borrowings under the Company's revolving line of credit. F-40 PACER INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
(Unaudited) March 31, 1999 December 31, 1998 -------------- ----------------- (In thousands, except share data) ASSETS CURRENT ASSETS: Cash and cash equivalents.................... $ 10 $ 10 Accounts receivable, net of allowances of $2,070 and $2,032, respectively............. 41,492 41,566 Prepaid expenses and other................... 1,926 1,644 Deferred income taxes........................ 597 597 -------- -------- Total current assets.................... 44,025 43,817 -------- -------- PROPERTY AND EQUIPMENT: Property and equipment, at cost.............. 5,323 7,926 Accumulated depreciation..................... (1,170) (852) -------- -------- Property and equipment, net............. 4,153 7,074 -------- -------- OTHER ASSETS: Intangible assets, net....................... 60,932 61,788 Deferred income taxes........................ 73 73 Other assets................................. 1,885 1,119 -------- -------- Total assets............................ $111,068 $113,871 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt and capital leases.............................. $ 3,294 $ 2,803 Accounts payable............................. 24,386 23,429 Accrued expenses............................. 14,275 17,179 Income taxes payable......................... 537 -- Deferred income taxes........................ -- -- -------- -------- Total current liabilities............... 42,492 43,411 LONG-TERM LIABILITIES: Employee benefits............................ 710 672 Long-term debt and capital leases............ 47,064 50,456 -------- -------- Total liabilities....................... 90,266 94,539 -------- -------- STOCKHOLDERS' EQUITY: Preferred stock at March 31, 1999 and December 31, 1998: $0.01 par value, 600,000 shares authorized, 350,000 shares issued and outstanding................................. 4 4 Common stock at March 31, 1999 and December 31, 1998: $0.0001 par value, 20,000,000 shares authorized, 5,437,392 shares issued and outstanding............................. 1 1 Warrants at March 31, 1999 and December 31, 1998: 18,421 outstanding 53 53 Additional paid-in capital................... 14,201 14,201 Retained earnings............................ 6,543 5,073 -------- -------- Total stockholders' equity.............. 20,802 19,332 -------- -------- Total liabilities and stockholders' equity................................. $111,068 $113,871 ======== ========
The accompanying notes are an integral part of the financial statements. F-41 PACER INTERNATIONAL, INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) (Unaudited) Three Months Ended Three Months Ended March 31, 1999 March 31, 1998 ------------------ ------------------ (In thousands) REVENUES................................. $ 89,892 $ 50,362 COST OF PURCHASED TRANSPORTATION AND SERVICES................................ (75,164) (42,003) -------- -------- Net revenues........................... 14,728 8,359 OPERATING EXPENSES: Selling, general and administrative expenses.............................. 10,268 5,634 Depreciation and amortization.......... 764 341 -------- -------- Income from operations............... 3,696 2,384 INTEREST EXPENSE (INCOME)................ 1,126 554 -------- -------- Income before income tax provision....... 2,570 1,830 INCOME TAX PROVISION..................... 1,100 765 -------- -------- Net income............................... $ 1,470 $ 1,065 ======== ========
The accompanying notes are an integral part of the financial statements. F-42 PACER INTERNATIONAL, INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (Unaudited) Three Months Ended Three Months Ended March 31, 1999 March 31, 1998 ------------------ ------------------ (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income............................. $ 1,470 $ 1,065 Adjustments to reconcile net income to net cash provided by (used in) operating activities Depreciation and amortization.......... 764 341 Deferred income taxes.................. -- (29) Changes in operating assets and liabilities: Decrease in accounts receivable, net of allowances....................... 74 852 Decrease (increase) in prepaid expenses and other.................. (281) 118 Decrease (increase) in other assets.. (287) 5 Increase in accounts payable......... 956 800 Increase (decrease) in accrued expenses............................ (2,292) (501) Increase in income taxes payable..... 537 48 Increase in employee benefits........ 38 6 ------- ------- Net cash provided by operating activities.......................... 979 2,705 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment.... (408) (387) Proceeds from equipment sales.......... 3,035 -- ------- ------- Net cash provided by (used in) investing activities................ 2,627 (387) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Cash overdrafts........................ (705) -- Proceeds on long-term debt............. 4,740 1,202 Principal payments on long-term debt... (7,641) (3,519) ------- ------- Net cash used in financing activities.......................... (3,606) (2,317) ------- ------- NET INCREASE IN CASH AND CASH EQUIVALENTS........................ -- 1 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............................... 10 86 ------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD.................................. $ 10 $ 87 ======= =======
The accompanying notes are an integral part of the financial statements. F-43 PACER INTERNATIONAL, INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF INTERIM PERIOD PRESENTATION The unaudited interim financial statements as of March 31, 1999 and for the three months ended March 31, 1999 and March 31, 1998 are condensed and do not contain all information required by generally accepted accounting principles to be included in a full set of financial statements. In the opinion of management, all adjustments (consisting of only normal recurring adjustments) necessary for fair presentation have been included. The results of operations for any interim period are not necessarily indicative of the results of operations to be expected for any full fiscal year. The audited financial statements of Pacer International, Inc., ("Pacer International") presented elsewhere in this document, include a summary of significant accounting policies and should be read in conjunction with these interim financial statements. 2. SUBSEQUENT EVENTS Pacer International, Inc. entered into an agreement dated February 22, 1999 with Apollo Management, L.P. ("Apollo") through a wholly-owned subsidiary in which Apollo agreed to acquire a controlling interest in Pacer International. Consideration of $46 million in cash and $26 million of the surviving corporation's common stock was payable to Pacer International Stockholders. The transaction closed on May 28, 1999. In connection with the transaction, Pacer International Inc. was renamed Pacer Logistics, Inc. On April 20, 1999, Pacer International acquired certain assets of Keystone Terminals, Inc. (DE) and Keystone Terminals, Inc. (NJ) ("Keystone") for $8.25 million. Keystone, which was established in 1964, is an intermodel marketing company with strong westbound traffic flow that originates in the northeastern United States. The acquisition was financed through borrowings under Pacer International's revolving line of credit. 3. CONTINGENCIES Pacer International is a party to various legal proceedings, claims and assessments arising in the normal course of its business activities. Interstate is a named defendant in a class action filed in July 1997 in the State of California, Los Angeles Superior Court, Central District, alleging, among other things, breach of fiduciary duty, unfair business practices, conversion and money had and received in connection with monies allegedly wrongfully deducted from truck drivers' earnings. Plaintiffs have demanded in excess of $8.8 million, together with unspecified punitive damages, costs and interest, as well as equitable relief. Interstate has entered into a Judge Pro Tempore Submission Agreement dated as of October 9, 1998, pursuant to which the plaintiffs and defendants have waived their rights to a jury trial, stipulated to a certified class, and agreed to a minimum and a maximum judgement amount. Pacer International intends to defend this action vigorously and believes that its defenses are meritorious. Based upon information presently available and in light of legal and other defenses and insurance coverage, management does not expect these legal proceedings, claims and assessments, individually or in aggregate, to have a material adverse impact on the Pacer International's consolidated financial position or results of operations. F-44 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- All tendered old notes, executed letters of transmittal and other related documents should be directed to the exchange agent. Questions and requests for assistance and requests for additional copies of the prospectus, the letter of transmittal and other related documents should be addressed to the exchange agent as follows: By Registered or Certified Mail: Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, DE 19890 Attn: Corporate Trust Administration By Hand Delivery before 4:30 p.m.: Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, DE 19890 Attn: Corporate Trust Administration By Overnight Courier and by Hand Delivery after 4:30 p.m. on the Expiration Date: Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, DE 19890 Attn: Corporate Trust Administration Facsimile Transmission: (302) 651-8882 Attn: Customer Service Information or Confirmation by Telephone: (302) 651-8681 Originals of all documents submitted by facsimile should be sent promptly by hand, overnight delivery, or registered or certified mail. --------------- No dealer, salesperson or any other person has been authorized to give any information or to make any representation not contained in this prospectus and, if given or made, such information or representation must not be relied upon as having been authorized by Pacer International. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered hereby in any jurisdiction to any person to whom it is unlawful to make such offer in such jurisdiction. Neither the delivery of this prospectus nor any sale made hereunder shall, under any circumstances, create any implication that the information herein is correct as of any time subsequent to the date hereof or that there has been no change in the affairs of Pacer International since such date. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ----------------------- PROSPECTUS ----------------------- [LOGO] Pacer International, Inc. $150,000,000 $150,000,000 11 3/4% Senior Subordinated Notes due 2007 , 1999 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 20. Indemnification of Directors and Officers. The Amended and Restated Charter of Pacer International, Inc. (the "Pacer International Charter") states that Pacer International shall, to the full extent permitted by the Tennessee Business Corporation Act (the "TBCA"), as amended or interpreted from time to time, indemnify all directors, officers and employees whom it may indemnify pursuant thereto and, in addition, Pacer International may, to the extent permitted by the TBCA, indemnify agents of Pacer International or other persons. Sections 48-18-501 through 48-18-509 of the TBCA permit indemnification of directors, officers, and employees for reasonable expenses incurred in a wholly successful defense of any proceeding or when the relevant circumstances so dictate. The corporation may also indemnify a director made a party to a proceeding against liability incurred in the proceeding so long as the director acted in good faith and his conduct was in the best interests, or at least not opposed to the best interests, of the corporation. Section 48-18-509 of the TBCA also provides that the indemnification provided for therein shall not be deemed exclusive of any other rights to which those seeking indemnification may otherwise be entitled. In addition, Pacer International maintains a director's and officer's liability insurance policy. Item 21. Exhibits and Financial Statement Schedules. (a) Exhibits
Exhibit No. Description ----------- ----------- 3.1 Amended and Restated Charter of Pacer International, Inc. 3.2 Amended and Restated Bylaws of Pacer International, Inc. 4.1 Credit Agreement, dated as of May 28, 1999, among Pacer International, Inc., the lenders party thereto from time to time, Morgan Stanley Senior Funding, Inc., as Syndication Agent, Credit Suisse First Boston Corporation, as Documentation Agent and Bankers Trust Company, as Administrative Agent. 4.2 Indenture, dated as of May 28, 1999, among Pacer International, Inc., the Guarantors and Wilmington Trust Company, as Trustee (including form of 11 3/4% Senior Subordinated Notes due 2007). 4.3 Form of 11 3/4% Senior Subordinated Notes due 2007 (filed as part of Exhibit 4.2). 4.4 Stock Purchase Agreement, dated as of March 15, 1999, between APL Limited and Coyote Acquisition LLC. 4.5 Non-Competition Agreement, dated as of May 28, 1999, among Neptune Orient Lines Limited, APL Limited, Pacer International, Inc. and Coyote Acquisition LLC. 4.6 Administrative Services Agreement, dated as of May 28, 1999, between APL Limited and Pacer International, Inc. 4.7 IT Supplemental Agreement, dated as of May 11, 1999, between APL Limited, APL Land Transport Services, Inc. and Coyote Acquisition LLC.* 4.8 Stacktrain Services Agreement, dated as of May 28, 1999, among American President Lines, Ltd., APL Co. Pte. Ltd., APL Limited and Pacer International, Inc. 4.9 TPI Chassis Sublet Agreement, dated as of May 28, 1999, among American President Lines, Ltd., APL Co. Pte. Ltd., APL Limited and Pacer International, Inc.
II-1
Exhibit No. Description ----------- ----------- 4.10 Equipment Supply Agreement, dated as of May 28, 1999, among American President Lines, Ltd., APL Co. Pte. Ltd., APL Limited and Pacer International, Inc. 4.11 Primary Obligation and Guaranty Agreement, dated as of March 15, 1999, by Neptune Orient Lines Limited in favor of Coyote Acquisition LLC and APL Land Transport Services, Inc. 4.12 Shareholders' Agreement, dated as of May 28, 1999, among APL Limited, Pacer International, Inc., Coyote Acquisition LLC and Coyote Acquisition II LLC. 4.13 Shareholders' Agreement, dated as of May 28, 1999, by and among Pacer International, Inc., Coyote Acquisition LLC, Coyote Acquisition II LLC and the Management Stockholders. 4.14 Shareholders' Agreement, dated as of May 28, 1999, by and among Pacer International, Inc., Coyote Acquisition LLC, Coyote Acquisition II LLC, BT Capital Investors, L.P. and Pacer International Equity Investors, LLC. 4.15 Management Agreement, dated as of May 28, 1999, between Apollo Management IV, L.P. and Pacer International, Inc. 4.16 Tax Sharing Agreement, dated as of May 28, 1999, by and among Coyote Acquisition LLC, Pacer International, Inc. and Pacer Logistics, Inc. 4.17 Purchase Agreement, dated as of May 24, 1999, among Pacer International, Inc., the Guarantors and the Placement Agents named therein. 4.18 Registration Rights Agreement, dated as of May 28, 1999, between Pacer International, Inc., and the Purchasers named therein. 4.19 Form of Joinder Agreement, dated as of May 24, 1999, between Coyote Acquisition LLC and the Placement Agents named therein (filed as part of Exhibit 4.17). 4.20 Intermodal Transportation Agreement No. 1111, dated as of May 4, 1999, between CSX Intermodal, Inc., APL Land Transport Services, Inc., APL Limited and APL Co. Pte. LTD.* 4.21 Domestic Incentive Agreement, dated as of May 4, 1999, between CSX Intermodal, Inc. and Pacer International, Inc.* 4.22 Rail Transportation Agreement, dated as of October 11, 1996, between Union Pacific Railroad Company, APL Land Transport Services, Inc., American President Lines, LTD., and APL Co. Pte. LTD.* 5.1 Opinion of Dewey Ballantine LLP as to the legality of the securities being registered. 10.1 Employment Agreement for Donald C. Orris. 10.2 Employment Agreement for Gerry Angeli. 10.3 Employment Agreement for Gary I. Goldfein. 10.4 Employment Agreement for Robert L. Cross. 10.5 Employment Agreement for Allen E. Steiner. 12.1 Statement of Computation of Ratio of Earnings to Fixed Charges. 16.1 Letter re: change in certifying accountant. 21.1 List of the Subsidiaries of Pacer International, Inc. 23.1 Consent of Dewey Ballantine LLP (included as part of its opinion filed as Exhibit 5.1 hereto). 23.2 Consent of Arthur Andersen LLP. 25.1 Form T-1 Statement of Eligibility of Trustee. 27.1 Financial Data Schedule. 99.1 Form of Letter of Transmittal. 99.2 Form of Notice of Guaranteed Delivery.*
- -------- * To be filed by amendment II-2 Item 22. Undertakings. 1. The undersigned registrant hereby undertakes: (a) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post- effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (b) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. 2. The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. 3. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. 4. The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. II-3 5. The undersigned registrant hereby undertakes to supply by means of post- effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it becomes effective. II-4 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Walnut Creek, State of California, on July 30, 1999. Pacer International, Inc. /s/ Donald C. Orris By: _________________________________ Donald C. Orris Chairman, President and Chief Executive Officer KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby severally constitutes and appoints and , and each of them, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to the Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that each said attorney-in-fact and agents or any of them or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date /s/ Donald C. Orris Chairman, President and July 30, 1999 ______________________________________ Chief Executive Officer Donald C. Orris /s/ Lawrence C. Yarberry Executive Vice President, July 30, 1999 ______________________________________ Chief Financial Officer Lawrence C. Yarberry and Treasurer /s/ Joseph P. Atturio Vice President, Controller July 30, 1999 ______________________________________ and Secretary Joseph P. Atturio /s/ Joshua J. Harris Director July 30, 1999 ______________________________________ Joshua J. Harris /s/ Bruce H. Spector Director July 30, 1999 ______________________________________ Bruce H. Spector /s/ Marc E. Becker Director July 30, 1999 ______________________________________ Marc E. Becker /s/ Timothy J. Rhein Director July 30, 1999 ______________________________________ Timothy J. Rhein
II-5 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Walnut Creek, State of California, on July 30, 1999. Pacer Logistics, Inc. By:/s/ Donald C. Orris ---------------------------------- Donald C. Orris Chairman, President and Chief Executive Officer KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby severally constitutes and appoints Donald C. Orris, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to the Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite or necessary fully to all intents and purposes as he or she might or could do and perform each and every act and thing requisite or necessary fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated.
Signature Title Date --------- ----- ---- /s/ Donald C. Orris Chairman, President and July 30, 1999 ___________________________________________ Chief Executive Officer Donald C. Orris /s/ Gary I. Goldfein Executive Vice President July 30, 1999 ___________________________________________ and Director Gary I. Goldfein /s/ Lawrence C. Yarberry Executive Vice President, July 30, 1999 ___________________________________________ Chief Financial Officer Lawrence C. Yarberry and Treasurer /s/ Joseph P. Atturio Vice President, Controller July 30, 1999 ___________________________________________ and Secretary Joseph P. Atturio /s/ Joshua J. Harris Director July 30, 1999 ___________________________________________ Joshua J. Harris /s/ Marc E. Becker Director July 30, 1999 ___________________________________________ Marc E. Becker
II-6 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Walnut Creek, State of California, on July 30, 1999. Cross Con Transport, Inc. /s/ Donald C. Orris By: _________________________________ Donald C. Orris Chairman KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby severally constitutes and appoints Donald C. Orris, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to the Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite or necessary fully to all intents and purposes as he or she might or could do and perform each and every act and thing requisite or necessary fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date /s/ Donald C. Orris Chairman July 30, 1999 ______________________________________ Donald C. Orris /s/ Richard P. Hyland President, Chief Executive July 30, 1999 ______________________________________ Officer, Assistant Richard P. Hyland Secretary and Assistant Treasurer /s/ Lawrence C. Yarberry Chief Financial Officer, July 30, 1999 ______________________________________ Secretary and Treasurer Lawrence C. Yarberry /s/ Gerry Angeli Director July 30, 1999 ______________________________________ Gerry Angeli
II-7 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Walnut Creek, State of California, on July 30, 1999. Cross Con Terminals, Inc. /s/ Donald C. Orris By: _________________________________ Donald C. Orris Chairman KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby severally constitutes and appoints Donald C. Orris, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to the Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite or necessary fully to all intents and purposes as he or she might or could do and perform each and every act and thing requisite or necessary fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated.
Signature Title Date /s/ Donald C. Orris Chairman July 30, 1999 ______________________________________ Donald C. Orris /s/ Richard P. Hyland President, Chief Executive July 30, 1999 ______________________________________ Officer, Assistant Richard P. Hyland Secretary and Assistant Treasurer /s/ Lawrence C. Yarberry Chief Financial Officer, July 30, 1999 ______________________________________ Secretary and Treasurer Lawrence C. Yarberry /s/ Gerry Angeli Director July 30, 1999 ______________________________________ Gerry Angeli
II-8 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Walnut Creek, State of California, on July 30, 1999. Pacer International Rail Services LLC By:Pacer Logistics, Inc. Its Managing Member /s/ Donald C. Orris By: _________________________________ Donald C. Orris Chairman, President and Chief Executive Officer KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby severally constitutes and appoints Donald C. Orris, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to the Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite or necessary fully to all intents and purposes as he or she might or could do and perform each and every act and thing requisite or necessary fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated.
Signature Title Date /s/ Donald C. Orris Chairman, President and July 30, 1999 ______________________________________ Chief Executive Officer Donald C. Orris /s/ Gary I. Goldfein Executive Vice President July 30, 1999 ______________________________________ and Director Gary I. Goldfein /s/ Joshua J. Harris Director July 30, 1999 ______________________________________ Joshua J. Harris /s/ Marc E. Becker Director July 30, 1999 ______________________________________ Marc E. Becker
II-9 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Walnut Creek, State of California, on July 30, 1999. Pacer International Consulting LLC Pacer Logistics, Inc. By: ___________________________________ Its Managing Member /s/ Donald C. Orris By: ___________________________________ Donald C. Orris Chairman, President and Chief Executive Officer KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby severally constitutes and appoints Donald C. Orris, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to the Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in- fact and agent full power and authority to do and perform each and every act and thing requisite or necessary fully to all intents and purposes as he or she might or could do and perform each and every act and thing requisite or necessary fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated.
Signature Title Date /s/ Donald C. Orris Chairman, President and July 30, 1999 ______________________________________ Chief Executive Officer Donald C. Orris /s/ Gary I. Goldfein Executive Vice President July 30, 1999 ______________________________________ and Director Gary I. Goldfein /s/ Joshua J. Harris Director July 30, 1999 ______________________________________ Joshua J. Harris /s/ Marc E. Becker Director July 30, 1999 ______________________________________ Marc E. Becker
II-10 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Walnut Creek, State of California, on July 30, 1999. Pacer Rail Services llc Pacer Logistics, Inc. By: ___________________________________ Its Managing Member /s/ Donald C. Orris By: ___________________________________ Donald C. Orris Chairman, President and Chief Executive Officer KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby severally constitutes and appoints Donald C. Orris, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to the Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in- fact and agent full power and authority to do and perform each and every act and thing requisite or necessary fully to all intents and purposes as he or she might or could do and perform each and every act and thing requisite or necessary fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated.
Signature Title Date /s/ Donald C. Orris Chairman, President and July 30, 1999 ______________________________________ Chief Executive Officer Donald C. Orris /s/ Gary I. Goldfein Executive Vice President July 30, 1999 ______________________________________ and Director Gary I. Goldfein /s/ Joshua J. Harris Director July 30, 1999 ______________________________________ Joshua J. Harris /s/ Marc E. Becker Director July 30, 1999 ______________________________________ Marc E. Becker
II-11 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Walnut Creek, State of California, on July 30, 1999. Pacific Motor Transport Company By:__________________________________ /s/ Donald C. Orris Donald C. Orris Chairman KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby severally constitutes and appoints Donald C. Orris, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to the Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite or necessary fully to all intents and purposes as he or she might or could do and perform each and every act and thing requisite or necessary fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated.
Signature Title Date /s/ Donald C. Orris Chairman July 30, 1999 ______________________________________ Donald C. Orris /s/ Gerry Angeli President, Chief Executive July 30, 1999 ______________________________________ Officer and Director Gerry Angeli /s/ Lawrence C. Yarberry Executive Vice President, July 30, 1999 ______________________________________ Chief Financial Officer Lawrence C. Yarberry and Treasurer /s/ Joseph P. Atturio Controller and Secretary July 30, 1999 ______________________________________ Joseph P. Atturio
II-12 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Walnut Creek, State of California, on July 30, 1999. Pacer Express, Inc. By:__________________________________ /s/ Donald C. Orris Donald C. Orris Chairman KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby severally constitutes and appoints Donald C. Orris, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to the Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite or necessary fully to all intents and purposes as he or she might or could do and perform each and every act and thing requisite or necessary fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated.
Signature Title Date /s/ Donald C. Orris Chairman July 30, 1999 ______________________________________ Donald C. Orris /s/ Gary I. Goldfein President, Chief Executive July 30, 1999 ______________________________________ Officer and Director Gary I. Goldfein /s/ Lawrence C. Yarberry Executive Vice President, July 30, 1999 ______________________________________ Chief Financial Officer Lawrence C. Yarberry and Treasurer /s/ Joseph P. Atturio Controller and Secretary July 30, 1999 ______________________________________ Joseph P. Atturio
II-13 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Walnut Creek, State of California, on July 30, 1999. Pacer Integrated Logistics, Inc. /s/ Donald C. Orris By: _________________________________ Donald C. Orris Chairman KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby severally constitutes and appoints Donald C. Orris, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to the Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite or necessary fully to all intents and purposes as he or she might or could do and perform each and every act and thing requisite or necessary fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date /s/ Donald C. Orris Chairman July 30, 1999 ______________________________________ Donald C. Orris /s/ Gerry Angeli President Chief Executive July 30, 1999 ______________________________________ Officer, and director Gerry Angeli /s/ Lawrence C. Yarberry Executive Vice President, July 30, 1999 ______________________________________ Chief Financial Officer Lawrence C. Yarberry and Treasurer /s/ Joseph P. Atturio Controller and Secretary July 30, 1999 ______________________________________ Joseph P. Atturio
II-14 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Walnut Creek, State of California, on July 30, 1999. PLM Acquisition Corporation /s/ Donald C. Orris By: _________________________________ Donald C. Orris Chairman KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby severally constitutes and appoints Donald C. Orris, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to the Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite or necessary fully to all intents and purposes as he or she might or could do and perform each and every act and thing requisite or necessary fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated.
Signature Title Date /s/ Donald C. Orris Chairman July 30, 1999 ______________________________________ Donald C. Orris /s/ Robert L. Cross Executive Vice President, July 30, 1999 ______________________________________ Chief Financial Officer Robert L. Cross and Treasurer /s/ Lawrence C. Yarberry Vice President, Chief July 30, 1999 ______________________________________ Financial Officer, Lawrence C. Yarberry Secretary and Treasurer /s/ Gerry Angeli Director July 30, 1999 ______________________________________ Gerry Angeli
II-15 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Walnut Creek, State of California, on July 30, 1999. Manufacturers Consolidation Service, Inc. /s/ Donald C. Orris By: _________________________________ Donald C. Orris Chairman KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby severally constitutes and appoints Donald C. Orris, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to the Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite or necessary fully to all intents and purposes as he or she might or could do and perform each and every act and thing requisite or necessary fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated.
Signature Title Date /s/ Donald C. Orris Chairman July 30, 1999 ______________________________________ Donald C. Orris /s/ Richard P. Hyland President and Chief July 30, 1999 ______________________________________ Executive Officer Richard P. Hyland /s/ Lawrence C. Yarberry Executive Vice President, July 30, 1999 ______________________________________ Chief Financial Officer Lawrence C. Yarberry and Treasurer /s/ Joseph P. Atturio Controller and Secretary July 30, 1999 ______________________________________ Joseph P. Atturio /s/ Gerry Angeli Director July 30, 1999 ______________________________________ Gerry Angeli
II-16 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Walnut Creek, State of California, on July 30, 1999. LEVCON, INC. /s/ Donald C. Orris By: _________________________________ Donald C. Orris Chairman KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby severally constitutes and appoints Donald C. Orris, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to the Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite or necessary fully to all intents and purposes as he or she might or could do and perform each and every act and thing requisite or necessary fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated.
Signature Title Date /s/ Donald C. Orris Chairman July 30, 1999 ______________________________________ Donald C. Orris /s/ Richard P. Hyland Chief Executive Officer July 30, 1999 ______________________________________ Richard P. Hyland /s/ Gerry Angeli Executive Vice President July 30, 1999 ______________________________________ and Director Gerry Angeli /s/ Lawrence C. Yarberry Executive Vice President July 30, 1999 ______________________________________ and Chief Financial Lawrence C. Yarberry Officer /s/ Joseph P. Atturio Controller and Secretary July 30, 1999 ______________________________________ Joseph P. Atturio
II-17 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Walnut Creek, State of California, on July 30, 1999. Manufacturers Consolidation Service of Canada, Inc. By:/s/ Donald C. Orris ---------------------------------- Donald C. Orris Chairman KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby severally constitutes and appoints Donald C. Orris, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to the Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite or necessary fully to all intents and purposes as he or she might or could do and perform each and every act and thing requisite or necessary fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated.
Signature Title Date --------- ----- ---- /s/ Donald C. Orris Chairman July 30, 1999 ___________________________________________ Donald C. Orris /s/ Richard P. Hyland President and Chief July 30, 1999 ___________________________________________ Executive Officer Richard P. Hyland /s/ Lawrence C. Yarberry Executive Vice President, July 30, 1999 ___________________________________________ Chief Financial Officer Lawrence C. Yarberry and Assistant Secretary /s/ Joseph P. Atturio Controller and Secretary July 30, 1999 ___________________________________________ Joseph P. Atturio /s/ Gerry Angeli Director July 30, 1999 ___________________________________________ Gerry Angeli
II-18 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Walnut Creek, State of California, on July 30, 1999. Interstate Consolidation Service, Inc. /s/ Donald C. Orris By:__________________________________ Donald C. Orris Chairman KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby severally constitutes and appoints Donald C. Orris, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to the Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite or necessary fully to all intents and purposes as he or she might or could do and perform each and every act and thing requisite or necessary fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated.
Signature Title Date /s/ Donald C. Orris Chairman July 30, 1999 ______________________________________ Donald C. Orris /s/ Gary I. Goldfein President, Chief Executive July 30, 1999 ______________________________________ Officer and Director Gary I. Goldfein /s/ Lawrence C. Yarberry Executive Vice President, July 30, 1999 ______________________________________ Chief Financial Officer Lawrence C. Yarberry and Treasurer /s/ Joseph P. Atturio Controller and Secretary July 30, 1999 ______________________________________ Joseph P. Atturio
II-19 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Walnut Creek, State of California, on July 30, 1999. Interstate Consolidation, Inc. /s/ Donald C. Orris By:__________________________________ Donald C. Orris Chairman KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby severally constitutes and appoints Donald C. Orris, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to the Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite or necessary fully to all intents and purposes as he or she might or could do and perform each and every act and thing requisite or necessary fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated.
Signature Title Date /s/ Donald C. Orris Chairman July 30, 1999 ______________________________________ Donald C. Orris /s/ Gary I. Goldfein President, Chief Executive July 30, 1999 ______________________________________ Officer and Director Gary I. Goldfein /s/ Lawrence C. Yarberry Executive Vice President, July 30, 1999 ______________________________________ Chief Financial Officer Lawrence C. Yarberry and Treasurer /s/ Joseph P. Atturio Controller and Secretary July 30, 1999 ______________________________________ Joseph P. Atturio
II-20 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Walnut Creek, State of California, on July 30, 1999. Intermodal Container Service, Inc. /s/ Donald C. Orris By: _________________________________ Donald C. Orris Chairman KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby severally constitutes and appoints Donald C. Orris, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to the Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite or necessary fully to all intents and purposes as he or she might or could do and perform each and every act and thing requisite or necessary fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated.
Signature Title Date /s/ Donald C. Orris Chairman July 30, 1999 ______________________________________ Donald C. Orris /s/ Gary I. Goldfein President, Chief Executive Officer, July 30, 1999 ______________________________________ and Director Gary I. Goldfein /s/ Lawrence C. Yarberry Executive Vice President, July 30, 1999 ______________________________________ Chief Financial Officer and Lawrence C. Yarberry Treasurer /s/ Joseph P. Atturio Controller and Secretary July 30, 1999 ______________________________________ Joseph P. Atturio
II-21 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Walnut Creek, State of California, on July 30, 1999. Keystone Terminals Acquisition Corp. /s/ Donald C. Orris By: _________________________________ Donald C. Orris Chairman, President and Chief Executive Officer KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby severally constitutes and appoints Donald C. Orris, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to the Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite or necessary fully to all intents and purposes as he or she might or could do and perform each and every act and thing requisite or necessary fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated.
Signature Title Date /s/ Donald C. Orris Chairman, President and July 30, 1999 ______________________________________ Chief Executive Officer Donald C. Orris /s/ Lawrence C. Yarberry Executive Vice President, July 30, 1999 ______________________________________ Chief Financial Officer Lawrence C. Yarberry and Treasurer /s/ Joseph P. Atturio Vice President, Controller July 30, 1999 ______________________________________ and Secretary Joseph P. Atturio
II-22 EXHIBIT INDEX
Exhibit No. Description ----------- ----------- 3.1 Amended and Restated Charter of Pacer International, Inc. 3.2 Amended and Restated Bylaws of Pacer International, Inc. 4.1 Credit Agreement, dated as of May 28, 1999, among Pacer International, Inc., the lenders party thereto from time to time, Morgan Stanley Senior Funding, Inc., as Syndication Agent, Credit Suisse First Boston Corporation, as Documentation Agent and Bankers Trust Company, as Administrative Agent. 4.2 Indenture, dated as of May 28, 1999, among Pacer International, Inc., the Guarantors and Wilmington Trust Company, as Trustee (including form of 11 3/4% Senior Subordinated Notes due 2007). 4.3 Form of 11 3/4% Senior Subordinated Notes due 2007 (filed as part of Exhibit 4.2). 4.4 Stock Purchase Agreement, dated as of March 15, 1999, between APL Limited and Coyote Acquisition LLC. 4.5 Non-Competition Agreement, dated as of May 28, 1999, among Neptune Orient Lines Limited, APL Limited, Pacer International, Inc. and Coyote Acquisition LLC. 4.6 Administrative Services Agreement, dated as of May 28, 1999, between APL Limited and Pacer International, Inc. 4.7 IT Supplemental Agreement, dated as of May 11, 1999, between APL Limited, APL Land Transport Services, Inc. and Coyote Acquisition LLC.* 4.8 Stacktrain Services Agreement, dated as of May 28, 1999, among American President Lines, Ltd., APL Co. Pte. Ltd., APL Limited and Pacer International, Inc. 4.9 TPI Chassis Sublet Agreement, dated as of May 28, 1999, among American President Lines, Ltd., APL Co. Pte. Ltd., APL Limited and Pacer International, Inc. 4.10 Equipment Supply Agreement, dated as of May 28, 1999, among American President Lines, Ltd., APL Co. Pte. Ltd., APL Limited and Pacer International, Inc. 4.11 Primary Obligation and Guaranty Agreement, dated as of March 15, 1999, by Neptune Orient Lines Limited in favor of Coyote Acquisition LLC and APL Land Transport Services, Inc. 4.12 Shareholders' Agreement, dated as of May 28, 1999, among APL Limited, Pacer International, Inc., Coyote Acquisition LLC and Coyote Acquisition II LLC. 4.13 Shareholders' Agreement, dated as of May 28, 1999, by and among Pacer International, Inc., Coyote Acquisition LLC, Coyote Acquisition II LLC and the Management Stockholders. 4.14 Shareholders' Agreement, dated as of May 28, 1999, by and among Pacer International, Inc., Coyote Acquisition LLC, Coyote Acquisition II LLC, BT Capital Investors, L.P. and Pacer International Equity Investors, LLC. 4.15 Management Agreement, dated as of May 28, 1999, between Apollo Management IV, L.P. and Pacer International, Inc. 4.16 Tax Sharing Agreement, dated as of May 28, 1999, by and among Coyote Acquisition LLC, Pacer International, Inc. and Pacer Logistics, Inc. 4.17 Purchase Agreement, dated as of May 24, 1999, among Pacer International, Inc., the Guarantors and the Placement Agents named therein. 4.18 Registration Rights Agreement, dated as of May 28, 1999, between Pacer International, Inc., and the Purchasers named therein.
Exhibit No. Description ----------- ----------- 4.19 Form of Joinder Agreement, dated as of May 24, 1999, between Coyote Acquisition LLC and the Placement Agents named therein (filed as part of Exhibit 4.17). 4.20 Intermodal Transportation Agreement No. 1111, dated as of May 4, 1999, between CSX Intermodal, Inc., APL Land Transport Services, Inc., APL Limited and APL Co. Pte. LTD.* 4.21 Domestic Incentive Agreement, dated as of May 4, 1999, between CSX Intermodal, Inc. and Pacer International, Inc.* 4.22 Rail Transportation Agreement, dated as of October 11, 1996, between Union Pacific Railroad Company, APL Land Transport Services, Inc., American President Lines, LTD., and APL Co. Pte. LTD.* 5.1 Opinion of Dewey Ballantine LLP as to the legality of the securities being registered. 10.1 Employment Agreement for Donald C. Orris. 10.2 Employment Agreement for Gerry Angeli. 10.3 Employment Agreement for Gary I. Goldfein. 10.4 Employment Agreement for Robert L. Cross. 10.5 Employment Agreement for Allen E. Steiner. 12.1 Statement of Computation of Ratio of Earnings to Fixed Charges. 16.1 Letter re: change in certifying accountant. 21.1 List of the Subsidiaries of Pacer International, Inc. 23.1 Consent of Dewey Ballantine LLP (included as part of its opinion filed as Exhibit 5.1 hereto). 23.2 Consent of Arthur Andersen LLP. 25.1 Form T-1 Statement of Eligibility of Trustee. 27.1 Financial Data Schedule. 99.1 Form of Letter of Transmittal. 99.2 Form of Notice of Guaranteed Delivery.*
- -------- * To be filed by amendment EX-3.1 2 AMENDED AND RESTATED CHARTER OF PACER INTERNATIONA Exhibit 3.1 AMENDED AND RESTATED CHARTER OF PACER INTERNATIONAL, INC. Pursuant to the provisions of Section 48-20-101 of the Tennessee Business Corporation Act (the "Act"), the undersigned corporation adopts the --- following amended and restated charter: 1. Name. The name of the corporation is Pacer International, Inc. ---- (the "Corporation"). ----------- 2. Registered Office and Registered Agent. The address of the -------------------------------------- registered office of the Corporation in Tennessee is CT Corporation System, 530 Knoxville, TN 37902, County Knox. The Corporation's registered agent at the registered office is CT Corporation System 3. Principal Office. The address of the principal office of the ---------------- Corporation is 3746 Mt. Diablo Blvd., Suite 110, Lafayette, California 94549. 4. Corporation for Profit. The Corporation is for profit. ---------------------- 5. Authorized Shares. The Corporation shall have authority, acting ----------------- by its board of directors, to issue not more than twenty-one million (21,000,000) shares divided into classes as follows: (a) Twenty million (20,000,000) shares shall be shares of common stock, each with a par value of one cent ($.01) ("Common Stock"). All shares of ------------ Common Stock shall be one and the same class and when issued shall have equal rights of participation in dividends and assets of the Corporation and shall be non-assessable. Each outstanding share of Common Stock shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders. There shall be no cumulative voting of the Common Stock of the Corporation. (b) One million (1,000,000) shares shall be shares of preferred stock, each with a par value of one cent ($.01) ("Preferred Stock"). --------------- (i) The board of directors is hereby authorized to issue the Preferred Stock from time to time in one or more series, which Preferred Stock shall be preferred to the Common Stock as to dividends and distribution of assets of the Corporation on dissolution, as hereinafter provided, and shall have such distinctive designations as may be stated in the articles of amendment providing for the issue of such stock adopted by the board of directors. In such articles of amendment providing for the issuance of shares of each particular series, the board of directors is hereby expressly authorized and empowered to fix the number of shares constituting such series and to fix the relative rights and preferences of the shares of the series so established to the full extent allowable by law except insofar as such rights and preferences are fixed herein. Such authorization in the board of directors shall expressly include the authority to fix and determine the relative rights and preferences of such shares in the following respects: (A) The rate of dividend; (B) Whether shares can be redeemed or called and, if so, the redemption or call price and terms and conditions of redemption or call; (C) The amount payable upon shares in the event of voluntary and involuntary liquidation; (D) The purchase, retirement or sinking fund provisions, if any, for the call, redemption or purchase of shares; (E) The terms and conditions, if any, on which shares may be converted into Common Stock or any other securities; (F) Whether or not shares have voting rights, and the extent of such voting rights, if any, including the number of votes per share; and (G) Whether or not shares shall be cumulative, non-cumulative or partially cumulative as to dividends and the dates from which any cumulative dividends are to accumulate. All shares of the Preferred Stock shall be of equal rank and shall be identical, except in respect to the particulars that may be fixed by the board of directors as hereinabove provided in this paragraph and which may vary among the series. Different series of the Preferred Stock shall not be construed to constitute different classes of stock for the purpose of voting by classes, except when such voting by classes is expressly required by law. (ii) The holders of Preferred Stock are entitled to receive, when and as declared by the board of directors, but only from funds legally available for the payment of dividends, cash dividends at the annual rate for each particular series as theretofore fixed and determined by the board of directors as hereinbefore authorized, and no more; such dividends to be payable before any dividend on Common Stock shall be paid or set apart for payment arrearages in the payment of dividends shall not bear interest. (iii) In the event of any dissolution, liquidation or winding up of the affairs of the Corporation, after payment or provision for payment of the debts and other liabilities of the Corporation, the holders of each series of Preferred Stock shall be entitled to receive, out of the net assets of the Corporation, an amount in cash for each share equal to the amount fixed and determined by the board of directors in any articles of amendment providing for the issue of any particular series of Preferred Stock, plus an amount equal to any dividends payable to such holder which are then unpaid, either under the provisions of the articles of amendment of the board of directors providing for the issue of such series of Preferred Stock or by declaration of the board of directors, on each such share up to the date fixed for distribution, and no more, before any distribution shall be made to the holders of Common Stock. Neither the merger or consolidation of the Corporation, nor the sale, lease or conveyance of all or a part of its assets, shall be deemed to be a dissolution, liquidation or winding up of the affairs of the Corporation. 2 (c) 50,000 shares of Preferred Stock shall have the rights and designations set forth below. (i) Designation and Amount. The designation of the series of the ---------------------- preferred stock shall be "Series A Preferred Nonparticipating Pay-In-Kind Stock", par value one cent ($.01) per share (the "Series A Preferred Stock"). ------------------------ The number of authorized shares of Series A Preferred Stock shall be 50,000. The Series A Preferred Stock shall be assigned a liquidation value of $1,000 per share (the "Liquidation Value"). Capitalized terms used herein are defined in ----------------- clause (xii) hereof. (ii) Stock Dividends. (a) General Obligation. The holders of Series A --------------- ------------------ Preferred Stock shall be entitled to receive when, as and if declared by the board of directors and out of funds of the Corporation legally available therefor, cumulative dividends for each share of Series A Preferred Stock outstanding, from the Issue Date, at the annual rate of 7.5% of the Liquidation Value per share and no more (the "Stock Dividend"). The Stock Dividend shall be -------------- payable annually in arrears in additional shares of Series A Preferred Stock and the number of shares (which may include fractions thereof) so delivered shall be equal to the quotient of (x) the Stock Dividend, divided by (y) the Liquidation Value. Stock Dividends shall accrue, without interest, from day to day (whether or not the Corporation has earnings, there are funds legally available therefor or such dividends are declared) and shall be fully cumulative. Stock Dividends, if declared, shall be payable annually on the last Business Day (as defined below) of each fiscal year of the Corporation (each such date being hereinafter referred to as a "Dividend Date") following the original date of issuance of any ------------- share of Series A Preferred Stock (the "Issue Date"). Each Dividend will be ---------- payable to holders of record of Series A Preferred Stock as they appear on the stock records of the Corporation at the close of business on such record dates, not more than 60 days prior to such Dividend Dates, as shall be fixed by the board of directors. (b) Distribution of Partial Dividend Payments. Except as ----------------------------------------- otherwise provided herein, if at any time the Corporation pays less than the total amount of dividends then accrued with respect to the Series A Preferred Stock, such payment shall be distributed ratably among the holders thereof based upon the aggregate accrued but unpaid dividends on the Series A Preferred Stock held by each such holder. (c) Priority of Dividends. The Stock Dividends on the Series A --------------------- Preferred Stock pursuant to clause (ii)(a) shall be cumulative such that all accrued and unpaid dividends thereon (through the most recent Dividend Date) shall be fully paid or declared with funds irrevocably set apart for payment thereof before any dividend, distribution or payment may be made with respect to the Common Stock or any other equity securities of the Corporation ranking junior to the Series A Preferred Stock with respect to the payment of dividends. (iii) Liquidation. Upon any liquidation, dissolution or winding up ----------- of the Corporation, whether voluntary or involuntary, the holders of the Series A Preferred Stock shall be entitled to be paid, before any distribution or payment is made upon any Common Stock or any other equity securities of the Corporation ranking junior to the Series A Preferred Stock with respect to payment of amounts upon liquidation, dissolution or winding up, an amount per share 3 equal to the Liquidation Value thereof (plus an amount equal to all accrued and unpaid dividends thereon to but excluding the date of distribution), and the holders of Series A Preferred Stock shall not be entitled to any further payment. If upon any such liquidation, dissolution or winding up of the Corporation, the Corporation's assets (or proceeds thereof) to be distributed among the holders of the Series A Preferred Stock are insufficient to permit payment to such holders of the aggregate amount which they are entitled to be paid hereunder, then the entire assets (or proceeds thereof) to be distributed to the holders of Series A Preferred Stock shall be distributed ratably among such holders of Series A Preferred Stock. Neither a consolidation or merger of the Corporation with another entity, nor the consummation of a statutory binding share exchange involving the Corporation, nor the sale or transfer by the Corporation of all or any part of its assets, shall be deemed to be a liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, within the meaning of this clause (iii). (iv) Redemption. (a) Mandatory Redemption. The Corporation shall ---------- -------------------- redeem each of the shares of Series A Preferred Stock held by a holder of Series A Preferred Stock on the tenth anniversary of the Issue Date (or, if such day is not any day other than a Saturday, a Sunday or any day on which banks are authorized or required to close in New York City ("Business Day"), on the next ------------ following Business Day) of such Share (the "Redemption Date"). Upon such --------------- redemption, each holder of such Share shall be entitled to a cash payment equal to the current Liquidation Value of such Share plus any accrued dividends to the date of redemption (the "Redemption Price"). ---------------- (b) Effect of Redemption. On or after the Redemption Date, all -------------------- rights in respect of the Shares to be redeemed, except the right to receive the Redemption Price, shall (unless default shall be made by the Corporation in the payment of the Redemption Price, in which event such rights shall be exercisable until such default is cured) cease and terminate, and such shares shall no longer be deemed to be outstanding, notwithstanding that any certificates representing such shares shall not have been surrendered to the Corporation. (c) Redemption Price. For each share which is to be redeemed, ---------------- the Corporation will be obligated on the Redemption Date to pay to the holder thereof (upon surrender by such holder at the Corporation's principal office of the certificate representing such share) an amount in immediately available funds equal to the Redemption Price thereof. If for any reason the Corporation defaults in its obligation to pay all or any portion of the Redemption Price, in addition to any other rights or remedies of the redeeming holder of the Series A Preferred Stock, the unpaid portion thereof will bear interest at a rate per annum of 7.5%. If the Corporation's funds which are legally available for redemption of shares are insufficient to redeem the total number of shares to be redeemed on such date, those funds which are legally available will be used to redeem the maximum possible number of shares ratably among the holders of the shares to be redeemed based upon the aggregate Redemption Price of such shares held be each such holder. At any time thereafter when additional funds of the Corporation are legally available for the redemption of shares, such funds will immediately be used to redeem the balance of the shares which the Corporation has become obligated to redeem on any Redemption Date but which it has not redeemed. 4 (v) Voting Rights. The holders of the Series A Preferred Stock ------------- shall have no voting rights other than as required by law. (vi) Transferability. A holder of shares of Series A Preferred Stock --------------- shall not make, nor suffer to be made, any transfer, sale, assignment, gift, pledge, mortgage, or other disposition or encumbrance (all which are comprised within the word "transfer" as used hereinafter) of all or any portion of the Series A Preferred Stock held by such holder, except as expressly approved by the Board of Directors or as otherwise contemplated in this designations. Any transfers which are not in compliance with the terms of this designation, shall be null and void and the Corporation shall not, and shall cause any transfer agent not to, give any effect in the Corporation's records to such attempted transfer. (vii) Amendments. The rights, privileges and preferences of the ---------- Series A Preferred Stock shall not be amended without the consent of a majority of the then outstanding shares of the Series A Preferred Stock, given in writing or by vote at a meeting, if such amendment would have a material and adverse effect on the rights of the holders of the Series A Preferred Stock. (viii) Business Day. If any day specified as a Dividend Date is not a ------------ Business Day, such Dividend Date shall be the next following Business Day, unless such Dividend Date falls in the following calendar month in which case such Dividend Date shall be the immediately preceding Business Day. (ix) No Preemptive Rights. The holders of shares of Series A -------------------- Preferred Stock shall have no preemptive rights. (x) Rank. The Series A Preferred Stock shall, with respect to ---- dividend rights and rights on liquidation, winding up and dissolution (with respect to the Liquidation Amount) (i) rank senior and prior to any class of common stock, and to any other class or series of securities now or hereafter issued by the Corporation not designated as senior to or on parity with the Series A Preferred Stock (ii) rank on a parity with any other class or series of preferred stock hereafter issued by the Corporation, designated as on a parity as to dividend rights, rights on liquidation, winding up and dissolution (with respect to the Liquidation Amount) with the Series A Preferred Stock and (iii) rank junior to any preferred stock hereafter issued by the Corporation, designated as senior as to dividend rights, rights on liquidation, winding up and dissolution with the Series A Preferred Stock. (xi) Reacquired Shares. Any shares of Series A Preferred Stock ----------------- redeemed, purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock of the Corporation and may be reissued as part of another series of Preferred Stock of the Corporation. 5 6. Limitation on Directors' Liability. ---------------------------------- (a) A director of the Corporation shall not be personally liable to the Corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, except for liability for (i) any breach of the director's duty of loyalty to the Corporation or its shareholders, (ii) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, or (iii) unlawful distributions under Section 48-18-304 of the Act, as amended from time to time. (b) If the Act is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Act, as so amended. Any repeal or modification of the foregoing by the shareholders shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. 7. Indemnification. --------------- (a) The Corporation shall indemnify, and upon request shall advance expenses to, in the manner and to the full extent permitted by law, any officer or director (or the estate of any such person) who was or is a party to, or is threatened to be made a party to, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, investigative or otherwise, by reason of the fact that such person is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, partner, trustee or employee of another corporation, partnership, joint venture, trust or other enterprise (an "indemnitee"). The Corporation may, to the full extent permitted by law, ---------- purchase and maintain insurance on behalf of any such person against any liability which may be asserted against him or her. To the full extent permitted by law, the indemnification and advances provided for herein shall include expenses (including attorneys' fees), judgments, fines and amounts paid in settlement. The indemnification provided herein shall not be deemed to limit the right of the Corporation to indemnify any other person for any such expenses (including attorneys' fees), judgments, fines and amounts paid in settlement to the full extent permitted by law, both as to action in his official capacity and as to action in another capacity while holding such office. Notwithstanding the foregoing, the Corporation shall not indemnify any such indemnitee (1) in any proceeding by the Corporation against such indemnitee; or (2) if a judgment or other final adjudication adverse to the indemnitee establishes his liability for (i) any breach of the duty of loyalty to the Corporation or its shareholders, (ii) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, or (iii) unlawful distributions under Section 48- 18-304 of the Act. (b) The rights to indemnification and advancement of expenses set forth in paragraph 7(a) above are intended to be greater than those which are otherwise provided for in the Act, are contractual between the Corporation and the person being indemnified, his heirs, executors and administrators, and, with respect to paragraph 7(a), are mandatory, notwithstanding a person's failure to meet the standard of conduct required for permissive indemnification under the Act, as amended from time to time. The rights to indemnification and 6 advancement of expenses set forth in paragraph 7(a) above are nonexclusive of other similar rights which may be granted by law, this Charter, the bylaws, a resolution of the board of directors or shareholders of the Corporation, or an agreement with the Corporation, which means of indemnification and advancement of expenses are hereby specifically authorized. (c) Any repeal or modification of the provisions of this paragraph 7, either directly or by the adoption of an inconsistent provision of this Charter, shall not adversely affect any right or protection set forth herein existing in favor of a particular individual at the time of such repeal or modification. In addition, if an amendment to the Act limits or restricts in any way the indemnification rights permitted by law as of the date hereof, such amendment shall apply only to the extent mandated by law and only to activities of persons subject to indemnification under this paragraph 7 which occur subsequent to the effective date of such amendment. 8. Express Powers of Board of Directors. In furtherance of and not ------------------------------------ in limitation of the powers conferred by statute, the Corporation is expressly authorized, acting upon the authority of the board of directors and without the approval of the shareholders, to: (a) Issue shares of any class or series as a share dividend in respect of shares of the same class or series or any other class or series; (b) Fix or change the number of directors, including an increase or decrease in the number of directors; (c) Determine, establish or modify, in whole or in part, the preferences, limitations and relative rights of (i) any class of shares before the issuance of any shares of that class, or (ii) one or more series within a class before the issuance of any shares of that series. The board of directors is further authorized to amend this Charter, without shareholder action, to set forth such preferences, limitations and relative rights; and (d) Determine, in accordance with law, the method by which vacancies occurring on the board of directors are to be filled. 9. Removal of Directors. Directors may be removed from office either -------------------- with or without cause at any time by the affirmative vote of the holders of a majority of the outstanding shares of the Corporation entitled to vote, given at a meeting of the shareholders called for that purpose, or by the consent of the holders of a majority of the outstanding shares of the Corporation entitled to vote, give in accordance with Section 48-17-104 of the Act. This Charter was duly adopted on May 28, 1999 by the board of directors and shareholders of the Corporation. 7 IN WITNESS WHEREOF, PACER INTERNATIONAL, INC. has caused this Amended and Restated Charter to be signed by Donald C. Orris, its Chief Executive Officer, who hereby acknowledges under penalties of perjury that the facts herein stated are true and that this Amended and Restated Charter is his act and deed, this 28th day of May, 1999. PACER INTERNATIONAL, INC. /s/ Donald C. Orris -------------------------------------- Donald C. Orris Chief Executive Officer Dated: May 28, 1999 8 EX-3.2 3 AMENDED AND RESTATED BYLAWS OF PACER INTERNATIONAL Exhibit 3.2 AMENDED AND RESTATED BYLAWS OF PACER INTERNATIONAL, INC. ARTICLE I CORPORATE OFFICES The registered office of the Corporation within the State of Tennessee shall be located at CT Corporation, 530 Gay Street, Knoxville, TN, 37902. The Corporation may also have such other offices, including its principal office, at such places, within or without the State of Tennessee, as the board of directors may from time to time designate or the business of the Corporation may require. ARTICLE II SHAREHOLDERS' MEETING Section 1. Annual Meetings. The annual meeting of shareholders shall --------------- be held on such other date during the year and at such other time as may be designated by the board of directors and stated in the notice of meeting, for the purpose of electing directors and transacting such other business as may be properly brought before the meeting. Section 2. Special Meetings. Special meetings of shareholders may be ---------------- called for any purpose or purposes by the board of directors. Section 3. Notice of Meetings. A written notice of each meeting of ------------------ shareholders stating the place, date and time of the meeting, and, in the case of a special meeting, describing the purpose or purposes for which the meeting is called, shall be given to each shareholder entitled to notice of such meeting not less than ten days nor more than two months before the date of the meeting. Section 4. Place of Meetings. Meetings of shareholders shall be held ----------------- at such places, within or without the State of Tennessee, as may be designated by the board of directors and stated in the notice of meeting. Section 5. Quorum. The holders of shares entitled to vote as a ------ separate voting group may take action on a matter at a meeting only if a quorum exists with respect to that matter. Unless the charter or the Act provides otherwise, the holders of a majority of the votes entitled to be cast on a matter by a voting group constitute a quorum of that voting group for action on that matter. Once a share is represented for any purpose at a meeting, the holder is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting, unless a new record date is or must be set for that adjourned meeting. Section 6. Voting. Directors shall be elected by a plurality of the ------ votes cast by shareholders entitled to vote in the election at a meeting at which a quorum is present. Shareholder action on any other matter is approved by a voting group, if the votes cast by shareholders within the voting group in favor of the action exceed the votes cast by shareholders within the voting group in opposition to such action, unless the charter or the Act provides otherwise. If two or more groups are entitled to vote separately on a matter, action on the matter is approved only when approved by each voting group. Section 7. Adjournment. If a meeting of shareholders is adjourned to ----------- another date, time or place, notice need not be given of the adjourned meeting if the new date, time and place are announced at the meeting before the adjournment. At the adjourned meeting, the Corporation may transact any business which might have been transacted at the time originally designated for the meeting if a quorum existed at the time originally designated for the meeting; provided, however, if a new record date is or must be fixed under the Act or these bylaws, a notice of the adjourned meeting must be given to shareholders as of the new record date. Section 8. Proxies. A shareholder may appoint a proxy to vote at a ------- meeting of shareholders or otherwise act for him by signing an appointment form, either personally or by his attorney-in-fact. An appointment of a proxy is effective when received by the secretary or other officer or agent authorized to tabulate votes. An appointment is valid for eleven months, unless another period is expressly provided for in the appointment form. An appointment of a proxy is revocable by the shareholder, unless the appointment form conspicuously states that it is irrevocable and the appointment is coupled with an interest. Section 9. Action by Written Consent. Any action required or ------------------------- permitted to be taken at a meeting of the shareholders may be taken without a meeting, if all shareholders consent to the taking of such action without a meeting by signing one or more written consents describing the action taken and indicating each shareholder's vote or abstention on the action. The affirmative vote of the number of shares which would be necessary to authorize or take action at a meeting of shareholders is the act of the shareholders without a meeting. The written consent or consents shall be included in the minutes or filed with the corporate records reflecting the action taken. Action taken by written consent is effective when the last shareholder signs the consent, unless the consent specifies a different effective date. ARTICLE III RECORD DATE In order that the Corporation may determine the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other action, the board of directors may fix, in advance, a record date, which shall not be more than seventy nor less than ten days before the date of such meeting, nor more than seventy days prior to any other action. If no record date is fixed, (i) the record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the day before the day on which the first notice is given to such shareholders and (ii) the record date for determining shareholders for any other purpose shall be at the close of business on the day that the board of directors authorizes the action. A determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders shall apply to any adjournment of the meeting, unless the board of directors fixes a new record date. The board of directors must fix a new record date, if the meeting is adjourned to a date more than four months after the date fixed for the original meeting. 2 ARTICLE IV DIRECTORS Section 1. Number and Term. The business and affairs of the --------------- Corporation shall be managed under the direction of a board of directors consisting of not less than five nor more than nine members, the number of which shall be fixed by the board of directors. Each director shall hold office until the next annual meeting of shareholders and until his successor is elected and qualified or until his earlier resignation or removal. A decrease in the number of directors shall not shorten an incumbent director's term. Section 2. Committees. The board of directors, with the approval of a ---------- majority of all the directors in office when the action is taken, may create one or more committees. A committee shall consist of one or more directors who serve at the pleasure of the board of directors. Any such committee, to the extent specified by the board of directors, may exercise the authority of the board of directors in supervising the management of the business and affairs of the Corporation, except that a Committee may not: (i) authorize distributions, except according to a formula or method prescribed by the board of directors; (ii) approve or propose to shareholders action required by law to be approved by shareholders; (iii) fill vacancies on the board of directors or any of its committees; (iv) amend the charter; (v) adopt, amend or repeal bylaws; (vi) approve a plan of merger not requiring shareholder approval; (vii) authorize or approve reacquisition of shares, except according to a formula or method prescribed by the board of directors; or (vii) authorize or approve the issuance or sale or contract for sale of shares, or determine the designation and relative rights, preferences and limitations of a class or series of shares, except that the board of directors may authorize a committee or senior executive officer of the Corporation to do so within limits specifically prescribed by the board of directors. The provisions of Sections 7, 8, 9, 10, 11 and 12 of this Article IV and of Article V applicable to the board of directors shall also apply to committees. Section 3. Compensation. Directors shall receive such compensation as ------------ shall be fixed by the board of directors and shall be entitled to reimbursement for any reasonable expenses incurred in attending meetings and otherwise carrying out their duties. Directors may also serve the Corporation in any other capacity and receive compensation therefor. Section 4. Removal. Shareholders may remove one or more directors ------- with or without cause. If a director is elected by a voting group of shareholders, only shareholders of that voting group may participate in the vote to remove him without cause. A director may be removed only if the number of votes cast to remove him exceeds the number of votes cast not to remove him. Section 5. Resignation. A director may resign at any time by ----------- delivering written notice to the Corporation, the board of directors, the chairman or the president. A resignation is effective when the notice is delivered, unless the notice specifies a later effective date. Section 6. Vacancies. The board of directors may fill any vacancy --------- occurring on the board of directors, including any vacancy resulting from an increase in the number of directors or from the resignation or removal of a director. If the directors remaining in office constitute fewer than a quorum, the board of directors may fill the vacancy by the affirmative vote of a majority of all the directors remaining in office. 3 Section 7. Quorum and Voting. A quorum of the board of directors ----------------- consists of a majority of the number of directors fixed by the board of directors pursuant to Section 1 of this Article IV. If a quorum is present when a vote is taken, the affirmative vote of a majority of directors present is the act of the board of directors, unless the charter requires the vote of a greater number of directors. Section 8. Regular Meetings. Regular meetings of the board of ---------------- directors may be held without notice at such places, within or without the States of Tennessee and California, on such dates and at such times as the board of directors may determine from time to time. Section 9. Special Meetings. Special meetings of the board of ---------------- directors may be called by the chairman of the board, the president or any two directors and shall be held at such places, within or without the States of Tennessee and California, on such dates and at such times as may be stated in the notice of meeting. Section 10. Notices. Special meetings of the board of directors must ------- be preceded by at least one days' notice of the date, time and place of the meeting. The notice need not describe the purpose of the meeting, unless the purpose, or one of the purposes, of the meeting is to remove a director or directors pursuant to Section 4 of this Article IV. Notice of an adjourned meeting need not be given, if the time and place to which the meeting is adjourned are fixed at the meeting at which the adjournment is taken and if the period of any one adjournment does not exceed one month. Section 11. Meeting by Telephone. Any or all directors may participate -------------------- in a regular or special meeting by conference telephone or any other means of communication by which all directors participating may simultaneously hear each other during the meeting. A director participating in a meeting by this means is deemed to be present in person at the meeting. Section 12. Action by Written Consent. Any action required or ------------------------- permitted to be taken at a meeting of the board of directors may be taken without a meeting, if all directors consent to the taking of such action without a meeting by signing one or more written consents describing the action taken and indicating each director's vote or abstention on the action. The affirmative vote of the number of directors that would be necessary to authorize or take action at a meeting is the act of the board of directors without a meeting. The written consent or consents shall be included in the minutes or filed with the corporate records reflecting the action taken. Action taken by written consent is effective when the last director signs the consent, unless the consent specifies a different effective date. ARTICLE V WAIVER OF NOTICE A shareholder or director may waive any notice required to be given by the Act, the charter or these bylaws before or after the date and time stated in the notice. The waiver must be in writing, signed by the shareholder or director entitled to the notice and delivered to the Corporation and filed in the Corporation's minutes or corporate records, except that a shareholder's or director's attendance at or participation in a meeting may constitute a waiver of notice under the Act. Neither the business to be transacted at, nor the purpose of, any meeting of the shareholders or directors need be specified in any waiver of notice. 4 ARTICLE VI OFFICERS Section 1. Election and Term. At the first meeting of the board of ----------------- directors following the annual meeting of shareholders, or as soon thereafter as is conveniently possible, the board of directors shall elect a president and a secretary and such other officers as the board of directors may determine, including a chairman of the board, a vice chairman of the board, one or more vice presidents (any one or more of which may be designated as a senior or executive vice president), a treasurer, a controller and one or more assistant vice presidents, assistant treasurers, assistant controllers and assistant secretaries. The board of directors may elect officers at such additional times as it deems advisable. Each officer of the Corporation shall serve until his successor is elected and qualified or until his earlier resignation or removal. Any number of offices may be held by the same person, except that the president may not serve as the secretary. Section 2. Compensation. The salaries and other compensation of the ------------ officers of the Corporation shall be determined by the board of directors or a committee thereof. Section 3. Removal. The board of directors may remove any officer at ------- any time, with or without cause, but no such removal shall affect the contract rights, if any, of the person so removed. Section 4. Resignation. An officer of the Corporation may resign at ----------- any time by delivering notice to the Corporation. A resignation is effective when the notice is delivered, unless the notice specifies a later effective date. If a resignation is made effective at a later date and the Corporation accepts the future effective date, the board of directors may fill the pending vacancy before the effective date if it provides that the successor does not take office until the effective date. An officer's resignation does not affect the Corporation's contract rights, if any, with the officer. Section 5. Duties. The duties and powers of the officers of the ------ corporation shall be as follows: (a) Chief Executive Officer - The chief executive officer shall (i) be chosen from among the members of the board of directors (ii) be primarily responsible for the general management of the business affairs of the Corporation and for implementing the policies and directives of the board of directors, (iii) preside at all meetings of shareholders and the board of directors, (iv) have authority to make contracts on behalf of the Corporation in the ordinary course of the corporation's business and (v) perform such other duties as from time to time may be assigned by the board of directors or any committee therof. (b) President - The president shall (i) preside at all meetings of the shareholders and the board of directors during the absence or disability of the chairman of the board, (ii) be primarily responsible for the general management of the business of the Corporation and for implementing the policies and directives of the board of directors during the absence or disability of the chairman of the board, (iii) have authority to make contracts on behalf of the Corporation in the ordinary course of the Corporation's business and (iv) perform such other duties as from time to time may be assigned by the chairman of the board or the board of directors or any committee thereof. 5 (c) Vice Presidents - The vice presidents in the order designated by the board of directors, shall exercise the functions of the president during the absence or disability of the president and shall perform such other duties as may be assigned by the chairman of the board, the president or the board of directors or any committee thereof. (d) Chief Financial Officer - The chief financial officer shall (i) have general supervision over the funds of the Corporation and the investment or deposit thereof, (ii) advise the officers and, if requested, the board of directors regarding the financial condition of the Corporation and (iii) perform such other duties as may be assigned by the chairman of the board or the board of directors or any committee thereof. (e) Secretary - The secretary shall (i) attend the meetings of the shareholders, the board of directors and committees of the board of directors and prepare minutes of all such meetings in a book to be kept for that purpose, (ii) give, or cause to be given, such notice as may be required of all meetings of the shareholders, board of directors and committees of the board of directors, (iii) authenticate records of the Corporation and (iv) perform such other duties as may be assigned by the chairman of the board or the board of directors or any committee thereof. ARTICLE VII DIRECTOR INDEMNIFICATION To the maximum extent permitted by law, subject to the limitations contained in this Article VIII, the Corporation shall indemnify an individual who is a party to a proceeding because such individual is or was an officer of the Corporation against any liability incurred in the proceeding and, prior to the disposition thereof, advance the reasonable expenses incurred by such officer in connection with the proceeding, except that the Corporation shall not be required to indemnify or advance expenses to any officer, (i) if it is determined that the officer did not conduct himself in good faith and in the reasonable belief that his conduct was not opposed to the Corporation's best interests and, in the case of a criminal proceeding, had no reasonable cause to believe his conduct was unlawful, (ii) if it is determined that the officer is liable for profits made from the purchase or sale by the officer of securities of the Corporation pursuant to the provisions of Section 16(b) of the Securities and Exchange Act of 1934, as amended, or any similar provisions of any federal or state statutes or regulations or (iii) in connection with a proceeding initiated by or on behalf of such officer or to which such officer voluntarily becomes a party, other than a suit to enforce indemnification rights. No indemnification shall be made by the Company for any amount paid in settlement without the Corporation's prior written consent. Conduct with respect to an employee benefit plan for a purpose reasonably believed to be in the interest of the participants in and beneficiaries of the plan is conduct that is not opposed to the Corporation's best interests. The termination of a proceeding by a judgment, order, settlement, conviction or upon a pleas of nolo contendere or its equivalent is not, of itself, determinative whether the conduct in question was opposed to the Corporation's best interests. The determination on behalf of the Company of whether an officer is entitled to indemnification or advancement of expenses under this Article VIII shall be made by the board of directors or a committee thereof or by independent special legal counsel in accordance with the provisions of Section 48-18-506 of the Act relating to indemnification of directors. An officer's rights to advancement of expenses are also conditioned upon the officer's furnishing the Corporation: (a) a written affirmation, personally signed by or on behalf of the officer, of his good faith belief that 6 he is or will be entitled to indemnification for liability under the terms of this Article XIV and (b) a written undertaking (in the form of an unlimited general obligation of the officer, which need not be secured) personally signed by or on behalf of the officer to repay any advances, if a judgment or other final adjudication adverse to the officer establishes his liability contrary to his affirmation. An officer's rights to indemnification and advancement of expenses as provided in this Article VIII are intended to be greater than those which are otherwise provided for in the Act notwithstanding a failure to meet the standard of conduct required for permissive indemnification under the Act, are contractual in nature between the Corporation and the officer and are mandatory. An officer's rights to indemnification and advancement of expenses under this bylaw shall not be exclusive of other rights to which an officer may be entitled under an insurance policy, the Act, the charter, a resolution of shareholders or directors or an agreement providing for indemnification. ARTICLE VIII EMERGENCY BYLAW In the event that a quorum of directors cannot be readily assembled because of a catastrophic event, the board of directors may take action by the affirmative vote of a majority of those directors present at a meeting and may exercise any emergency power granted to a board of directors under the act not inconsistent with this bylaw. If less than three regularly elected directors are present, the director present having the greatest seniority as a director may appoint one or more persons (not to exceed the number most recently fixed by the board pursuant to Section 1 of Article IV) from among the officers or other executive employees of the Corporation to serve as substitute directors. If no regularly elected director is present, the officer present having the greatest seniority as an officer shall serve as a substitute director, shall appoint up to four additional persons from among the officers or other executive employees of the Corporation to serve as substitute directors. Special meetings of the board of directors may be called in an emergency by the director or, if no director is present at the Corporation's principal offices, by the officer present having the greatest seniority as an officer. ARTICLE IX CORPORATE SEAL The Corporation may have a corporate seal, but the use of or failure to use any such seal shall not have any legal effect on any action taken or instrument executed by or on behalf of the Corporation. The seal may be used by impressing or affixing it to an instrument or by causing a facsimile thereof to be printed or otherwise reproduced thereon. ARTICLE X FISCAL YEAR The fiscal year of the Corporation shall begin the 1st business day of January each year. 7 ARTICLE XI AMENDMENT The board of directors may amend or repeal these bylaws, unless (i) the charter or the Act reserves this power exclusively to shareholders of (ii) the shareholders, in amending or repealing a particular bylaw, provide expressly that the board of directors may not amend or repeal that bylaw. Shareholders may amend or repeal any bylaw, even though the bylaws may also be amended or repealed by the board of directors. ARTICLE XII DEFINITION The term "Act" as used in these bylaws refers to the Tennessee Business Corporation Act, as amended from time to time. Terms defined in the Act shall have the same meanings when used in these bylaws. 8 EX-4.1 4 CREDIT AGREEMENT DATED MAY 28, 1999 EXHIBIT 4.1 ________________________________________________________________________________ CREDIT AGREEMENT among PACER INTERNATIONAL, INC. (f/k/a Land Transport Services, Inc.) VARIOUS LENDING INSTITUTIONS, CREDIT SUISSE FIRST BOSTON, AS DOCUMENTATION AGENT, MORGAN STANLEY SENIOR FUNDING, INC., AS SYNDICATION AGENT, and BANKERS TRUST COMPANY, AS ADMINISTRATIVE AGENT ________________________________________________________________________________ Dated as of May 28, 1999 ________________________________________________________________________________ TABLE OF CONTENTS -----------------
Page ---- SECTION 1. Amount and Terms of Credit................................................................ 1 1.01 Commitments............................................................................... 1 1.02 Minimum Borrowing Amounts, etc............................................................ 4 1.03 Notice of Borrowing....................................................................... 4 1.04 Disbursement of Funds..................................................................... 5 1.05 Notes..................................................................................... 6 1.06 Conversions............................................................................... 8 1.07 Pro Rata Borrowings....................................................................... 8 1.08 Interest.................................................................................. 9 1.09 Interest Periods.......................................................................... 10 1.10 Increased Costs; Illegality; etc.......................................................... 11 1.11 Compensation.............................................................................. 13 1.12 Change of Lending Office.................................................................. 13 1.13 Replacement of Banks...................................................................... 14 SECTION 2. Letters of Credit......................................................................... 16 2.01 Letters of Credit......................................................................... 16 2.02 Letter of Credit Requests................................................................. 18 2.03 Letter of Credit Participations........................................................... 18 2.04 Agreement to Repay Letter of Credit Drawings.............................................. 20 2.05 Increased Costs........................................................................... 21 SECTION 3. Fees; Commitments......................................................................... 22 3.01 Fees...................................................................................... 22 3.02 Voluntary Termination or Reduction of Total Unutilized Revolving Loan Commitment.......... 23 3.03 Mandatory Reduction of Commitments........................................................ 24 SECTION 4. Payments.................................................................................. 25 4.01 Voluntary Prepayments..................................................................... 25 4.02 Mandatory Repayments and Commitment Reductions............................................ 26 4.03 Method and Place of Payment............................................................... 32 4.04 Net Payments.............................................................................. 33 SECTION 5. Conditions Precedent to Initial Credit Events............................................. 35 5.01 Execution of Agreement; Notes............................................................. 36 5.02 Officer's Certificate..................................................................... 36
Page ---- 5.03 Opinions of Counsel................................................................................ 36 5.04 Company Documents; Proceedings..................................................................... 36 5.05 Adverse Change, etc................................................................................ 37 5.06 Litigation......................................................................................... 37 5.07 Approvals.......................................................................................... 37 5.08 Consummation of the Recapitalization; Equity Financing, etc........................................ 38 5.09 Refinancing........................................................................................ 39 5.10 Security Documents; etc............................................................................ 40 5.11 Subsidiaries Guaranty.............................................................................. 41 5.12 Employee Benefit Plans; Shareholders' Agreements; Management Agreements; Employment Agreements; Collective Bargaining Agreements; Existing Indebtedness Agreements; Material Contracts; Tax Allocation Agreements.......................................................................... 41 5.13 Consent Letter..................................................................................... 42 5.14 Solvency Certificate; Insurance Certificates....................................................... 43 5.15. Financial Statements; Projections.................................................................. 43 5.16 Payment of Fees.................................................................................... 43 SECTION 6. Conditions Precedent to All Credit Events......................................................... 43 6.01 No Default; Representations and Warranties......................................................... 44 6.02 Notice of Borrowing; Letter of Credit Request...................................................... 44 SECTION 7. Representations and Warranties.................................................................... 44 7.01 Company Status..................................................................................... 45 7.02 Company Power and Authority........................................................................ 45 7.03 No Violation....................................................................................... 45 7.04 Litigation......................................................................................... 45 7.05 Use of Proceeds; Margin Regulations................................................................ 46 7.06 Governmental Approvals............................................................................. 46 7.07 Investment Company Act............................................................................. 46 7.08 Public Utility Holding Company Act................................................................. 46 7.09 True and Complete Disclosure....................................................................... 46 7.10 Financial Condition; Financial Statements.......................................................... 47 7.11 Security Interests................................................................................. 49 7.12 Compliance with ERISA.............................................................................. 49 7.13 Capitalization..................................................................................... 50 7.14 Subsidiaries....................................................................................... 51 7.15 Intellectual Property, etc......................................................................... 51 7.16 Compliance with Statutes, etc...................................................................... 51 7.17 Environmental Matters.............................................................................. 51 7.18 Properties......................................................................................... 52 7.19 Labor Relations.................................................................................... 52 7.20 Tax Returns and Payments........................................................................... 53 7.21 Existing Indebtedness.............................................................................. 53
(ii)
Page ---- 7.22 Insurance............................................................................................... 53 7.23 Representations and Warranties in Other Documents....................................................... 53 7.24 The Transaction......................................................................................... 54 7.25 Special Purpose Corporation............................................................................. 54 7.26 Subordination........................................................................................... 54 7.27 Year 2000 Representation................................................................................ 54 SECTION 8. Affirmative Covenants.................................................................................. 55 8.01 Information Covenants................................................................................... 55 8.02 Books, Records and Inspections.......................................................................... 59 8.03 Insurance............................................................................................... 59 8.04 Payment of Taxes........................................................................................ 60 8.05 Corporate Franchises.................................................................................... 60 8.06 Compliance with Statutes; etc........................................................................... 61 8.07 Compliance with Environmental Laws...................................................................... 61 8.08 ERISA................................................................................................... 62 8.09 Good Repair............................................................................................. 63 8.10 End of Fiscal Years; Fiscal Quarters.................................................................... 63 8.11 Additional Security; Further Assurances................................................................. 64 8.12 Foreign Subsidiaries Security........................................................................... 65 8.13 Use of Proceeds......................................................................................... 66 8.14 Permitted Acquisitions.................................................................................. 66 8.15 Performance of Obligations.............................................................................. 68 8.16 Maintenance of Company Separateness..................................................................... 68 8.17 Year 2000 Compliance.................................................................................... 68 SECTION 9. Negative Covenants..................................................................................... 69 9.01 Changes in Business..................................................................................... 69 9.02 Consolidation; Merger; Sale or Purchase of Assets; etc.................................................. 69 9.03 Liens................................................................................................... 72 9.04 Indebtedness............................................................................................ 74 9.05 Advances; Investments; Loans............................................................................ 77 9.06 Dividends; etc.......................................................................................... 79 9.07 Transactions with Affiliates and Unrestricted Subsidiaries.............................................. 81 9.08 Designated Senior Debt.................................................................................. 82 9.09 Consolidated Interest Coverage Ratio.................................................................... 82 9.10 Adjusted Total Leverage Ratio........................................................................... 83 9.11 Capital Expenditures.................................................................................... 84 9.12 Limitation on Voluntary Payments and Modifications of Indebtedness; Modifications of Certificate of Incorporation, By-Laws and Certain Other Agreements; Issuances of Capital Stock; etc..................................................................... 83 9.13 Limitation on Issuance of Capital Stock................................................................. 87 9.14 Limitation on Certain Restrictions on Subsidiaries...................................................... 88
(iii)
Page ---- 9.15 Limitation on the Creation of Subsidiaries, Joint Ventures and Unrestricted Subsidiaries.................. 89 SECTION 10. Events of Default......................................................................................... 90 10.01 Payments.................................................................................................. 90 10.02 Representations, etc...................................................................................... 90 10.03 Covenants................................................................................................. 90 10.04 Default Under Other Agreements............................................................................ 90 10.05 Bankruptcy, etc........................................................................................... 91 10.06 ERISA..................................................................................................... 91 10.07 Security Documents........................................................................................ 92 10.08 Guaranties................................................................................................ 92 10.09 Judgments................................................................................................. 92 10.10 Ownership................................................................................................. 92 SECTION 11. Definitions............................................................................................... 93 SECTION 12. The Agents................................................................................................ 130 12.01 Appointment............................................................................................... 130 12.02 Delegation of Duties...................................................................................... 130 12.03 Exculpatory Provisions.................................................................................... 131 12.04 Reliance by Agents........................................................................................ 131 12.05 Notice of Default......................................................................................... 132 12.06 Nonreliance on Agents and Other Banks..................................................................... 132 12.07 Indemnification........................................................................................... 133 12.08 Agents in their Individual Capacities..................................................................... 133 12.09 Holders................................................................................................... 134 12.10 Resignation of the Agents................................................................................. 134 SECTION 13. Miscellaneous............................................................................................. 135 13.01 Payment of Expenses, etc.................................................................................. 135 13.02 Right of Setoff........................................................................................... 136 13.03 Notices................................................................................................... 136 13.04 Benefit of Agreement...................................................................................... 136 13.05 No Waiver; Remedies Cumulative............................................................................ 139 13.06 Payments Pro Rata......................................................................................... 139 13.07 Calculations; Computations................................................................................ 139 13.08 Governing Law; Submission to Jurisdiction; Venue.......................................................... 140 13.09 Counterparts.............................................................................................. 141 13.10 Effectiveness............................................................................................. 141 13.11 Headings Descriptive...................................................................................... 141 13.12 Amendment or Waiver; etc.................................................................................. 141 13.13 Survival.................................................................................................. 143 13.14 Domicile of Loans and Commitments......................................................................... 143
(iv)
Page ---- 13.15 Confidentiality................................................................................................. 143 13.16 Waiver of Jury Trial............................................................................................ 140 13.17 Register........................................................................................................ 140 13.18 Limitation on Additional Amounts, etc........................................................................... 141 13.19 Post-Closing Actions............................................................................................ 141
SCHEDULE I List of Banks and Commitments SCHEDULE II Bank Addresses SCHEDULE III Real Properties SCHEDULE IV Existing Indebtedness SCHEDULE V Plans SCHEDULE VI Existing Investments SCHEDULE VII Subsidiaries SCHEDULE VIII Insurance SCHEDULE IX Existing Liens SCHEDULE X Capitalization SCHEDULE XI Consolidated EBITDA Adjustments SCHEDULE XII Environmental Matters SCHEDULE XIII Tractor Trailers SCHEDULE XIV Existing Letters of Credit EXHIBIT A Form of Notice of Borrowing EXHIBIT B-2 Form of Revolving Note EXHIBIT B-3 Form of Swingline Note EXHIBIT C Form of Letter of Credit Request EXHIBIT D Form of Section 4.04(b)(ii) Certificate EXHIBIT E-1 Form of Opinion of Dewey Ballantine LLP, special New York counsel to the Credit Parties EXHIBIT E-2 Form of Opinion of Waller Lansden Dortch & Davis, special Tennessee counsel to the Credit Parties EXHIBIT F Form of Officers' Certificate EXHIBIT G Form of Pledge Agreement EXHIBIT H Form of Security Agreement EXHIBIT I Form of Subsidiaries Guaranty EXHIBIT J Form of Consent Letter EXHIBIT K Form of Solvency Certificate EXHIBIT L Form of Assignment and Assumption Agreement EXHIBIT M Form of Intercompany Note EXHIBIT N Form of Shareholder Subordinated Note EXHIBIT O Form of Borrower Exchange PIK Preferred Stock Certificate of Designation (v) CREDIT AGREEMENT, dated as of May 28, 1999, among PACER INTERNATIONAL, INC. (f/k/a Land Transport Services, Inc.), a Tennessee corporation (the "Borrower"), the lenders from time to time party hereto (each, a "Bank" and, collectively, the "Banks"), CREDIT SUISSE FIRST BOSTON, as Documentation Agent (in such capacity, the "Documentation Agent"), MORGAN STANLEY SENIOR FUNDING, INC., as Syndication Agent (in such capacity, the "Syndication Agent"), and BANKERS TRUST COMPANY, as Administrative Agent (in such capacity, the "Administrative Agent" and, together with the Documentation Agent and the Syndication Agent, each, an "Agent" and, collectively, the "Agents"). Unless otherwise defined herein, all capitalized terms used herein and defined in Section 11 are used herein as so defined. W I T N E S S E T H : - - - - - - - - - - WHEREAS, subject to and upon the terms and conditions herein set forth, the Banks are willing to make available to the Borrower the credit facilities provided for herein; NOW, THEREFORE, IT IS AGREED: SECTION 1. Amount and Terms of Credit. -------------------------- 1.01 Commitments. (a) Subject to and upon the terms and conditions ----------- set forth herein, each Bank with a Term Loan Commitment severally agrees to make a term loan (each, a "Term Loan" and, collectively, the "Term Loans") to the Borrower, which Term Loans: (i) shall be incurred by the Borrower pursuant to a single drawing on the Initial Borrowing Date for the purposes described in Section 7.05(a); (ii) shall be denominated in U.S. Dollars; (iii) except as hereafter provided, shall, at the option of the Borrower, be incurred and maintained as, and/or converted into, Base Rate Loans or Eurodollar Loans, provided, that (x) except as otherwise -------- specifically provided in Section 1.10(b), all Term Loans made as part of the same Borrowing shall at all times consist of Term Loans of the same Type and (y) unless the Administrative Agent has determined that the Syndication Date has occurred (at which time this clause (y) shall no longer be applicable), no more than three Borrowings of Term Loans to be maintained as Eurodollar Loans may be incurred prior to the 90/th/ day after the Initial Borrowing Date (or, if later, the last day of the Interest Period applicable to the third Borrowing of Eurodollar Loans referred to below), each of which Borrowings of Eurodollar Loans may only have an Interest Period of one month, and the first of which Borrowings may only be made on, or within five Business Days after, the Initial Borrowing Date, the second of which Borrowings may only be made on the last day of the Interest Period of the first such Borrowing and the third of which Borrowings may only be made on the last day of the Interest Period of the second such Borrowing; and (iv) shall be made by each Bank in that initial aggregate principal amount as is equal to the Term Loan Commitment of such Bank on the Initial Borrowing Date (before giving effect to the termination thereof on such date pursuant to Section 3.03(b)). Once repaid, Term Loans incurred hereunder may not be reborrowed. (b) Subject to and upon the terms and conditions herein set forth, each RL Bank severally agrees, at any time and from time to time on and after the Initial Borrowing Date and prior to the Revolving Loan Maturity Date, to make a revolving loan or revolving loans (each, a "Revolving Loan" and, collectively, the "Revolving Loans") to the Borrower, which Revolving Loans: (i) shall be denominated in U.S. Dollars; (ii) shall, at the option of the Borrower, be incurred and maintained as, and/or converted into, Base Rate Loans or Eurodollar Loans, provided -------- that (x) except as otherwise specifically provided in Section 1.10(b), all Revolving Loans made as part of the same Borrowing shall at all times be of the same Type and (y) unless the Administrative Agent has determined that the Syndication Date has occurred (at which time this clause (y) shall no longer be applicable), no more than three Borrowings of Revolving Loans to be maintained as Eurodollar Loans may be incurred prior to the 90/th/ day after the Initial Borrowing Date (or, if later, the last day of the Interest Period applicable to the third Borrowing of Eurodollar Loans referred to below), each of which Borrowings of Eurodollar Loans may only have an Interest Period of one month, and the first of which Borrowings may only be made on the same date as the initial Borrowing of Term Loans that are maintained as Eurodollar Loans, the second of which Borrowings may only be made on the last day of the Interest Period of the first such Borrowing and the third of which Borrowings may only be made on the last day of the Interest Period of the second such Borrowing; (iii) may be repaid and reborrowed in accordance with the provisions hereof; (iv) shall not exceed for any Bank at any time outstanding that aggregate principal amount which, when added to the product of (x) such Bank's Adjusted RL Percentage and (y) the sum of (I) the aggregate amount of all Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid with the proceeds of, and simultaneously with the incurrence of, the respective incurrence of Revolving Loans) at such time and (II) the aggregate principal amount of all Swingline Loans (exclusive of Swingline Loans which are repaid with the proceeds of, and simultaneously with the incurrence of, the respective incurrence of Revolving Loans) then outstanding, equals the Revolving Loan Commitment of such Bank at such time; and (v) shall not exceed for all Banks at any time outstanding that aggregate principal amount which, when added to (x) the aggregate amount of all Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid with the proceeds of, and simultaneously with the incurrence of, the respective incurrence of Revolving Loans) at such time and (y) the aggregate principal amount of all Swingline Loans (exclusive of Swingline Loans which are repaid with the proceeds of, and simultaneously with the incurrence of, the respective incurrence of Revolving Loans) then outstanding, exceeds an amount equal to the Total Revolving Loan Commitment then in effect. (c) Subject to and upon the terms and conditions set forth herein, BTCo in its individual capacity agrees to make at any time and from time to time on and after the Initial Borrowing Date and prior to the Swingline Expiry Date, a revolving loan or revolving loans to the Borrower (each, a "Swingline Loan" and, collectively, the "Swingline Loans"), which Swingline Loans: (i) shall be denominated in U.S. Dollars; (ii) shall be made and maintained as Base Rate Loans; (iii) may be repaid and reborrowed in accordance with the provisions hereof; (iv) shall not exceed in aggregate principal amount at any time outstanding, when combined with (x) the aggregate principal amount of all Revolving Loans made by Non-Defaulting Banks then outstanding and (y) the aggregate amount of all Letter of Credit Outstandings at such time, an amount equal to the Adjusted Total Revolving Loan Commitment at such time (after giving effect to any changes thereto on such date); and (v) shall not exceed in aggregate principal amount at any time outstanding the Maximum Swingline Amount. Notwithstanding anything contained in this Section 1.01(c), (i) BTCo shall not be obligated to make any Swingline Loans at a time when a Bank Default exists unless BTCo has entered into arrangements satisfactory to it and the Borrower to eliminate BTCo's risk with respect to the Defaulting Bank's or Banks' participation in such Swingline Loans, including by cash collateralizing such Defaulting Bank's or Banks' RL Percentage of the outstanding Swingline Loans and (ii) BTCo will not make a Swingline Loan after it has received written notice from the Borrower or the Required Banks stating that a Default or an Event of Default exists until such time as BTCo shall have received a written notice of (x) rescission of such notice from the party or parties originally delivering the same or (y) a waiver of such Default or Event of Default from the Required Banks. (d) On any Business Day, BTCo may, in its sole discretion, give notice to the RL Banks that its outstanding Swingline Loans shall be funded with a Borrowing of Revolving Loans (provided that each such notice shall be deemed -------- to have been automatically given upon the occurrence of a Default or an Event of Default under Section 10.05 or upon the exercise of any of the remedies provided in the last paragraph of Section 10), in which case a Borrowing of Revolving Loans constituting Base Rate Loans (each such Borrowing, a "Mandatory Borrowing") shall be made on the immediately succeeding Business Day by all RL Banks pro rata based on each RL Bank's Adjusted RL Percentage (determined before --- ---- giving effect to any termination of the Revolving Loan Commitments pursuant to the last paragraph of Section 10), and the proceeds thereof shall be applied directly to repay BTCo for such outstanding Swingline Loans. Each RL Bank hereby irrevocably agrees to make Revolving Loans upon one Business Day's notice pursuant to each Mandatory Borrowing in the amount and in the manner specified in the preceding sentence and on the date specified in writing by BTCo notwithstanding (i) that the amount of the Mandatory Borrowing may not comply with the Minimum Borrowing Amount otherwise required hereunder, (ii) whether any conditions specified in Section 5 or 6 are then satisfied, (iii) whether a Default or an Event of Default has occurred and is continuing, (iv) the date of such Mandatory Borrowing and (v) the amount of the Total Revolving Loan Commitment or the Adjusted Total Revolving Loan Commitment at such time. In the event that any Mandatory Borrowing cannot for any reason be made on the date otherwise required above (including, without limitation, as a result of the commencement of a proceeding under the Bankruptcy Code with respect to the Borrower), then each RL Bank (other than BTCo) hereby agrees that it shall forthwith purchase from BTCo (without recourse or warranty) such assignment of the outstanding Swingline Loans as shall be necessary to cause the RL Banks to share in such Swingline Loans ratably based upon their respective Adjusted RL Percentages (determined before giving effect to any termination of the Revolving Loan Commitments pursuant to the last paragraph of Section 10), provided that -------- (x) all interest payable on the Swingline Loans shall be for the account of BTCo until the date the respective assignment is purchased and, to the extent attributable to the purchased assignment, shall be payable to the RL Bank purchasing same from and after such date of purchase (or, if earlier, from the date on which the Mandatory Borrowing would otherwise have occurred, so long as the payments required by the following clause (y) have in fact been made) and (y) at the time any purchase of assignments pursuant to this sentence is actually made, the purchasing RL Bank shall be required to pay BTCo interest on the principal amount of assignment purchased for each day from and including the day upon which the Mandatory Borrowing would otherwise have occurred to but excluding the date of payment for such assignment, at the rate otherwise applicable to Revolving Loans maintained as Base Rate Loans hereunder for each day thereafter. 1.02 Minimum Borrowing Amounts, etc. The aggregate principal amount ------------------------------- of each Borrowing of Loans shall not be less than the Minimum Borrowing Amount applicable to such Loans, provided that Mandatory Borrowings shall be made in -------- the amounts required by Section 1.01(d). More than one Borrowing may be incurred on any day, provided, that at no time shall there be outstanding more -------- than eight Borrowings of Eurodollar Loans. 1.03 Notice of Borrowing. (a) Whenever the Borrower desires to make ------------------- a Borrowing of Loans hereunder (excluding Borrowings of Swingline Loans and Mandatory Borrowings), an Authorized Officer of the Borrower shall give the Administrative Agent at its Notice Office, prior to 12:00 Noon (New York time), at least three Business Days' prior written notice (or telephonic notice promptly confirmed in writing) of each Borrowing of Eurodollar Loans, and at least one Business Day's prior written notice (or telephonic notice promptly confirmed in writing) of each Borrowing of Base Rate Loans to be made hereunder. Each such notice (each, a "Notice of Borrowing") shall, except as otherwise expressly provided in Section 1.10, be irrevocable, and, in the case of each written notice and each confirmation of telephonic notice, shall be in the form of Exhibit A, appropriately completed to specify: (i) the aggregate principal amount of the Revolving Loans to be made pursuant to such Borrowing, (ii) the date of such Borrowing (which shall be a Business Day), (iii) whether the respective Borrowing shall consist of Term Loans or Revolving Loans, (iv) whether the respective Borrowing shall consist of Base Rate Loans or, to the extent permitted hereunder, Eurodollar Loans and, if Eurodollar Loans, the Interest Period to be initially applicable thereto and (v) in the case of a Borrowing of Revolving Loans the proceeds of which are to be utilized to finance, in whole or in part, the purchase price of a Permitted Acquisition, (x) a reference to the officer's certificate, if any, delivered in accordance with Section 8.14, (y) the aggregate principal amount of such Revolving Loans to be utilized in connection with such Permitted Acquisition and (z) the Total Unutilized Revolving Loan Commitment then in effect after giving effect to the respective Permitted Acquisition (and all payments to be made in connection therewith). The Administrative Agent shall promptly give each Bank which is required to make Loans of the Tranche specified in the respective Notice of Borrowing, written notice (or telephonic notice promptly confirmed in writing) of each proposed Borrowing, of such Bank's proportionate share thereof and of the other matters required by the immediately preceding sentence to be specified in the Notice of Borrowing. (b) (i) Whenever the Borrower desires to incur Swingline Loans hereunder, an Authorized Officer of the Borrower shall give BTCo not later than 12:00 Noon (New York time) on the day such Swingline Loan is to be made, written notice (or telephonic notice promptly confirmed in writing) of each Swingline Loan to be made hereunder. Each such notice shall be irrevocable and shall specify in each case (x) the date of such Borrowing (which shall be a Business Day) and (y) the aggregate principal amount of the Swingline Loan to be made pursuant to such Borrowing. (ii) Mandatory Borrowings shall be made upon the notice (or deemed notice) specified in Section 1.01(d), with the Borrower irrevocably agreeing, by its incurrence of any Swingline Loan, to the making of Mandatory Borrowings as set forth in such Section 1.01(d). (c) Without in any way limiting the obligation of the Borrower to confirm in writing any telephonic notice permitted to be given hereunder, the Administrative Agent or BTCo (in the case of a Borrowing of Swingline Loans) or the respective Letter of Credit Issuer (in the case of the issuance of Letters of Credit), as the case may be, may prior to receipt of written confirmation act without liability upon the basis of such telephonic notice, believed by the Administrative Agent, BTCo or such Letter of Credit Issuer, as the case may be, in good faith to be from an Authorized Officer of the Borrower. In each such case, the Administrative Agent's, BTCo's or the respective Letter of Credit Issuer's, as the case may be, record of the terms of such telephonic notice shall be conclusive evidence of the contents of such notice, absent manifest error. 1.04 Disbursement of Funds. (a) Not later than 1:00 P.M. (New York --------------------- time) on the date specified in each Notice of Borrowing (or (x) in the case of Swingline Loans, not later than 2:00 P.M. (New York time) on the date specified in Section 1.03(b)(i) or (y) in the case of Mandatory Borrowings, not later than 12:00 Noon (New York time) on the date specified in Section 1.01(d)), each Bank with a Commitment under the respective Tranche will make available its pro rata share (determined --- ---- in accordance with Section 1.07), if any, of each Borrowing requested to be made on such date (or in the case of Swingline Loans, BTCo shall make available the full amount thereof) in the manner provided below. All amounts shall be made available to the Administrative Agent in U.S. Dollars and in immediately available funds at the Payment Office and the Administrative Agent promptly will make available to the Borrower by depositing to its account at the Payment Office the aggregate of the amounts so made available in the type of funds received. Unless the Administrative Agent shall have been notified by any Bank prior to the date of Borrowing that such Bank does not intend to make available to the Administrative Agent its portion of the Borrowing or Borrowings to be made on such date, the Administrative Agent may assume that such Bank has made such amount available to the Administrative Agent on such date of Borrowing, and the Administrative Agent, in reliance upon such assumption, may (in its sole discretion and without any obligation to do so) make available to the Borrower a corresponding amount. If such corresponding amount is not in fact made available to the Administrative Agent by such Bank and the Administrative Agent has made available same to the Borrower, the Administrative Agent shall be entitled to recover such corresponding amount on demand from such Bank. If such Bank does not pay such corresponding amount forthwith upon the Administrative Agent's demand therefor, the Administrative Agent shall promptly notify the Borrower, and the Borrower shall immediately pay such corresponding amount to the Administrative Agent. The Administrative Agent shall also be entitled to recover on demand from such Bank or the Borrower, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Administrative Agent to the Borrower to the date such corresponding amount is recovered by the Administrative Agent, at a rate per annum equal to (x) if paid by such Bank, the overnight Federal Funds Rate or (y) if paid by the Borrower, the then applicable rate of interest, calculated in accordance with Section 1.08. (b) Nothing in this Agreement shall be deemed to relieve any Bank from its obligation to fulfill its commitments hereunder or to prejudice any rights which the Borrower may have against any Bank as a result of any default by such Bank hereunder. 1.05 Notes. (a) The Borrower's obligation to pay the principal of, ----- and interest on, all the Loans made to it by each Bank shall be set forth on the Register maintained by the Administrative Agent pursuant to Section 13.17 and, subject to the provisions of Section 1.05(f), shall be evidenced (i) if Term Loans, by a promissory note substantially in the form of Exhibit B-1 with blanks appropriately completed in conformity herewith (each, a "Term Note" and, collectively, the "Term Notes"), (ii) if Revolving Loans, by a promissory note substantially in the form of Exhibit B-2 with blanks appropriately completed in conformity herewith (each, a "Revolving Note" and, collectively, the "Revolving Notes") and (iii) if Swingline Loans, by a promissory note substantially in the form of Exhibit B-3 with blanks appropriately completed in conformity herewith (the "Swingline Note"). (b) The Term Note issued to each Bank with a Term Loan Commitment or outstanding Term Loans shall (i) be executed by the Borrower, (ii) be payable to such Bank or its registered assigns and be dated the Initial Borrowing Date (or, in the case of any Term Note issued after the Initial Borrowing Date, the date of issuance thereof), (iii) be in a stated principal amount equal to the Term Loan Commitment of such Bank on the Initial Borrowing Date (or, in the case of any Term Note issued after the Initial Borrowing Date, in a stated principal amount equal to the outstanding principal amount of the Term Loan of such Bank on the date of the issuance thereof) and be payable in the principal amount of Term Loans evidenced thereby from time to time, (iv) mature on the Term Loan Maturity Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to voluntary repayment as provided in Section 4.01 and mandatory repayment as provided in Section 4.02 and (vii) be entitled to the benefits of this Agreement and the other Credit Documents. (c) The Revolving Note issued to each RL Bank shall (i) be executed by the Borrower, (ii) be payable to such RL Bank or its registered assigns and be dated the date of issuance thereof, (iii) be in a stated principal amount equal to the Revolving Loan Commitment of such RL Bank and be payable in the principal amount of the outstanding Revolving Loans evidenced thereby, (iv) mature on the Revolving Loan Maturity Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to voluntary prepayment as provided in Section 4.01 and mandatory repayment as provided in Section 4.02 and (vii) be entitled to the benefits of this Agreement and the other Credit Documents. (d) The Swingline Note issued to BTCo shall (i) be executed by the Borrower, (ii) be payable to BTCo or its registered assigns and be dated the Initial Borrowing Date, (iii) be in a stated principal amount equal to the Maximum Swingline Amount and be payable in the principal amount of the outstanding Swingline Loans evidenced thereby, (iv) mature on the Swingline Expiry Date, (v) bear interest as provided in Section 1.08 in respect of the Base Rate Loans evidenced thereby, (vi) be subject to voluntary prepayment as provided in Section 4.01 and mandatory repayment as provided in Section 4.02 and (vii) be entitled to the benefits of this Agreement and the other Credit Documents. (e) Each Bank will note on its internal records the amount of each Loan made by it and each payment in respect thereof and will prior to any transfer of any of its Notes endorse on the reverse side thereof the outstanding principal amount of Loans evidenced thereby. Failure to make any such notation or any error in such notation shall not affect the Borrower's obligations in respect of such Loans. (f) Notwithstanding anything to the contrary contained above or elsewhere in this Agreement, Notes shall only be delivered to Banks which at any time specifically request the delivery of such Notes. No failure of any Bank to request or obtain a Note evidencing its Loans to the Borrower shall affect or in any manner impair the obligations of the Borrower to pay the Loans (and all related Obligations) which would otherwise be evidenced thereby in accordance with the requirements of this Agreement, and shall not in any way affect the security or guaranties therefor provided pursuant to the various Credit Documents. Any Bank which does not have a Note evidencing its outstanding Loans shall in no event be required to make the notations otherwise described in preceding clause (e). At any time when any Bank requests the delivery of a Note to evidence any of its Loans, the Borrower shall promptly execute and deliver to the respective Bank the requested Note in the appropriate amount or amounts to evidence such Loans. 1.06 Conversions. The Borrower shall have the option to convert on ----------- any Business Day occurring on or after the Initial Borrowing Date, all or a portion at least equal to the applicable Minimum Borrowing Amount of the outstanding principal amount of Loans (other than Swingline Loans, which shall at all times be maintained as Base Rate Loans) made pursuant to one or more Borrowings of one or more Types of Loans under a single Tranche into a Borrowing or Borrowings of another Type of Loan under such Tranche; provided, that (i) -------- except as otherwise provided in Section 1.10(b) or unless the Borrower pays all breakage costs and other amounts owing to each Bank pursuant to Section 1.11 concurrently with any such conversion, Eurodollar Loans may be converted into Base Rate Loans only on the last day of an Interest Period applicable to the Loans being converted, and no partial conversion of a Borrowing of Eurodollar Loans shall reduce the outstanding principal amount of the Eurodollar Loans made pursuant to such Borrowing to less than the Minimum Borrowing Amount applicable thereto, (ii) Base Rate Loans may only be converted into Eurodollar Loans if no Default or Event of Default is in existence on the date of the conversion, (iii) unless the Administrative Agent has determined that the Syndication Date has occurred (at which time this clause (iii) shall no longer be applicable), prior to the 90th day after the Initial Borrowing Date, conversions of Base Rate Loans into Eurodollar Loans may only be made if any such conversion is effective on the first day of the first, second or third Interest Period referred to in clause (y) of each of Sections 1.01(a)(iii) and 1.01(b)(ii) and so long as such conversion does not result in a greater number of Borrowings of Eurodollar Loans prior to the 90th day after the Initial Borrowing Date as are permitted under Sections 1.01(a)(iii) and 1.01(b)(ii) and (iv) Borrowings of Eurodollar Loans resulting from this Section 1.06 shall be limited in number as provided in Section 1.02. Each such conversion shall be effected by the Borrower by giving the Administrative Agent at its Notice Office, prior to 12:00 Noon (New York time), at least three Business Days' (or one Business Day's in the case of a conversion into Base Rate Loans) prior written notice (or telephonic notice promptly confirmed in writing) (each, a "Notice of Conversion") specifying the Loans to be so converted, the Borrowing(s) pursuant to which the Loans were made and, if to be converted into a Borrowing of Eurodollar Loans, the Interest Period to be initially applicable thereto. The Administrative Agent shall give each Bank prompt notice of any such proposed conversion affecting any of its Loans. Upon any such conversion, the proceeds thereof will be deemed to be applied directly on the day of such conversion to prepay the outstanding principal amount of the Loans being converted. 1.07 Pro Rata Borrowings. All Borrowings of Term Loans and Revolving ------------------- Loans under this Agreement shall be incurred by the Borrower from the Banks pro --- rata on the basis of such Banks' Term Loan Commitments or Revolving Loan - ---- Commitments, as the case may be; provided that all Borrowings of Revolving Loans -------- made pursuant to a Mandatory Borrowing shall be incurred from the RL Banks pro --- rata on the basis of their respective Adjusted RL Percentages. - ---- It is understood that no Bank shall be responsible for any default by any other Bank of its obligation to make Loans hereunder and that each Bank shall be obligated to make the Loans to be made by it hereunder, regardless of the failure of any other Bank to fulfill its commitments hereunder. 1.08 Interest. (a) The Borrower agrees to pay interest in respect -------- of the unpaid principal amount of each Base Rate Loan made to it from the date of the Borrowing thereof until the earlier of (i) the maturity (whether by acceleration or otherwise) of such Base Rate Loan and (ii) the conversion of such Base Rate Loan to a Eurodollar Loan pursuant to Section 1.06, at a rate per annum which shall at all times be the relevant Applicable Margin plus the Base ---- Rate, each as in effect from time to time. (b) The Borrower agrees to pay interest in respect of the unpaid principal amount of each Eurodollar Loan made to it from the date of the Borrowing thereof until the earlier of (i) the maturity (whether by acceleration or otherwise) of such Eurodollar Loan and (ii) the conversion of such Eurodollar Loan to a Base Rate Loan pursuant to Section 1.06, 1.09 or 1.10(b), as applicable, at a rate per annum which shall at all times be the relevant Applicable Margin plus the Eurodollar Rate for such Interest Period, each as in ---- effect from time to time. (c) To the extent permitted by law, overdue principal and overdue interest in respect of each Loan shall, in each case, bear interest at a rate per annum equal to the greater of (x) the rate which is 2% in excess of the rate borne by such Loan immediately prior to the respective payment default and (y) the rate which is 2% in excess of the rate otherwise applicable to Base Rate Loans from time to time. Interest which accrues under this Section 1.08(c) shall be payable on demand. (d) Interest shall accrue from and including the date of any Borrowing to but excluding the date of any repayment thereof and shall be payable (i) in respect of each Base Rate Loan, quarterly in arrears on each Quarterly Payment Date, (ii) in respect of each Eurodollar Loan, on (x) the date of any conversion into a Base Rate Loan pursuant to Section 1.06, 1.09 or 1.10(b), as applicable (on the amount converted) and (y) the last day of each Interest Period applicable thereto and, in the case of an Interest Period in excess of three months, on each date occurring at three month intervals after the first day of such Interest Period and (iii) in respect of each Loan, on (x) the date of any prepayment or repayment thereof (on the amount prepaid or repaid), (y) at maturity (whether by acceleration or otherwise) and (z) after such maturity, on demand. (e) All computations of interest hereunder shall be made in accordance with Section 13.07(b). (f) Upon each Interest Determination Date, the Administrative Agent shall determine the Eurodollar Rate for the respective Interest Period or Interest Periods and shall promptly notify the Borrower and the Banks thereof. Each such determination shall, absent manifest error, be final and conclusive and binding on all parties hereto. 1.09 Interest Periods. At the time the Borrower gives a Notice of ---------------- Borrowing or Notice of Conversion in respect of the making of, or conversion into, a Borrowing of Eurodollar Loans (in the case of the initial Interest Period applicable thereto) or prior to 12:00 Noon (New York time) on the third Business Day prior to the expiration of an Interest Period applicable to a Borrowing of Eurodollar Loans (in the case of any subsequent Interest Period), the Borrower shall have the right to elect by giving the Administrative Agent written notice (or telephonic notice promptly confirmed in writing) of the Interest Period applicable to such Borrowing, which Interest Period shall, at the option of the Borrower (but otherwise subject to clause (y) of the proviso to Sections 1.01(a)(iii) and 1.01(b)(ii) and to clause (iii) of the proviso to Section 1.06), be a one, two, three, six or, to the extent available to each Bank with outstanding Loans and/or Commitments under the respective Tranche, nine or twelve month period. Notwithstanding anything to the contrary contained above: (i) all Eurodollar Loans comprising a Borrowing shall at all times have the same Interest Period; (ii) the initial Interest Period for any Borrowing of Eurodollar Loans shall commence on the date of such Borrowing (including the date of any conversion from a Borrowing of Base Rate Loans) and each Interest Period occurring thereafter in respect of such Borrowing shall commence on the day on which the next preceding Interest Period applicable thereto expires; (iii) if any Interest Period for any Borrowing of Eurodollar Loans begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period, such Interest Period shall end on the last Business Day of such calendar month; (iv) if any Interest Period would otherwise expire on a day which is not a Business Day, such Interest Period shall expire on the next succeeding Business Day, provided, that if any Interest Period for any -------- Borrowing of Eurodollar Loans would otherwise expire on a day which is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day; (v) no Interest Period for a Borrowing under a Tranche shall be selected which would extend beyond the respective Maturity Date for such Tranche; (vi) no Interest Period may be elected at any time when a Default or an Event of Default is then in existence; and (vii) no Interest Period in respect of any Borrowing of Term Loans shall be elected which extends beyond any date upon which a Scheduled Repayment will be required to be made under Section 4.02(b) if, after giving effect to the election of such Interest Period, the aggregate principal amount of such Term Loans which have Interest Periods which will expire after such date will be in excess of the aggregate principal amount of such Term Loans then outstanding less the aggregate amount of such required Scheduled Repayment. If upon the expiration of any Interest Period applicable to a Borrowing of Eurodollar Loans, the Borrower has failed to elect, or is not permitted to elect, a new Interest Period to be applicable to the respective Borrowing of Eurodollar Loans as provided above, the Borrower shall be deemed to have elected to convert such Borrowing into a Borrowing of Base Rate Loans effective as of the expiration date of such current Interest Period. 1.10 Increased Costs; Illegality; etc. (a) In the event that (x) in --------------------------------- the case of clause (i) below, the Administrative Agent or (y) in the case of clauses (ii) and (iii) below, any Bank, shall have determined in good faith (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto): (i) on any Interest Determination Date, that, by reason of any changes arising after the Effective Date affecting the interbank Eurodollar market, adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided for in the definition of Eurodollar Rate; or (ii) at any time, that such Bank shall incur increased costs or reductions in the amounts received or receivable hereunder with respect to any Eurodollar Loans because of (x) any change since the Effective Date in any applicable law, governmental rule, regulation, guideline, order or request (whether or not having the force of law), or in the interpretation or administration thereof and including the introduction of any new law or governmental rule, regulation, guideline, order or request (other than, in each case, any such change with respect to taxes or any similar charges), such as, for example, but not limited to, a change in official reserve requirements, but, in all events, excluding reserves required under Regulation D to the extent included in the computation of the Eurodollar Rate and/or (y) other circumstances affecting such Bank, the interbank Eurodollar market or the position of such Bank in such market (other than circumstances relating to taxes or any similar charges); or (iii) at any time since the Effective Date, that the making or continuance of any Eurodollar Loan has become unlawful by compliance by such Bank with any law, governmental rule, regulation, guideline or order (or would conflict with any governmental rule, regulation, guideline, request or order not having the force of law but with which such Bank customarily complies even though the failure to comply therewith would not be unlawful), or has become impracticable as a result of a contingency occurring after the Effective Date which materially and adversely affects the interbank Eurodollar market; then, and in any such event, such Bank (or the Administrative Agent in the case of clause (i) above) shall promptly give notice (by telephone confirmed in writing) to the Borrower and (except in the case of clause (i)) to the Administrative Agent of such determination (which notice the Administrative Agent shall promptly transmit to each of the other Banks). Thereafter, (x) in the case of clause (i) above, Eurodollar Loans shall no longer be available until such time as the Administrative Agent notifies the Borrower and the Banks that the circumstances giving rise to such notice by the Administrative Agent no longer exist, and any Notice of Borrowing or Notice of Conversion given by the Borrower with respect to Eurodollar Loans which have not yet been incurred (including by way of conversion) shall be deemed rescinded by the Borrower, (y) in the case of clause (ii) above, the Borrower agrees, subject to the provisions of Section 13.18 (to the extent applicable), to pay to such Bank, upon written demand therefor, such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Bank in its sole discretion shall determine) as shall be required to compensate such Bank for such increased costs or reductions in amounts received or receivable hereunder (a written notice as to the additional amounts owed to such Bank, showing in reasonable detail the basis for the calculation thereof, prepared in good faith and submitted to the Borrower by such Bank shall, absent manifest error, be final and conclusive and binding upon all parties hereto, although the failure to give any such notice shall not release or diminish any of the Borrower's obligations to pay additional amounts pursuant to this Section 1.10(a) upon the subsequent receipt of such notice) and (z) in the case of clause (iii) above, the Borrower shall take one of the actions specified in Section 1.10(b) as promptly as practicable and, in any event, within the time period required by law. (b) At any time that any Eurodollar Loan is affected by the circumstances described in Section 1.10(a)(ii) or (iii), the Borrower may (and in the case of a Eurodollar Loan affected pursuant to Section 1.10(a)(iii), the Borrower shall) either (i) if the affected Eurodollar Loan is then being made pursuant to a Borrowing, cancel said Borrowing by giving the Administrative Agent telephonic notice (confirmed promptly in writing) thereof on the same date that the Borrower was notified by a Bank pursuant to Section 1.10(a)(ii) or (iii)), or (ii) if the affected Eurodollar Loan is then outstanding, upon at least three Business Days' notice to the Administrative Agent, require the affected Bank to convert each such Eurodollar Loan into a Base Rate Loan (which conversion, in the case of the circumstance described in Section 1.10(a)(iii), shall occur no later than the last day of the Interest Period then applicable to such Eurodollar Loan or such earlier day as shall be required by applicable law); provided, that if more than one Bank is affected at any time, then all -------- affected Banks must be treated the same pursuant to this Section 1.10(b). (c) If any Bank shall have determined that after the Effective Date, the adoption or effectiveness of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by such Bank or any corporation controlling such Bank with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Bank's or such other corporation's capital or assets as a consequence of such Bank's Commitment or Commitments or its obligations hereunder to the Borrower to a level below that which such Bank or such other corporation could have achieved but for such adoption, effectiveness, change or compliance (taking into consideration such Bank's or such other corporation's policies with respect to capital adequacy), then from time to time, upon written demand by such Bank (with a copy to the Administrative Agent), accompanied by the notice referred to in the last sentence of this clause (c), the Borrower agrees, subject to the provisions of Section 13.18 (to the extent applicable), to pay to such Bank such additional amount or amounts as will compensate such Bank or such other corporation for such reduction in the rate of return to such Bank or such other corporation. Each Bank, upon determining in good faith that any additional amounts will be payable pursuant to this Section 1.10(c), will give prompt written notice thereof to the Borrower (a copy of which shall be sent by such Bank to the Administrative Agent), which notice shall set forth in reasonable detail the basis of the calculation of such additional amounts, although the failure to give any such notice shall not release or diminish the Borrower's obligation to pay additional amounts pursuant to this Section 1.10(c) upon the subsequent receipt of such notice. In determining any additional amounts owing under this Section 1.10(c), each Bank will act reasonably and in good faith and will use averaging and attribution methods which are reasonable; provided that such Bank's reasonable good faith -------- determination of compensation owing under this Section 1.10(c) shall, absent manifest error, be final and conclusive and binding on all the parties hereto. 1.11 Compensation. The Borrower agrees, subject to the provisions of ------------ Section 13.18 (to the extent applicable), to compensate each Bank, promptly upon its written request (which request shall set forth in reasonable detail the basis for requesting such compensation), for all reasonable losses, expenses and liabilities (including, without limitation, any loss, expense or liability incurred by reason of the liquidation or reemployment of deposits or other funds required by such Bank to fund its Eurodollar Loans but excluding any loss of anticipated profits) which such Bank may sustain: (i) if for any reason (other than a default by such Bank or any Agent) a Borrowing of, or conversion from or into, Eurodollar Loans does not occur on a date specified therefor in a Notice of Borrowing or Notice of Conversion given by the Borrower (whether or not withdrawn by the Borrower or deemed withdrawn pursuant to Section 1.10(a)); (ii) if any repayment (including any repayment made pursuant to Section 4.01 or 4.02 or as a result of an acceleration of the Loans pursuant to Section 10 or as a result of the replacement of a Bank pursuant to Section 1.13 or 13.12(b)) or conversion of any Eurodollar Loans of the Borrower occurs on a date which is not the last day of an Interest Period applicable thereto; (iii) if any prepayment of any Eurodollar Loans is not made on any date specified in a notice of prepayment given by the Borrower; or (iv) as a consequence of (x) any other default by the Borrower to repay its Eurodollar Loans when required by the terms of this Agreement or (y) an election made by the Borrower pursuant to Section 1.10(b). Each Bank's calculation of the amount of compensation owing pursuant to this Section 1.11 shall be made in good faith. A Bank's basis for requesting compensation pursuant to this Section 1.11 and a Bank's calculation of the amount thereof made in accordance with the requirements of this Section 1.11, shall, absent manifest error, be final and conclusive and binding on all parties hereto. 1.12 Change of Lending Office. (a) Each Bank may at any time or ------------------------ from time to time designate, by written notice to the Administrative Agent to the extent not already reflected on Schedule II, one or more lending offices (which, for this purpose, may include Affiliates of the respective Bank) for the various Loans made, and Letters of Credit participated in, by such Bank; provided that, for designations made after the Effective Date, to the extent - -------- such designation shall result in increased costs under Section 1.10, 2.05 or 4.04 in excess of those which would be charged in the absence of the designation of a different lending office (including a different Affiliate of the respective Bank), then the Borrower shall not be obligated to pay such excess increased costs (although the Borrower, in accordance with and pursuant to the other provisions of this Agreement, shall be obligated to pay the costs which would apply in the absence of such designation and any subsequent increased costs of the type described above resulting from changes after the date of the respective designation). Each lending office and Affiliate of any Bank designated as provided above shall, for all purposes of this Agreement, be treated in the same manner as the respective Bank (and shall be entitled to all indemnities and similar provisions in respect of its acting as such hereunder). (b) Each Bank agrees that, upon the occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or (iii), 1.10(c), 2.05 or 4.04 with respect to such Bank, it will, if requested by the Borrower, use reasonable efforts (subject to overall policy considerations of such Bank) to designate another lending office for any Loans or Letters of Credit affected by such event, with the object of avoiding the consequences of the event giving rise to the operation of any such Section; provided, that such designation is made on -------- such terms that such Bank and its lending office suffer no economic, legal or regulatory disadvantage. Nothing in this Section 1.12 shall affect or postpone any of the obligations of the Borrower or the right of any Bank provided in Section 1.10, 2.05 or 4.04 (although each such Bank shall nevertheless have an obligation to change its applicable lending office subject to the terms set forth in the immediately preceding sentence). 1.13 Replacement of Banks. (x) If any Bank becomes a Defaulting -------------------- Bank, (y) upon the occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or (iii), Section 1.10(c), Section 2.05 or Section 4.04 with respect to any Bank which results in such Bank charging to the Borrower increased costs in a material amount in excess of those being generally charged by the other Banks or (z) in the case of a refusal by a Bank to consent to a proposed change, waiver, discharge or termination with respect to this Agreement which has been approved by the Required Banks as provided in Section 13.12(b), the Borrower shall have the right, in accordance with Section 13.04(b), if no Default or Event of Default then exists or would exist after giving effect to such replacement, to replace such Bank (the "Replaced Bank") with one or more other Eligible Transferee or Transferees, none of whom shall constitute a Defaulting Bank at the time of such replacement (collectively, the "Replacement Bank") and each of which shall be reasonably acceptable to the Administrative Agent or, at the option of the Borrower, to replace only (a) the Revolving Loan Commitment (and outstandings pursuant thereto) of the Replaced Bank with an identical Revolving Loan Commitment provided by the Replacement Bank or (b) in the case of a replacement as provided in Section 13.12(b) where the consent of the respective Bank is required with respect to less than all Tranches of its Loans or Commitments, the Commitments and/or outstanding Loans of such Bank in respect of each Tranche where the consent of such Bank would otherwise be individually required, with identical Commitments and/or Loans of the respective Tranche provided by the Replacement Bank; provided that: -------- (i) at the time of any replacement pursuant to this Section 1.13, the Replacement Bank shall enter into one or more Assignment and Assumption Agreements pursuant to Section 13.04(b) (and with all fees payable pursuant to said Section 13.04(b) to be paid by the Replacement Bank) pursuant to which the Replacement Bank shall acquire all of the Commitments and outstanding Loans (or, in the case of the replacement of only (a) the Revolving Loan Commitment, the Revolving Loan Commitment and outstanding Revolving Loans and participations in Letter of Credit Outstandings and/or (b) the outstanding Term Loans, the outstanding Term Loans) of, and in each case (except for the replacement of only the outstanding Term Loans of the respective Bank) participations in Letters of Credit by, the Replaced Bank and, in connection therewith, shall pay to (x) the Replaced Bank in respect thereof an amount equal to the sum of (A) an amount equal to the principal of, and all accrued interest on, all outstanding Loans (or of the Loans of the respective Tranche being replaced) of the Replaced Bank, (B) an amount equal to all Unpaid Drawings (unless there are no Unpaid Drawings with respect to the Tranche being replaced) that have been funded by (and not reimbursed to) such Replaced Bank, together with all then unpaid interest with respect thereto at such time and (C) an amount equal to all accrued, but theretofore unpaid, Fees owing to the Replaced Bank (but only with respect to the relevant Tranche, in the case of the replacement of less than all Tranches of Loans then held by the respective Replaced Bank) pursuant to Section 3.01, (y) except in the case of the replacement of only the outstanding Term Loans of a Replaced Bank, each Letter of Credit Issuer an amount equal to such Replaced Bank's RL Percentage of any Unpaid Drawing relating to Letters of Credit issued by such Letter of Credit Issuer (which at such time remains an Unpaid Drawing) to the extent such amount was not theretofore funded by such Replaced Bank and (z) in the case of any replacement of Revolving Loan Commitments, BTCo an amount equal to such Replaced Bank's Adjusted RL Percentage of any Mandatory Borrowing to the extent such amount was not theretofore funded by such Replaced Bank; and (ii) all obligations of the Borrower then owing to the Replaced Bank (other than those (a) specifically described in clause (i) above in respect of which the assignment purchase price has been, or is concurrently being, paid, but including all amounts, if any, owing under Section 1.11 or (b) relating to any Tranche of Loans and/or Commitments of the respective Replaced Bank which will remain outstanding after giving effect to the respective replacement) shall be paid in full to such Replaced Bank concurrently with such replacement. Upon the execution of the respective Assignment and Assumption Agreements, the payment of amounts referred to in clauses (i) and (ii) above, recordation of the assignment on the Register by the Administrative Agent pursuant to Section 13.17 and, if so requested by the Replacement Bank, delivery to the Replacement Bank of the appropriate Note or Notes executed by the Borrower, (x) the Replacement Bank shall become a Bank hereunder and, unless the respective Replaced Bank continues to have outstanding Term Loans and/or a Revolving Loan Commitment hereunder, the Replaced Bank shall cease to constitute a Bank hereunder, except with respect to indemnification provisions under this Agreement (including, without limitation, Sections 1.10, 1.11, 2.05, 4.04, 13.01 and 13.06), which shall survive as to such Replaced Bank and (y) except in the case of the replacement of only outstanding Term Loans, the Adjusted RL Percentages of the Banks shall be automatically adjusted at such time to give effect to such replacement. SECTION 2. Letters of Credit. ----------------- 2.01 Letters of Credit. (a) Subject to and upon the terms and ----------------- conditions herein set forth, the Borrower may request a Letter of Credit Issuer at any time and from time to time after the Initial Borrowing Date and prior to the tenth Business Day (or the 30th day in the case of Trade Letters of Credit) preceding the Revolving Loan Maturity Date to issue on a sight basis, (x) for the account of the Borrower and for the benefit of any holder (or any trustee, agent or other similar representative for any such holders) of L/C Supportable Indebtedness, irrevocable sight standby letters of credit in a form customarily used by such Letter of Credit Issuer or in such other form as has been approved by such Letter of Credit Issuer (each such standby letter of credit, a "Standby Letter of Credit") in support of such L/C Supportable Indebtedness and (y) for the account of the Borrower and for the benefit of sellers of goods and materials to the Borrower or any of its Subsidiaries in the ordinary course of business, irrevocable sight trade letters of credit in a form customarily used by such Letter of Credit Issuer or in such other form as has been approved by such Letter of Credit Issuer (each such trade letter of credit, a "Trade Letter of Credit," and each such Standby Letter of Credit and Trade Letter of Credit, a "Letter of Credit" and, collectively, the "Letters of Credit"). (b) Subject to and upon the terms and conditions set forth herein, each Letter of Credit Issuer hereby agrees that it will, at any time and from time to time after the Initial Borrowing Date and prior to the tenth Business Day (or the 30th day in the case of Trade Letters of Credit) preceding the Revolving Loan Maturity Date, following its receipt of the respective Letter of Credit Request, issue for the account of the Borrower one or more Letters of Credit, (x) in the case of Trade Letters of Credit, in support of trade obligations of the Borrower or any of its Subsidiaries that arise in the ordinary course of business or (y) in the case of Standby Letters of Credit, in support of such L/C Supportable Indebtedness as is permitted to remain outstanding hereunder. Notwithstanding the foregoing, no Letter of Credit Issuer shall be under any obligation to issue any Letter of Credit if at the time of such issuance: (i) any order, judgment or decree of any governmental authority or arbitrator shall purport by its terms to enjoin or restrain such Letter of Credit Issuer from issuing such Letter of Credit or any requirement of law applicable to such Letter of Credit Issuer or any request or directive (whether or not having the force of law) from any governmental authority with jurisdiction over such Letter of Credit Issuer shall prohibit, or request that such Letter of Credit Issuer refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon such Letter of Credit Issuer with respect to such Letter of Credit any restriction or reserve or capital requirement (for which such Letter of Credit Issuer is not otherwise compensated) not in effect on the Effective Date, or any unreimbursed loss, cost or expense which was not applicable, in effect or known to such Letter of Credit Issuer as of the Effective Date and which such Letter of Credit Issuer in good faith deems material to it; or (ii) such Letter of Credit Issuer shall have received written notice from the Borrower or the Required Banks prior to the issuance of such Letter of Credit of the type described in clause (vi) of Section 2.01(c) or the last sentence of Section 2.02(b). (c) Notwithstanding the foregoing, (i) no Letter of Credit shall be issued the Stated Amount of which, when added to the Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid on the date of, and prior to the issuance of, the respective Letter of Credit) at such time, would exceed either (x) $25,000,000 or (y) when added to the aggregate principal amount of all Revolving Loans made by the Non-Defaulting Banks and then outstanding and all Swingline Loans then outstanding, the Adjusted Total Revolving Loan Commitment at such time; (ii) (x) each Standby Letter of Credit shall have an expiry date occurring not later than one year after such Standby Letter of Credit's date of issuance, provided that any such Standby Letter of -------- Credit may be extendable for successive periods of up to one year, but not beyond the tenth Business Day preceding the Revolving Loan Maturity Date, on terms acceptable to the Letter of Credit Issuer and (y) each Trade Letter of Credit shall have an expiry date occurring not later than 180 days after such Trade Letter of Credit's date of issuance; (iii) (x) no Standby Letter of Credit shall have an expiry date occurring later than the tenth Business Day preceding the Revolving Loan Maturity Date and (y) no Trade Letter of Credit shall have an expiry date occurring later than 30 days prior to the Revolving Loan Maturity Date; (iv) each Letter of Credit shall be denominated in U.S. Dollars; (v) the Stated Amount of each Letter of Credit shall not be less than $100,000 or such lesser amount as is acceptable to the respective Letter of Credit Issuer; and (vi) no Letter of Credit Issuer will issue any Letter of Credit after it has received written notice from the Borrower or the Required Banks stating that a Default or an Event of Default exists until such time as such Letter of Credit Issuer shall have received a written notice of (x) rescission of such notice from the party or parties originally delivering the same or (y) a waiver of such Default or Event of Default by the Required Banks. (d) Notwithstanding the foregoing, in the event a Bank Default exists, no Letter of Credit Issuer shall be required to issue any Letter of Credit unless the respective Letter of Credit Issuer has entered into arrangements satisfactory to it and the Borrower to eliminate such Letter of Credit Issuer's risk with respect to the participation in Letters of Credit of the Defaulting Bank or Defaulting Banks, including by cash collateralizing such Defaulting Bank's or Banks' Adjusted RL Percentage of the Letter of Credit Outstandings, as the case may be. (e) Schedule XIV hereto contains a description of all letters of credit issued by FNBC for the account of Pacer Logistics or Pacific Motor Transport Company and outstanding on the Initial Borrowing Date. Each such letter of credit, as amended on the Initial Borrowing Date to change the account party thereon to "Pacer International, Inc.", including any extension or renewal thereof (each, as amended from time to time in accordance with the terms hereof and thereof, an "Existing Letter of Credit") shall constitute a "Letter of Credit" for all purposes of this Agreement, issued, for purposes of Section 2.03(a), on the Initial Borrowing Date. FNBC shall constitute the "Letter of Credit Issuer" with respect to each such Letter of Credit for all purposes of this Agreement. 2.02 Letter of Credit Requests. (a) Whenever the Borrower desires ------------------------- that a Letter of Credit be issued, the Borrower shall give the Administrative Agent and the respective Letter of Credit Issuer written notice thereof prior to 12:00 Noon (New York time) at least three Business Days (or such shorter period as may be acceptable to the respective Letter of Credit Issuer) prior to the proposed date of issuance (which shall be a Business Day) which written notice shall be in the form of Exhibit C (each, a "Letter of Credit Request"). Each Letter of Credit Request shall include any other documents as such Letter of Credit Issuer customarily requires in connection therewith. (b) The making of each Letter of Credit Request shall be deemed to be a representation and warranty by the Borrower that such Letter of Credit may be issued in accordance with, and it will not violate the requirements of, Section 2.01(c). Unless the respective Letter of Credit Issuer has received notice from the Borrower, any Agent or the Required Banks before it issues a Letter of Credit that one or more of the applicable conditions specified in Section 5 or 6, as the case may be, are not then satisfied, or that the issuance of such Letter of Credit would violate Section 2.01(c), then such Letter of Credit Issuer may issue the requested Letter of Credit for the account of the Borrower in accordance with such Letter of Credit Issuer's usual and customary practice. 2.03 Letter of Credit Participations. (a) Immediately upon the ------------------------------- issuance by a Letter of Credit Issuer of any Letter of Credit, such Letter of Credit Issuer shall be deemed to have sold and transferred to each other RL Bank, and each such RL Bank (each, a "Participant") shall be deemed irrevocably and unconditionally to have purchased and received from such Letter of Credit Issuer, without recourse or warranty, an undivided interest and participation, to the extent of such Participant's Adjusted RL Percentage, in such Letter of Credit, each substitute Letter of Credit, each drawing made thereunder and the obligations of the Borrower under this Agreement with respect thereto (although Letter of Credit Fees shall be payable directly to the Administrative Agent for the account of the RL Banks as provided in Section 3.01(b) and the Participants shall have no right to receive any portion of any Facing Fees with respect to such Letters of Credit) and any security therefor or guaranty pertaining thereto. Upon any change in the Revolving Loan Commitments or the Adjusted RL Percentages of the RL Banks pursuant to Section 1.13 or 13.04(b) or as a result of a Bank Default, it is hereby agreed that, with respect to all outstanding Letters of Credit and Unpaid Drawings with respect thereto, there shall be an automatic adjustment to the participations pursuant to this Section 2.03 to reflect the new Adjusted RL Percentages of the assigning and assignee Bank or of all RL Banks, as the case may be. (b) In determining whether to pay under any Letter of Credit, no Letter of Credit Issuer shall have any obligation relative to the Participants other than to determine that any documents required to be delivered under such Letter of Credit have been delivered and that they appear to substantially comply on their face with the requirements of such Letter of Credit. Any action taken or omitted to be taken by any Letter of Credit Issuer under or in connection with any Letter of Credit issued by it if taken or omitted in the absence of gross negligence or willful misconduct, shall not create for such Letter of Credit Issuer any resulting liability. (c) In the event that any Letter of Credit Issuer makes any payment under any Letter of Credit issued by it and the Borrower shall not have reimbursed such amount in full to the Letter of Credit Issuer pursuant to Section 2.04(a), such Letter of Credit Issuer shall promptly notify the Administrative Agent, and the Administrative Agent shall promptly notify each Participant of such failure, and each such Participant shall promptly and unconditionally pay to the Administrative Agent for the account of such Letter of Credit Issuer, the amount of such Participant's Adjusted RL Percentage of such payment in U.S. Dollars and in same day funds. If the Administrative Agent so notifies any Participant required to fund a payment under a Letter of Credit prior to 11:00 A.M. (New York time) on any Business Day, such Participant shall make available to the Administrative Agent at the Payment Office for the account of the respective Letter of Credit Issuer such Participant's Adjusted RL Percentage of the amount of such payment on such Business Day in same day funds (and, to the extent such notice is given after 11:00 A.M. (New York time) on any Business Day, such Participant shall make such payment on the immediately following Business Day). If and to the extent such Participant shall not have so made its Adjusted RL Percentage of the amount of such payment available to the Administrative Agent for the account of the respective Letter of Credit Issuer, such Participant agrees to pay to the Administrative Agent for the account of such Letter of Credit Issuer, forthwith on demand such amount, together with interest thereon, for each day from such date until the date such amount is paid to the Administrative Agent for the account of the Letter of Credit Issuer at the overnight Federal Funds Rate. The failure of any Participant to make available to the Administrative Agent for the account of the respective Letter of Credit Issuer its Adjusted RL Percentage of any payment under any Letter of Credit issued by it shall not relieve any other Participant of its obligation hereunder to make available to the Administrative Agent for the account of such Letter of Credit Issuer its applicable Adjusted RL Percentage of any payment under any such Letter of Credit on the date required, as specified above, but no Participant shall be responsible for the failure of any other Participant to make available to the Administrative Agent for the account of such Letter of Credit Issuer such other Participant's Adjusted RL Percentage of any such payment. (d) Whenever any Letter of Credit Issuer receives a payment of a reimbursement obligation as to which the Administrative Agent has received for the account of such Letter of Credit Issuer any payments from the Participants pursuant to clause (c) above, such Letter of Credit Issuer shall pay to the Administrative Agent and the Administrative Agent shall promptly pay to each Participant which has paid its Adjusted RL Percentage thereof, in U.S. Dollars and in same day funds, an amount equal to such Participant's Adjusted RL Percentage of the principal amount thereof and interest thereon accruing after the purchase of the respective participations. (e) Each Letter of Credit Issuer shall, promptly after each issuance of, or amendment or modification to, a Standby Letter of Credit issued by it, give the Administrative Agent, each Participant and the Borrower written notice of the issuance of, or amendment or modification to, such Standby Letter of Credit, which notice shall be accompanied by a copy of the Standby Letter of Credit or Standby Letters of Credit issued by it and each such amendment or modification thereto. (f) Each Letter of Credit Issuer (other than BTCo) shall deliver to the Administrative Agent, promptly on the first Business Day of each week, by facsimile transmission, the aggregate daily Stated Amount available to be drawn under the outstanding Trade Letters of Credit issued by such Letter of Credit Issuer for the previous week. The Administrative Agent shall, within 10 days after the last Business Day of each calendar month, deliver to each Participant a report setting forth for such preceding calendar month the aggregate daily Stated Amount available to be drawn under all outstanding Trade Letters of Credit during such calendar month. (g) The obligations of the Participants to make payments to the Administrative Agent for the account of the respective Letter of Credit Issuer with respect to Letters of Credit issued by it shall be irrevocable and not subject to counterclaim, set-off or other defense or any other qualification or exception whatsoever and shall be made in accordance with the terms and conditions of this Agreement under all circumstances, including, without limitation, any of the following circumstances: (i) any lack of validity or enforceability of this Agreement or any of the other Credit Documents; (ii) the existence of any claim, set-off, defense or other right which the Borrower or any of its Subsidiaries may have at any time against a beneficiary named in a Letter of Credit, any transferee of any Letter of Credit (or any Person for whom any such transferee may be acting), any Agent, any Letter of Credit Issuer, any Bank, or any other Person, whether in connection with this Agreement, any Letter of Credit, the transactions contemplated herein or any unrelated transactions (including any underlying transaction between the Borrower or any of its Subsidiaries and the beneficiary named in any such Letter of Credit); (iii) any draft, certificate or other document presented under the Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iv) the surrender or impairment of any security for the performance or observance of any of the terms of any of the Credit Documents; or (v) the occurrence of any Default or Event of Default. 2.04 Agreement to Repay Letter of Credit Drawings. (a) The Borrower -------------------------------------------- hereby agrees to reimburse each Letter of Credit Issuer, by making payment to the Administrative Agent in U.S. Dollars and in immediately available funds at the Payment Office, for any payment or disbursement made by such Letter of Credit Issuer under any Letter of Credit issued by it (each such amount so paid or disbursed until reimbursed, an "Unpaid Drawing") immediately after, and in any event on the date of (or, if not notified by the respective Letter of Credit Issuer prior to 1:00 P.M. (New York time) on the date of such payment or disbursement, on the Business Day following), such payment or disbursement, with interest on the amount so paid or disbursed by such Letter of Credit Issuer, to the extent not reimbursed prior to 2:00 P.M. (New York time) on Schedule I the date of such payment or disbursement, on the Business Day following), such payment or disbursement, with interest on the amount so paid or disbursed by such Letter of Credit Issuer, to the extent not reimbursed prior to 2:00 P.M. (New York time) on the date of such payment or disbursement, from and including the date paid or disbursed to but not including the date such Letter of Credit Issuer is reimbursed therefor at a rate per annum which shall be the then Applicable Margin for Revolving Loans maintained as Base Rate Loans plus the ---- Base Rate, each as in effect from time to time (plus an additional 2% per annum if not reimbursed by the third Business Day after the date of such payment or disbursement), such interest also to be payable on demand; provided, that it is -------- understood and agreed, however, that the notices referred to above in this clause (a) shall not be required to be given if a Default or an Event of Default under such Section 10.05 shall have occurred and be continuing, in which case the Unpaid Drawings shall be due and payable immediately without presentment, demand, protest or notice of any kind (all of which are hereby waived by each Credit Party) and shall bear interest at a rate per annum which shall be (x) until the third Business Day following the respective Drawing, the Applicable Margin for Revolving Loans maintained as Base Rate Loans plus the Base Rate, each as in effect from time to time, and (y) at all times on and after the third Business Day following the respective Drawing, the rate per annum specified in preceding clause (x) plus 2%. Each Letter of Credit Issuer shall provide the ---- Borrower prompt notice of any payment or disbursement made by it under any Letter of Credit issued by it, although the failure of, or delay in, giving any such notice shall not release or diminish the obligations of the Borrower under this Section 2.04(a) or under any other Section of this Agreement. (b) The Borrower's obligation under this Section 2.04 to reimburse the respective Letter of Credit Issuer with respect to drawings on Letters of Credit (including, in each case, interest thereon) shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Borrower or any of its Subsidiaries may have or have had against such Letter of Credit Issuer, any Agent or any Bank or other Person, including, without limitation, any defense based upon the failure of any drawing under a Letter of Credit issued by it to conform to the terms of the Letter of Credit or any nonapplication or misapplication by the beneficiary of the proceeds of such drawing; provided, however, that the Borrower shall not be -------- ------- obligated to reimburse such Letter of Credit Issuer for any wrongful payment made by such Letter of Credit Issuer under a Letter of Credit issued by it as a result of acts or omissions constituting willful misconduct or gross negligence on the part of such Letter of Credit Issuer as determined by a court of competent jurisdiction; provided, further, that any reimbursement made by the -------- ------- Borrower shall be without prejudice to any claim it may have against such Letter of Credit Issuer as a result of acts or omissions constituting willful misconduct or gross negligence on the part of such Letter of Credit Issuer. 2.05 Increased Costs. If after the Effective Date, any Letter of --------------- Credit Issuer or any Participant determines that the adoption or effectiveness of any applicable law, rule or regulation, order, guideline or request or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Letter of Credit Issuer or any Participant with any request or directive (whether or not having the force of law) by any such authority, central bank or comparable agency shall either (i) impose, modify or make applicable any reserve, deposit, capital adequacy or similar requirement against Letters of Credit issued by such Letter of Credit Issuer or such Participant's participation therein, or (ii) impose on any Letter of Credit Issuer or any Participant any other conditions directly or indirectly affecting this Agreement, any Letter of Credit or such Participant's participation therein; and the result of any of the foregoing is to increase the cost to such Letter of Credit Issuer or such Participant of issuing, maintaining or participating in any Letter of Credit, or to reduce the amount of any sum received or receivable by such Letter of Credit Issuer or such Participant hereunder or reduce the rate of return on its capital (other than any increased costs or reduction in the amount received or receivable resulting from the imposition of or a change in the rate of taxes or any similar charges) with respect to Letters of Credit, then, upon written demand to the Borrower by such Letter of Credit Issuer or such Participant (a copy of which notice shall be sent by such Letter of Credit Issuer or such Participant to the Administrative Agent), accompanied by the certificate described in the last sentence of this Section 2.05, the Borrower agrees, subject to the provisions of Section 13.18 (to the extent applicable), to pay to such Letter of Credit Issuer or such Participant such additional amount or amounts as will compensate such Letter of Credit Issuer or such Participant for such increased cost or reduction. Any Letter of Credit Issuer or any Participant, upon determining that any additional amounts will be payable pursuant to this Section 2.05, will give prompt written notice thereof to the Borrower, which notice shall include a certificate submitted to the Borrower by such Letter of Credit Issuer or such Participant, as the case may be (a copy of which certificate shall be sent by such Letter of Credit Issuer or such Participant to the Administrative Agent), setting forth in reasonable detail the basis for the determination of such additional amount or amounts necessary to compensate such Letter of Credit Issuer or such Participant as aforesaid and such certificate, if delivered in good faith, shall be final and conclusive and binding on the Borrower absent manifest error, although the failure to deliver any such certificate shall not release or diminish the Borrower's obligations to pay additional amounts pursuant to this Section 2.05 upon subsequent receipt of such certificate. SECTION 3. Fees; Commitments. ----------------- 3.01 Fees. (a) The Borrower shall pay to the Administrative Agent ---- for distribution to each Non-Defaulting Bank with a Revolving Loan Commitment, a commitment fee (the "Commitment Fee") for the period from the Effective Date to but not including the Revolving Loan Maturity Date (or such earlier date as the Total Revolving Loan Commitment shall have been terminated), computed at a rate for each day equal to the relevant Applicable Margin (as in effect from time to time) on the daily average Unutilized Revolving Loan Commitment of such Non- Defaulting Bank. Accrued Commitment Fees shall be due and payable quarterly in arrears on each Quarterly Payment Date and on the Revolving Loan Maturity Date (or such earlier date upon which the Total Revolving Loan Commitment is terminated). (b) The Borrower shall pay to the Administrative Agent for pro rata --- ---- distribution to each Non-Defaulting Bank with a Revolving Loan Commitment (based on its respective Adjusted RL Percentage), a fee in respect of each Letter of Credit (the "Letter of Credit Fee") computed at a rate per annum equal to the Applicable Margin for Revolving Loans maintained as Eurodollar Loans then in effect on the daily Stated Amount of such Letter of Credit. Accrued Letter of Credit Fees shall be due and payable quarterly in arrears on each Quarterly Payment Date and upon the first day on or after the termination of the Total Revolving Loan Commitment upon which no Letters of Credit remain outstanding. (c) The Borrower shall pay to each Letter of Credit Issuer a fee in respect of each Letter of Credit issued by such Letter of Credit Issuer (the "Facing Fee") computed at the rate of 1/4 of 1% per annum on the daily Stated Amount of such Letter of Credit; provided, that in no event shall the annual -------- Facing Fee with respect to each Letter of Credit be less than $500; it being agreed that (x) on the date of issuance of any Letter of Credit and on each anniversary thereof prior to the termination of such Letter of Credit, if $500 will exceed the amount of Facing Fees that will accrue with respect to such Letter of Credit for the immediately succeeding 12-month period, the full $500 shall be payable on the date of issuance of such Letter of Credit and on each such anniversary thereof prior to the termination of such Letter of Credit and (y) if on the date of the termination of any Letter of Credit, $500 actually exceeds the amount of Facing Fees paid or payable with respect to such Letter of Credit for the period beginning on the date of the issuance thereof (or if the respective Letter of Credit has been outstanding for more than one year, the date of the last anniversary of the issuance thereof occurring prior to the termination of such Letter of Credit) and ending on the date of the termination thereof, an amount equal to such excess shall be paid as additional Facing Fees with respect to such Letter of Credit on the next date upon which Facing Fees are payable in accordance with the immediately succeeding sentence. Except as provided in the immediately preceding sentence, accrued Facing Fees shall be due and payable quarterly in arrears on each Quarterly Payment Date and upon the first day on or after the termination of the Total Revolving Loan Commitment upon which no Letters of Credit remain outstanding. (d) The Borrower shall pay directly to each Letter of Credit Issuer upon each issuance of, payment under, and/or amendment of, a Letter of Credit issued by such Letter of Credit Issuer such amount as shall at the time of such issuance, payment or amendment be the administrative charge which such Letter of Credit Issuer is generally charging for issuances of, payments under or amendments of, letters of credit issued by it. (e) The Borrower shall pay to each Agent, for its own account, such other fees as may be agreed to in writing from time to time between the Borrower and such Agent, when and as due. (f) All computations of Fees shall be made in accordance with Section 13.07(b). 3.02 Voluntary Termination or Reduction of Total Unutilized Revolving ---------------------------------------------------------------- Loan Commitment. (a) Upon at least three Business Days' prior notice to the - --------------- Administrative Agent at its Notice Office (which notice the Administrative Agent shall promptly transmit to each of the Banks), the Borrower shall have the right, without premium or penalty, to terminate or partially reduce the Total Unutilized Revolving Loan Commitment provided that (i) any such termination or -------- partial reduction shall apply to proportionately and permanently reduce the Revolving Loan Commitment of each Bank with such a Commitment, (ii) any partial reduction pursuant to this Section 3.02(a) shall be in integral multiples of $1,000,000 and (iii) no reduction to the Total Unutilized Revolving Loan Commitment shall be in an amount which would cause the Revolving Loan Commitment of any RL Bank to be reduced (as required by the preceding clause (i)) by an amount which exceeds the remainder of (A) the Unutilized Revolving Loan Commitment of such RL Bank as in effect immediately before giving effect to such reduction minus (B) such RL Bank's Adjusted RL Percentage of the aggregate principal amount of Swingline Loans then outstanding. (b) In the event of certain refusals by a Bank to consent to certain proposed changes, waivers, discharges or terminations with respect to this Agreement which have been approved by the Required Banks as provided in Section 13.12(b), the Borrower shall have the right, subject to obtaining the consents required by Section 13.12(b), upon five Business Days' prior written notice to the Administrative Agent at its Notice Office (which notice the Administrative Agent shall promptly transmit to each of the Banks), to terminate the entire Revolving Loan Commitment of such Bank, so long as all Loans, together with accrued and unpaid interest, Fees and all other amounts, owing to such Bank (including all amounts, if any, owing pursuant to Section 1.11 but excluding amounts owing in respect of Term Loans maintained by such Bank, if such Term Loans are not being repaid pursuant to Section 13.12(b)) are repaid concurrently with the effectiveness of such termination (at which time Schedule I shall be deemed modified to reflect such changed amounts) and at such time, unless the respective Bank continues to have outstanding Term Loans hereunder, such Bank shall no longer constitute a "Bank" for purposes of this Agreement, except with respect to indemnifications under this Agreement (including, without limitation, Sections 1.10, 1.11, 2.05, 4.04, 13.01 and 13.06), which shall survive as to such repaid Bank. 3.03 Mandatory Reduction of Commitments. (a) The Total Commitment ---------------------------------- (and the Term Loan Commitment and Revolving Loan Commitment of each Bank) shall terminate in its entirety on July 15, 1999 unless the Initial Borrowing Date has occurred on or before such date. (b) In addition to any other mandatory commitment reductions pursuant to this Section 3.03, the Total Term Loan Commitment (and the Term Loan Commitment of each Bank with such a Commitment) shall terminate in its entirety on the Initial Borrowing Date (after giving effect to the making of the Term Loans on such date). (c) In addition to any other mandatory commitment reductions pursuant to this Section 3.03, the Total Revolving Loan Commitment (and the Revolving Loan Commitment of each RL Bank) shall terminate in its entirety on the Revolving Loan Maturity Date. (d) In addition to any other mandatory commitment reductions pursuant to this Section 3.03, the Total Revolving Loan Commitment shall be permanently reduced from time to time to the extent required by Section 4.02. (e) Each reduction to the Total Term Loan Commitment or Total Revolving Loan Commitment pursuant to this Section 3.03 (or pursuant to Section 4.02) shall be applied proportionately to reduce the Term Loan Commitment or the Revolving Loan Commitment, as the case may be, of each Bank with such a Commitment. SECTION 4. Payments. -------- 4.01 Voluntary Prepayments. The Borrower shall have the right to --------------------- prepay the Loans, and the right to allocate such prepayments to Term Loans, Revolving Loans and/or Swingline Loans as the Borrower elects, in whole or in part, without premium or penalty except as otherwise provided in this Agreement, from time to time on the following terms and conditions: (i) the Borrower shall give the Administrative Agent at its Notice Office written notice (or telephonic notice promptly confirmed in writing) of its intent to prepay the Loans, whether such Loans are Term Loans, Revolving Loans or Swingline Loans, the amount of such prepayment, the Types of Loans to be repaid and (in the case of Eurodollar Loans) the specific Borrowing(s) pursuant to which made, which notice (I) shall be given by the Borrower prior to 12:00 Noon (New York time) (x) at least one Business Day prior to the date of such prepayment in the case of Term Loans and Revolving Loans maintained as Base Rate Loans, (y) at least three Business Days prior to the date of such prepayment in the case of Eurodollar Loans and (z) on the date of such prepayment in the case of Swingline Loans and (II) shall, except in the case of Swingline Loans, promptly be transmitted by the Administrative Agent to each of the Banks; (ii) each prepayment (other than prepayments in full of (I) all outstanding Base Rate Loans or (II) any outstanding Borrowing of Eurodollar Loans) shall be in an aggregate principal amount of at least (x) $1,000,000, in the case of Eurodollar Loans, (y) $500,000, in the case of Revolving Loans and Term Loans maintained as Base Rate Loans and (z) $100,000, in the case of Swingline Loans and, in each case, if greater, in integral multiples of $100,000, provided, that no partial prepayment of -------- Eurodollar Loans made pursuant to a Borrowing shall reduce the aggregate principal amount of the Eurodollar Loans outstanding pursuant to such Borrowing to an amount less than the Minimum Borrowing Amount applicable thereto; (iii) at the time of any prepayment of Eurodollar Loans pursuant to this Section 4.01 on any date other than the last day of the Interest Period applicable thereto, the Borrower shall pay the amounts required pursuant to Section 1.11; (iv) except as provided in clause (vi) below, each prepayment in respect of any Loans made pursuant to a Borrowing shall be applied pro rata --- ---- among such Loans, provided, that at the Borrower's election in connection -------- with any prepayment of Revolving Loans pursuant to this Section 4.01, such prepayment shall not be applied to any Revolving Loans of a Defaulting Bank; (v) each prepayment of principal of Term Loans pursuant to this Section 4.01 shall be applied to reduce the then remaining Scheduled Repayments on a pro rata basis; and --- ---- (vi) in the event of certain refusals by a Bank to consent to certain proposed changes, waivers, discharges or terminations with respect to this Agreement which have been approved by the Required Banks as provided in Section 13.12(b), the Borrower may, upon five Business Days' prior written notice to the Administrative Agent at its Notice Office (which notice the Administrative Agent shall promptly transmit to each of the Banks), repay all Loans of such Bank (including all amounts, if any, owing pursuant to Section 1.11), together with accrued and unpaid interest, Fees and all other amounts then owing to such Bank (or owing to such Bank with respect to each Tranche which gave rise to the need to obtain such Bank's individual consent) in accordance with said Section 13.12(b), so long as (A) in the case of the repayment of Revolving Loans of any Bank pursuant to this clause (vi), the Revolving Loan Commitment of such Bank is terminated concurrently with such repayment (at which time Schedule I shall be deemed modified to reflect the changed Revolving Loan Commitments) and (B) the consents required by Section 13.12(b) in connection with the repayment pursuant to this clause (vi) shall have been obtained. 4.02 Mandatory Repayments and Commitment Reductions. (a) (i) If on ---------------------------------------------- any date the sum of (x) the aggregate outstanding principal amount of Revolving Loans made by Non-Defaulting Banks and Swingline Loans (after giving effect to all other repayments thereof on such date) and (y) the Letter of Credit Outstandings on such date, exceeds the Adjusted Total Revolving Loan Commitment as then in effect, the Borrower shall repay on such date the principal of Swingline Loans, and if no Swingline Loans are or remain outstanding, the principal of Revolving Loans of Non-Defaulting Banks in an aggregate amount equal to such excess. If, after giving effect to the prepayment of all outstanding Swingline Loans and all outstanding Revolving Loans of Non- Defaulting Banks, the aggregate amount of Letter of Credit Outstandings exceeds the Adjusted Total Revolving Loan Commitment as then in effect, the Borrower shall pay to the Administrative Agent at the Payment Office on such date an amount in cash and/or Cash Equivalents equal to such excess (up to the aggregate amount of Letter of Credit Outstandings at such time) and the Administrative Agent shall hold such payment as security for the obligations of the Borrower to Non-Defaulting Banks hereunder pursuant to a cash collateral agreement to be entered into in form and substance reasonably satisfactory to the Administrative Agent. (ii) On any date on which the aggregate outstanding principal amount of the Revolving Loans made by any Defaulting Bank exceeds the Revolving Loan Commitment of such Defaulting Bank, the Borrower shall prepay on such date principal of Revolving Loans of such Defaulting Bank in an amount equal to such excess. (b) In addition to any other mandatory repayments or commitment reductions pursuant to this Section 4.02, on each date set forth below, the Borrower shall be required to repay that principal amount of Term Loans, to the extent then outstanding, as is set forth opposite such date (each such repayment, as the same may be reduced as provided in Sections 4.01 and 4.02(h), a "Scheduled Repayment"): Scheduled Repayment Date Amount - ------------------------ ------ September 30, 1999 $ 337,500 December 31, 1999 $ 337,500 March 31, 2000 $ 337,500 June 30, 2000 $ 337,500 September 30, 2000 $ 337,500 December 31, 2000 $ 337,500 March 31, 2001 $ 337,500 June 30, 2001 $ 337,500 September 30, 2001 $ 337,500 December 31, 2001 $ 337,500 March 31, 2002 $ 337,500 June 30, 2002 $ 337,500 September 30, 2002 $ 337,500 December 31, 2002 $ 337,500 March 31, 2003 $ 337,500 June 30, 2003 $ 337,500 September 30, 2003 $ 337,500 December 31, 2003 $ 337,500 March 31, 2004 $ 337,500 June 30, 2004 $ 337,500 September 30, 2004 $ 337,500 December 31, 2004 $ 337,500 March 31, 2005 $ 337,500 June 30, 2005 $ 337,500 September 30, 2005 $ 337,500 December 31, 2005 $ 337,500 March 31, 2006 $ 337,500 Term Loan Maturity Date $125,887,500 (c) In addition to any other mandatory repayments or commitment reductions pursuant to this Section 4.02, on each date on or after the Effective Date upon which the Borrower or any of its Subsidiaries receives Net Sale Proceeds from any Asset Sale, an amount equal to the Applicable Prepayment Percentage of the Net Sale Proceeds from such Asset Sale shall be applied as a mandatory repayment and/or commitment reduction in accordance with the requirements of Sections 4.02(h) and (i); provided that (I) with respect to no more than $15,000,000 in the aggregate of such Net Sale Proceeds received by the Borrower and its Subsidiaries after the Effective Date in connection with one or more Permitted Sale-Leaseback Transactions, such Net Sale Proceeds shall not give rise to a mandatory repayment (and/or commitment reduction, as the case may be) on such date to the extent (i) no Default or Event of Default then exists and (ii) the Borrower delivers an officer's certificate to the Administrative Agent on or prior to such date stating that such Net Sale Proceeds constitute Net Sale Proceeds of a Permitted Sale-Leaseback Transaction consummated in accordance with the requirements of Section 9.02(a) and the definition thereof and (II) with respect to no more than $10,000,000 in the aggregate of such Net Sale Proceeds received by the Borrower or its Subsidiaries in any fiscal year of the Borrower, such Net Sale Proceeds shall not give rise to a mandatory repayment (and/or commitment reduction, as the case may be) on such date to the extent that no Default or Event of Default then exists and the Borrower delivers a certificate to the Administrative Agent on or prior to such date stating that such Net Sale Proceeds shall be used or contractually committed to be used to purchase assets used or to be used in the businesses permitted pursuant to Section 9.01 (including, without limitation (but only to the extent permitted by Section 9.02), the purchase of the capital stock of a Person engaged in such businesses) within 270 days following the date of receipt of such Net Sale Proceeds from such Asset Sale (which certificate shall set forth the estimates of the proceeds to be so expended); provided further that (i) if all or any portion of such Net Sale Proceeds are not so used (or contractually committed to be used) within such 270 day period, such remaining portion shall be applied on the last day of such period as a mandatory repayment and/or commitment reduction as provided above (without giving effect to the immediately preceding proviso) and (ii) if all or any portion of such Net Sale Proceeds are not so used within such 270-day period referred to in clause (i) of this proviso because such amount is contractually committed to be used and subsequent to such date such contract is terminated or expires without such portion being so used, such remaining portion shall be applied on the date of such termination or expiration as a mandatory repayment and/or commitment reduction as provided above (without giving effect to the immediately preceding proviso). Notwithstanding the foregoing provisions of this Section 4.02(c), so long as no Default or Event of Default shall have occurred and be continuing, no mandatory repayments or commitment reductions shall be required pursuant to the immediately preceding proviso appearing in this Section 4.02(c) until the date on which the aggregate Net Sale Proceeds from all Asset Sales not reinvested within the time periods specified by said proviso equals or exceeds $1,000,000. (d) In addition to any other mandatory repayments or commitment reductions pursuant to this Section 4.02, on each date on or after the Effective Date on which the Borrower or any of its Subsidiaries receives any cash proceeds from any incurrence of Indebtedness (other than Indebtedness permitted to be incurred pursuant to Section 9.04 as in effect on the Effective Date) or issuance of Preferred Stock (other than (x) Disqualified Preferred Stock to the extent the proceeds therefrom are used to effect Permitted Acquisitions, (y) Qualified Preferred Stock and (z) Pacer Logistics Preferred Stock issued on the Initial Borrowing Date in accordance with the requirements of Section 5.08) by the Borrower or any of its Subsidiaries, an amount equal to the Applicable Prepayment Percentage of the Net Cash Proceeds of the respective incurrence of Indebtedness or issuance of Preferred Stock shall be applied as a mandatory repayment and/or commitment reduction in accordance with the requirements of Sections 4.02(h) and (i). Notwithstanding the foregoing provisions of this Section 4.02(d), so long as no Default or Event of Default shall have occurred and be continuing, no mandatory repayment or commitment reduction shall be required pursuant to this Section 4.02(d) until the date on which the sum of (x) the Net Cash Proceeds required to be applied as mandatory repayments and/or commitment reductions in the absence of this sentence plus (y) the Net Cash Proceeds required to be ---- applied as mandatory repayments and/or commitment reductions pursuant to Section 4.02(e) in the absence of the last sentence of said Section, equals or exceeds $1,000,000. (e) In addition to any other mandatory repayments or commitment reductions pursuant to this Section 4.02, on each date on or after the Effective Date on which the Borrower or any of its Subsidiaries receives any cash proceeds from any sale or issuance of Qualified Preferred Stock or common equity of (or cash capital contributions to) the Borrower or any of its Subsidiaries (other than (v) the Equity Financing, (w) issuances of Borrower Common Stock to management of the Borrower and its Subsidiaries (including as a result of the exercise of any options with respect thereto) in an aggregate amount not to exceed $5,000,000 in any fiscal year of the Borrower, (x) equity contributions to any Subsidiary of the Borrower made by the Borrower or any other Subsidiary of the Borrower, (y) any issuance of Borrower Common Stock and Qualified Preferred Stock to the extent the proceeds therefrom are used to effect Permitted Acquisitions and (z) additional issuances of Borrower Common Stock and Qualified Preferred Stock, to the extent that the aggregate proceeds excluded pursuant to this clause (z) after the Effective Date do not exceed $5,000,000), an amount equal to the Applicable Prepayment Percentage of the Net Cash Proceeds of the respective equity issuance or capital contribution shall be applied as a mandatory repayment and/or commitment reduction in accordance with the requirements of Sections 4.02(h) and (i); provided that Net Cash Proceeds -------- received by the Borrower from additional sales or issuances of Borrower Common Stock shall not be required to be applied as a mandatory repayment and/or commitment reduction on the date of receipt thereof, to the extent that (x) no Default or Event of Default then exists and (y) the Borrower delivers a certificate to the Administrative Agent on or prior to such date stating that such Net Cash Proceeds shall be used or contractually committed to be used to make Capital Expenditures and/or effect Permitted Acquisitions within 270 days following the date of receipt of such Net Cash Proceeds (which certificate shall set forth the estimates of the proceeds to be so expended), and provided -------- further, that (i) if all or any portion of such Net Cash Proceeds are not so - ------- used (or contractually committed to be used) within such 270-day period, such remaining portion shall be applied on the last day of such period as a mandatory repayment and/or commitment reduction as provided above (without giving effect to the immediately preceding proviso) and (ii) if all or any portion of such Net Cash Proceeds are not so used within such 270-day period referred to in clause (i) above because such amount is contractually committed to be used and subsequent to such date such contract is terminated or expires without such portion being so used, such remaining portion shall be applied on the date of such termination or expiration as a mandatory repayment and/or commitment reduction as provided above (without giving effect to the immediately preceding proviso). Notwithstanding the foregoing provisions of this Section 4.02(e), so long as no Default or Event of Default shall have occurred and be continuing, no mandatory repayment and/or commitment reduction shall be required pursuant to this Section 4.02(e) until the date on which the sum of (x) the Net Cash Proceeds required to be applied as mandatory repayments and/or commitment reductions in the absence of this sentence plus (y) the Net Cash Proceeds required to be applied as mandatory ---- repayments and/or commitment reductions pursuant to Section 4.02(d) in the absence of the last sentence in said Section, equals or exceeds $1,000,000. (f) In addition to any other mandatory repayments or commitment reductions pursuant to this Section 4.02, within 10 days following each date on or after the Effective Date on which the Borrower or any of its Subsidiaries receives any cash proceeds from any Recovery Event, an amount equal to 100% of the proceeds of such Recovery Event (net of reasonable costs (including, without limitation, legal costs and expenses) and taxes incurred in connection with such Recovery Event and the amount of such proceeds required to be used to repay any Indebtedness (other than Indebtedness of the Banks pursuant to this Agreement) which is secured by the respective assets subject to such Recovery Event) shall be applied as a mandatory repayment and/or commitment reduction in accordance with the requirements of Sections 4.02(h) and (i), provided that (x) so long as -------- no Default or Event of Default then exists and such proceeds do not exceed $3,500,000, such proceeds shall not be required to be so applied on such date to the extent that an Authorized Officer of the Borrower has delivered a certificate to the Administrative Agent on or prior to such date stating that such proceeds shall be used or shall be committed to be used to replace or restore any properties or assets in respect of which such proceeds were paid within 360 days following the date of such Recovery Event (which certificate shall set forth the estimates of the proceeds to be so expended) and (y) so long as no Default or Event of Default then exists and to the extent that (a) the amount of such proceeds exceeds $3,500,000, (b) the amount of such proceeds, together with other cash available to the Borrower and its Subsidiaries and permitted to be spent by them on Capital Expenditures during the relevant period, equals at least 100% of the cost of replacement or restoration of the properties or assets in respect of which such proceeds were paid as determined by the Borrower and as supported by such estimates or bids from contractors or subcontractors or such other supporting information as the Administrative Agent may reasonably accept, (c) an Authorized Officer of the Borrower has delivered to the Administrative Agent a certificate on or prior to the date the respective mandatory repayment and/or commitment reduction would otherwise be required pursuant to this Section 4.02(f) in the form described in clause (x) above and also certifying its determination as required by preceding clause (b) and certifying the sufficiency of business interruption insurance as required by succeeding clause (d), and (d) an Authorized Officer of the Borrower has delivered to the Administrative Agent such evidence as the Administrative Agent may reasonably request in form and substance reasonably satisfactory to the Administrative Agent establishing that the Borrower has sufficient business interruption insurance and that the Borrower will receive payment thereunder in such amounts and at such times as are necessary to satisfy all obligations and expenses of the Borrower (including, without limitation, all debt service requirements, including pursuant to this Agreement), without any delay or extension thereof, for the period from the date of the respective casualty, condemnation or other event giving rise to the Recovery Event and continuing through the completion of the replacement or restoration of the respective properties or assets, then the entire amount of the proceeds of such Recovery Event and not just the portion in excess of $3,500,000 shall be deposited with the Administrative Agent pursuant to a cash collateral arrangement reasonably satisfactory to the Administrative Agent whereby such proceeds shall be disbursed to the Borrower from time to time as needed to pay or reimburse the Borrower or such Subsidiary actual costs incurred by it in connection with the replacement or restoration of the respective properties or assets (pursuant to such certification requirements as may be established by the Administrative Agent), provided further, that at any ---------------- time while an Event of Default has occurred and is continuing, the Required Banks may direct the Administrative Agent (in which case the Administrative Agent shall, and is hereby authorized by the Borrower to, follow said directions) to apply any or all proceeds then on deposit in such collateral account to the repayment of Obligations hereunder in the same manner as proceeds would be applied pursuant to the Security Agreement, and provided further, that ---------------- if all or any portion of such proceeds not required to be applied as a mandatory repayment and/or commitment reduction pursuant to the second preceding proviso (whether pursuant to clause (x) or (y) thereof) are either (A) not so used or committed to be so used within 360 days after the date of the respective Recovery Event or (B) if committed to be used within 360 days after the date of receipt of such net proceeds and not so used within 18 months after the date of respective Recovery Event then, in either such case, such remaining portion not used or committed to be used in the case of preceding clause (A) and not used in the case of preceding clause (B) shall be applied on the date occurring 360 days after the date of the respective Recovery Event in the case of clause (A) above or the date occurring 18 months after the date of the respective Recovery Event in the case of clause (B) above as a mandatory repayment and/or commitment reduction in accordance with the requirements of Sections 4.02(h) and (i). (g) In addition to any other mandatory repayments or commitment reductions pursuant to this Section 4.02, on each Excess Cash Flow Payment Date, an amount equal to the Applicable Excess Cash Flow Percentage of the Excess Cash Flow for the relevant Excess Cash Flow Payment Period shall be applied as a mandatory repayment and/or commitment reduction in accordance with the requirements of Sections 4.02(h) and (i). (h) Each amount required to be applied pursuant to Sections 4.02(c), (d), (e), (f) and (g) in accordance with this Section 4.02(h) shall be applied (i) first, to repay the outstanding principal amount of Term Loans and (ii) second, to the extent in excess of the amounts required to be applied pursuant to preceding clause (i), to reduce the Total Revolving Loan Commitment (it being understood and agreed that (x) the amount of any reduction to the Total Revolving Loan Commitment as provided in immediately preceding clause (ii) shall be deemed to be an application of proceeds for purposes of this Section 4.02(h) even though cash is not actually applied and (y) any cash received by the Borrower or such Subsidiary will be retained by such Person except to the extent that such cash is otherwise required to be applied as provided in Section 4.02(a) as a result of any reduction to the Total Revolving Loan Commitment). All repayments of outstanding Term Loans pursuant to Sections 4.02(c), (d), (e), (f) or (g) shall be applied to reduce the then remaining Scheduled Repayments on a pro rata basis (based upon the then remaining Scheduled Repayments after --- ---- giving effect to all prior reductions thereto). (i) With respect to each repayment of Loans required by this Section 4.02, the Borrower may designate the Types of Loans of the respective Tranche which are to be repaid and, in the case of Eurodollar Loans, the specific Borrowing or Borrowings of the respective Tranche pursuant to which made, provided that: (i) repayments of Eurodollar Loans pursuant to - -------- this Section 4.02 may only be made on the last day of an Interest Period applicable thereto unless (x) all Eurodollar Loans of the respective Tranche with Interest Periods ending on such date of required repayment and all Base Rate Loans of the respective Tranche have been paid in full and/or (y) concurrently with such repayment, the Borrower pays all breakage costs and other amounts owing to each Bank pursuant to Section 1.11; (ii) if any repayment of Eurodollar Loans made pursuant to a single Borrowing shall reduce the outstanding Eurodollar Loans made pursuant to such Borrowing to an amount less than the Minimum Borrowing Amount applicable thereto, such Borrowing shall be converted at the end of the then current Interest Period into a Borrowing of Base Rate Loans; and (iii) each repayment of any Tranche of Loans made pursuant to a Borrowing shall be applied pro rata among such Tranche of Loans. In the --- ---- absence of a designation by the Borrower as described in the preceding sentence, the Administrative Agent shall, subject to the above, make such designation in its sole discretion with a view, but no obligation, to minimize breakage costs owing under Section 1.11. Notwithstanding the foregoing provisions of this Section 4.02, if at any time the mandatory repayment of Loans pursuant to this Section 4.02 would result, after giving effect to the procedures set forth in this clause (i) above, in the Borrower incurring breakage costs under Section 1.11 as a result of Eurodollar Loans being repaid other than on the last day of an Interest Period applicable thereto (any such Eurodollar Loans, "Affected Loans"), the Borrower may elect, by written notice to the Administrative Agent, to have the provisions of the following sentence be applicable. At the time any Affected Loans are otherwise required to be prepaid, the Borrower may elect to deposit 100% (or such lesser percentage elected by the Borrower as not being repaid) of the principal amounts that otherwise would have been paid in respect of the Affected Loans with the Administrative Agent to be held as security for the obligations of the Borrower hereunder pursuant to a cash collateral agreement to be entered into in form and substance satisfactory to the Administrative Agent, with such cash collateral to be released from such cash collateral account (and applied to repay the principal amount of such Eurodollar Loans) upon each occurrence thereafter of the last day of an Interest Period applicable to Eurodollar Loans (or such earlier date or dates as shall be requested by the Borrower), with the amount to be so released and applied on the last day of each Interest Period to be the amount of such Eurodollar Loans to which such Interest Period applies (or, if less, the amount remaining in such cash collateral account). (j) Notwithstanding anything to the contrary contained elsewhere in this Agreement, (i) all then outstanding Swingline Loans shall be repaid in full on the Swingline Expiry Date and (ii) all other then outstanding Loans shall be repaid in full on the respective Maturity Date for such Loans. 4.03 Method and Place of Payment. Except as otherwise specifically --------------------------- provided herein, all payments under this Agreement or any Note shall be made to the Administrative Agent for the ratable account of the Bank or Banks entitled thereto not later than 12:00 Noon (New York time) on the date when due and shall be made in U.S. Dollars in immediately available funds at the Payment Office. Any payments under this Agreement or under any Note which are made later than 12:00 Noon (New York time) on any Business Day shall be deemed to have been made on the next succeeding Business Day. Whenever any payment to be made hereunder or under any Note shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest shall be payable during such extension at the applicable rate in effect immediately prior to such extension. 4.04 Net Payments. (a) All payments made by the Borrower hereunder ------------ or under any Note will be made without setoff, counterclaim or other defense. Except as provided in Section 4.04(b), all such payments will be made free and clear of, and without deduction or withholding for, any present or future taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed with respect to such payments by any jurisdiction or by any political subdivision or taxing authority thereof or therein with respect to such payments (but excluding, in the case of each Bank, except as provided in the second succeeding sentence, any tax, including any income, branch profits, franchise or similar tax, which in each case is imposed on or measured by the net income, net profits or capital of such Bank pursuant to the laws of the jurisdiction in which such Bank is organized or the jurisdiction in which the principal office or applicable lending office of such Bank is located or any political subdivision or taxing authority thereof or therein) and all interest, penalties or similar liabilities with respect to such nonexcluded taxes, levies, imposts, duties, fees, assessments or other charges (all such nonexcluded taxes, levies, imposts, duties, fees, assessments or other charges being referred to collectively as "Taxes"). If any Taxes are so levied or imposed, the Borrower agrees to pay the full amount of such Taxes, and such additional amounts as may be necessary so that every payment of all amounts due by the Borrower under this Agreement or under any Note, after withholding or deduction for or on account of any Taxes, will not be less than the amount provided for herein or in such Note. If any amounts are payable in respect of Taxes pursuant to the preceding sentence (any such amounts, the "Gross-Up Amount"), the Borrower agrees to reimburse each Bank, upon the written request of such Bank, for the net amount, if any, of any taxes such Bank shall determine are incurred by such Bank (taking into account in calculating such net amount any allowable credit, deduction or other benefit available as a result of, or with respect to, the payment by the Borrower to such Bank of (i) the Gross-Up Amount or (ii) any amount paid pursuant to this sentence) that would not have been incurred in the absence of the payment by the Borrower of (i) the Gross-Up Amount or (ii) any amount paid pursuant to this sentence. The Borrower will furnish to the Administrative Agent within 45 days after the date the payment of any Taxes is due pursuant to applicable law certified copies of tax receipts evidencing such payment by the Borrower. The Borrower agrees to indemnify and hold harmless each Bank, and reimburse such Bank upon its written request, for the amount of any Taxes so levied or imposed and paid by such Bank in respect of any payments by or on behalf of the Borrower. (b) Each Bank party to this Agreement on the Effective Date hereby represents that, as of the Effective Date, all payments of principal, interest, and fees to be made to it by the Borrower pursuant to this Agreement will be totally exempt from withholding of United States federal tax. Each Bank that is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax purposes agrees to deliver to the Borrower and the Administrative Agent on or prior to the Effective Date, or in the case of a Bank that is an assignee or transferee of an interest under this Agreement pursuant to Section 1.13 or 13.04, on the date of such assignment or transfer to such Bank, (i) two accurate and complete original signed copies of Internal Revenue Service Form W-8ECI or Form W-8BEN (with respect to a complete exemption under an income tax treaty) (or successor forms) certifying to such Bank's entitlement to a complete exemption from United States withholding tax with respect to payments to be made under this Agreement and under any Note, or (ii) if the Bank is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue Service Form W-8ECI or Form W-8BEN (with respect to a complete exemption under an income tax treaty) pursuant to clause (i) above, (x) a certificate substantially in the form of Exhibit D (any such certificate, a "Section 4.04(b)(ii) Certificate") and (y) two accurate and complete original signed copies of Internal Revenue Service Form W-8BEN (with respect to the portfolio interest exemption) (or successor form) certifying to such Bank's entitlement to a complete exemption from United States withholding tax with respect to payments of interest to be made under this Agreement and under any Note. In addition, each Bank agrees that (a) from time to time after the Effective Date, when a lapse in time or change in circumstances renders the previous certification obsolete or inaccurate in any material respect, and (b) upon the Borrower's reasonable request after the occurrence of any other event requiring the delivery of a Form W-8ECI, Form W-8BEN or any successor form in addition to or in replacement of the forms previously delivered, it will deliver to the Borrower and the Administrative Agent two new accurate and complete original signed copies of Internal Revenue Service Form W-8ECI, Form W-8BEN (with respect to the benefits of any income tax treaty) , Form W-8BEN (with respect to the portfolio interest exemption) and a Section 4.04(b)(ii) Certificate, or any successor form, as the case may be, and such other forms as may be required in order to confirm or establish the entitlement of such Bank to a continued exemption from or reduction in United States withholding tax with respect to payments under this Agreement and any Note, or it shall immediately notify the Borrower and the Administrative Agent of its inability to deliver any such form or certificate in which case such Bank shall not be required to deliver any such form or certificate pursuant to this Section 4.04(b). Notwithstanding anything to the contrary contained in Section 4.04(a), but subject to the immediately succeeding sentence, (x) the Borrower shall be entitled, to the extent it is required to do so by law, to deduct or withhold income or similar taxes imposed by the United States (or any political subdivision or taxing authority thereof or therein) from interest, fees or other amounts payable hereunder for the account of any Bank which is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for federal income tax purposes to the extent that such Bank has not provided to the Borrower U.S. Internal Revenue Service forms that establish a complete exemption from such deduction or withholding and (y) the Borrower shall not be obligated pursuant to Section 4.04(a) hereof to gross-up payments to be made to such Bank, or to indemnify and hold harmless or reimburse such Bank, in respect of income or similar taxes imposed by the United States if (I) such Bank has not provided to the Borrower the Internal Revenue Service forms required to be provided to the Borrower pursuant to this Section 4.04(b) or (II) in the case of a payment, other than interest, to a Bank described in clause (ii) above, to the extent that such forms do not establish a complete exemption from withholding of such taxes. Notwithstanding anything to the contrary contained in the preceding sentence or elsewhere in this Section 4.04 and except as set forth in Section 13.04(b), the Borrower agrees to pay additional amounts and to indemnify each Bank in the manner set forth in Section 4.04(a) (without regard to the identity of the jurisdiction requiring the deduction or withholding) in respect of any Taxes deducted or withheld by it as described in the immediately preceding sentence as a result of any changes after the Effective Date in any applicable law, treaty, governmental rule, regulation, guideline or order, or in the interpretation thereof, relating to the deducting or withholding of such Taxes. For purposes of the immediately preceding sentence, the final U.S. Treasury regulations that were issued October 6, 1997 and amended as of December 31, 1998 with respect to the withholding of United States Federal income tax (the "New Withholding Regulations") shall not be considered to constitute a change after the Effective Date, or otherwise, in any applicable law, treaty, governmental rule, regulation, guideline or order, or in the interpretation thereof, relating to the deducting or withholding of Taxes, notwithstanding that the New Withholding Regulations generally are only effective for payments made after December 31, 1999. The Borrower shall not be required to pay any additional amounts or indemnification under Section 4.04(a) to any Bank to the extent that the obligation to pay such additional amounts or indemnification would not have arisen but for the representation set forth in the first sentence of Section 4.04(b) above made by the Bank not being true. (c) If the Borrower pays any additional amount under this Section 4.04 with respect to taxes imposed on any payments made to or on behalf of a Bank and such Bank determines in its sole discretion that it has actually received or realized in connection therewith any refund of tax, or any reduction of, or credit against, its tax liabilities (a "Tax Benefit"), such Bank shall pay to the Borrower an amount that the Bank shall, in its sole discretion, determine is equal to the net benefit, after tax, which was obtained by the Bank as a consequence of such refund, reduction or credit; provided, however, that -------- ------- (i) any Bank may determine, in its sole discretion consistent with the policies of such Bank, whether to seek a Tax Benefit and (ii) nothing in this Section 4.04(c) shall require the Bank to disclose any confidential information to the Borrower (including, without limitation, its tax returns). (d) Each Bank shall use reasonable efforts (consistent with legal and regulatory restrictions and subject to overall policy considerations of such Bank) (i) to file any certificate or document or to furnish any information as reasonably requested by the Borrower pursuant to any applicable treaty, law or regulation or (ii) to designate a different applicable lending office of such Bank, if the making of such filing or the furnishing of such information or the designation of such other lending office would avoid the need for or reduce the amount of any additional amounts payable by the Borrower and would not, in the sole discretion of such Bank, be disadvantageous to such Bank. (e) The provisions of this Section 4.04 are subject to the provisions of Section 13.18 (to the extent applicable). SECTION 5. Conditions Precedent to Initial Credit Events. The --------------------------------------------- obligation of each Bank to make each Loan hereunder, and the obligation of the Letter of Credit Issuer to issue each Letter of Credit hereunder, in each case on the Initial Borrowing Date, is subject at the time of the making of such Loan or the issuance of such Letter of Credit, as the case may be, to the satisfaction of the following conditions: 5.01 Execution of Agreement; Notes. On or prior to the Initial ----------------------------- Borrowing Date, (i) the Effective Date shall have occurred and (ii) there shall have been delivered to the Administrative Agent for the account of each Bank requesting same the appropriate Term Note and/or Revolving Note and to BTCo, if so requested, the Swingline Note, in each case executed by the Borrower and in the amount, maturity and as otherwise provided herein. 5.02 Officer's Certificate. On the Initial Borrowing Date, the --------------------- Administrative Agent shall have received a certificate dated such date signed by an appropriate officer of the Borrower stating that all of the applicable conditions set forth in Sections 5.05 through 5.09, inclusive, and 6.01 (other than such conditions that are subject to the satisfaction of the Agents and/or the Required Banks), have been satisfied on such date. 5.03 Opinions of Counsel. On the Initial Borrowing Date, the ------------------- Administrative Agent shall have received opinions, addressed to each Agent, the Collateral Agent and each of the Banks and dated the Initial Borrowing Date, from (i) Dewey Ballantine LLP, special New York counsel to the Credit Parties, which opinion shall cover the matters contained in Exhibit E-1 and such other matters incident to the transactions contemplated herein as the Agents and the Required Banks may reasonably request and be in form and substance reasonably satisfactory to the Agents and the Required Banks, (ii) Waller Lansden Dortch & Davis, special Tennessee counsel to the Credit Parties, which opinion shall cover the matters contained in Exhibit E-2 and such other matters incident to the transactions contemplated herein as the Agents and the Required Banks may reasonably request and be in form and substance reasonably satisfactory to the Agents and the Required Banks, (iii) counsel rendering such opinions, reliance letters addressed to each Agent and each of the Banks and dated the Initial Borrowing Date with respect to all legal opinions delivered in connection with the Transaction, which opinions shall cover such matters as the Agents may reasonably request and be in form and substance reasonably satisfactory to the Agents and (iv) local counsel to the Credit Parties and/or the Agents reasonably satisfactory to the Agents, which opinions (x) shall be addressed to each Agent, the Collateral Agent and each of the Banks and be dated the Initial Borrowing Date, (y) shall cover the perfection of the security interests granted pursuant to the Security Documents and such other matters incident to the transactions contemplated herein as the Agents may reasonably request and (z) shall be in form and substance reasonably satisfactory to the Agents. 5.04 Company Documents; Proceedings. (a) On the Initial Borrowing ------------------------------ Date, the Administrative Agent shall have received from the Borrower and each other Credit Party a certificate, dated the Initial Borrowing Date, signed by the chairman, a vice-chairman, the president or any vice-president of such Credit Party, and attested to by the secretary or any assistant secretary of such Credit Party, in the form of Exhibit F with appropriate insertions, together with copies of the certificate of incorporation, by-laws or equivalent organizational documents of such Credit Party and the resolutions of such Credit Party referred to in such certificate and all of the foregoing (including each such certificate of incorporation, by-laws or other organizational document) shall be reasonably satisfactory to the Agents. (b) On the Initial Borrowing Date, all Company and legal proceedings and all instruments and agreements in connection with the transactions contemplated by this Agreement and the other Documents shall be reasonably satisfactory in form and substance to the Agents, and the Administrative Agent shall have received all information and copies of all certificates, documents and papers, including good standing certificates, bring-down certificates and any other records of Company proceedings and governmental approvals, if any, which any Agent reasonably may have requested in connection therewith, such documents and papers, where appropriate, to be certified by proper Company or governmental authorities. (c) On the Initial Borrowing Date and after giving effect to the Transaction, the capital structure (including, without limitation, the terms of any capital stock, options, warrants or other securities issued by the Borrower or any of its Subsidiaries), and management of the Borrower and its Subsidiaries shall be in form and substance satisfactory to the Agents. 5.05 Adverse Change, etc. (a) On the Initial Borrowing Date, since -------------------- December 31, 1998, nothing shall have occurred which (i) the Required Banks or any Agent shall reasonably determine has had, or could reasonably be expected to have, a material adverse effect on the rights or remedies of the Banks or the Agents, or on the ability of any Credit Party to perform its obligations to them hereunder or under any other Credit Document or (ii) has had a material adverse effect on the Transaction or a Material Adverse Effect. (b) On the Initial Borrowing Date, there shall not have occurred and be continuing any material adverse change to the syndication market for credit facilities similar in nature to this Agreement and there shall not have occurred and be continuing a material disruption or a material adverse change in financial, banking or capital markets that would have a material adverse effect on the syndication, in each case as determined by the Agents in their reasonable discretion. 5.06 Litigation. On the Initial Borrowing Date, there shall be no ---------- actions, suits, proceedings or investigations pending or threatened (a) with respect to this Agreement or any other Document or the Transaction, (b) with respect to any Existing Indebtedness, (c) which could reasonably be expected to have a Material Adverse Effect or (d) which any Agent or the Required Banks shall determine could reasonably be expected to have (i) a Material Adverse Effect or (ii) a material adverse effect on the Transaction, the rights or remedies of the Banks or the Agents hereunder or under any other Credit Document or on the ability of any Credit Party to perform its respective obligations to the Banks or the Agents hereunder or under any other Credit Document. 5.07 Approvals. On the Initial Borrowing Date, (i) all necessary --------- governmental (domestic and foreign), regulatory and third party approvals in connection with any Existing Indebtedness, the Transaction, the transactions contemplated by the Documents and otherwise referred to herein or therein shall have been obtained and remain in full force and effect and evidence thereof shall have been provided to the Administrative Agent, and (ii) all applicable waiting periods shall have expired without any action being taken by any competent authority which restrains, prevents or imposes materially adverse conditions upon the consummation of the Transaction, the making of the Loans and the transactions contemplated by the Documents or otherwise referred to herein or therein. Additionally, there shall not exist any judgment, order, injunction or other restraint issued or filed or a hearing seeking injunctive relief or other restraint pending or notified prohibiting or imposing materially adverse conditions upon, or materially delaying, or making economically unfeasible, the consummation of the Transaction or the making of the Loans. 5.08 Consummation of the Recapitalization; Equity Financing, etc. ------------------------------------------------------------ (a) On the Initial Borrowing Date, Acquisition Corp., APL and the Borrower shall have effected the Recapitalization (i) pursuant to which Acquisition Corp. shall have acquired all of the capital stock (other than the equity subject to the LTS Equity Rollover) of the Borrower pursuant to, and in accordance with the terms of, the Stock Purchase Agreement (the "Acquisition") and (ii) as a result of which (immediately after giving effect thereto) (x) Acquisition Corp. shall own approximately 93% of the issued and outstanding shares of Borrower Common Stock, (y) APL shall retain shares of Borrower Common Stock with a value of approximately $7,500,000 (the "LTS Equity Rollover"), representing approximately 7.0% of the issued and outstanding shares of Borrower Common Stock, and (z) cash in an aggregate amount not to exceed $300,000,000 shall have been distributed to APL (other than in respect to equity being retained pursuant to the LTS Equity Rollover) (the "Recap Distribution"). Concurrently with the consummation of the Recapitalization, the Borrower shall have caused an amendment to its Certificate of Incorporation to be filed with the Secretary of State of the State of Tennessee, which amendment shall change the name of the Borrower to "Pacer International, Inc." (b) On the Initial Borrowing Date and immediately after giving effect to the Recapitalization, (i) the Borrower shall have acquired all of the capital stock (other than the equity subject to the Pacer Logistics Equity Rollover) of Pacer Logistics, by way of a one-step merger of Pacer Logistics Acquisition Corp. with and into Pacer Logistics, with Pacer Logistics as the surviving corporation of such merger, pursuant to, and in accordance with the terms of the Pacer Logistics Acquisition Documents, for aggregate cash consideration equal to approximately $72.0 million (the "Pacer Logistics Acquisition") and (ii) Pacer Logistics shall have issued 24,333.94 shares of 7.5% Series B Perpetual Participating Exchangeable Preferred Stock, par value $.01 per share, with an aggregate liquidation preference of $24,333,940 (the "Pacer Logistics Preferred Stock") to certain existing managers of Pacer Logistics in exchange for existing Preferred Stock of Pacer Logistics held by them with a like aggregate liquidation preference (the "Pacer Logistics Equity Rollover"). (c) On the Initial Borrowing Date, (i) Acquisition Corp. shall have received cash proceeds in an amount equal to at least $96,000,000 from the issuance of common stock of Acquisition Corp. to Apollo Investment Fund IV, L.P. (the "Apollo Equity Financing" and, together with the LTS Equity Rollover and the Pacer Logistics Equity Rollover, the "Equity Financing") and shall have utilized the full amount of such cash proceeds to make payments owing in connection with the Transaction prior to utilizing any proceeds of Loans for such purpose and (ii) the Borrower shall have received gross cash proceeds in the aggregate amount of (x) $150,000,000 from the issuance of the Senior Subordinated Notes and (y) $40,000,000 from the sale of certain assets by the Borrower that will be leased-back from the purchaser thereof (the "Sale- Leaseback Transaction") and shall have utilized the full amount of such cash proceeds to make payments owing in connection with the Transaction prior to utilizing any proceeds of Loans for such purpose. (d) On the Initial Borrowing Date, (i) the Administrative Agent shall have received true and correct copies of all Recapitalization Documents, Senior Subordinated Notes Documents, Sale-Leaseback Transaction Documents, Equity Financing Documents and Pacer Logistics Acquisition Documents, certified as such by appropriate officer of the Borrower, (ii) all such Documents, and all terms and conditions thereof (including, without limitation, in the case of the Senior Subordinated Notes Documents and the Equity Financing Documents, amortization, maturities, interest rates, dividend rates, limitation on cash dividends payable, covenants, defaults, remedies, sinking fund provisions, conversion features and subordination provisions), shall be in form and substance reasonably satisfactory to each Agent and the Required Banks and (iii) all such Documents shall be in full force and effect. All conditions precedent to the consummation of the Transaction as set forth in the Recapitalization Documents, the Senior Subordinated Notes Documents, the Sale-Leaseback Transaction Documents, the Equity Financing Documents and the Pacer Logistics Acquisition Documents shall have been satisfied, and not waived unless consented to by each Agent and the Required Banks, to the reasonable satisfaction of each Agent and the Required Banks. Each of the Recapitalization, the issuance of the Senior Subordinated Notes, the Sale-Leaseback Transaction, the Equity Financing and the Pacer Logistics Acquisition shall have been consummated in accordance with the terms and conditions of the applicable Documents and all applicable law. 5.09 Refinancing. (a) On the Initial Borrowing Date (after having ----------- given effect to the Recapitalization and the Pacer Logistics Acquisition) and concurrently with the incurrence of Loans on such date, (i) approximately $58,600,000 of Indebtedness of the Borrower and its Subsidiaries (including Pacer Logistics) shall have been repaid in full, together with all fees and other amounts owing thereon (the "Refinanced Indebtedness"), all commitments under the documents evidencing Refinanced Indebtedness shall have been terminated and all letters of credit issued pursuant to the documents evidencing the Refinanced Indebtedness shall have been terminated, incorporated hereunder as Letters of Credit as contemplated by Section 2.01(e) or supported by a back- stop Letter of Credit issued hereunder, (ii) 350,000 shares of outstanding Preferred Stock of Pacer Logistics, par value $.01 per share, with an aggregate liquidation preference equal to $3,528,000 shall have been redeemed in full, and (iii) the Borrower shall have made cash payments not to exceed $500,000 to satisfy earn-out obligations owing in connection with acquisitions consummated by Pacer Logistics and its Subsidiaries prior to the Initial Borrowing Date. (b) On the Initial Borrowing Date and concurrently with the incurrence of Loans on such date, all security interests in respect of, and Liens securing, the Refinanced Indebtedness shall have been terminated and released, and the Administrative Agent shall have received all such releases as may have been requested by the Administrative Agent, which releases shall be in form and substance satisfactory to the Agents and the Required Banks. Without limiting the foregoing, there shall have been delivered to the Administrative Agent (x) proper termination statements (Form UCC-3 or the appropriate equivalent) for filing under the UCC of each jurisdiction where a financing statement (Form UCC-1 or the appropriate equivalent) was filed with respect to the Borrower or any of its Subsidiaries in connection with the security interests created with respect to the Refinanced Indebtedness and the documentation related thereto, (y) terminations or reassignments of any security interest in, or Lien on, any patents, trademarks, copyrights, or similar interests of the Borrower or any of its Subsidiaries on which filings have been made and (z) terminations of all mortgages, leasehold mortgages and deeds of trust created with respect to property of the Borrower or any of its Subsidiaries, in each case, to secure the obligations under the Refinanced Indebtedness, all of which shall be in form and substance satisfactory to the Agents and the Required Banks. (c) On the Initial Borrowing Date and after giving effect to the Transaction, the Borrower and its Subsidiaries shall have no Indebtedness or Preferred Stock outstanding other than (i) the Loans, (ii) the Senior Subordinated Notes, (iii) certain other indebtedness existing on the Initial Borrowing Date as listed on Schedule IV in an aggregate outstanding principal amount not to exceed $400,000 (with the Indebtedness described in this sub- clause (iii) being herein called the "Existing Indebtedness") and (iv) 24,333.94 shares of Pacer Logistics Preferred Stock. On and as of the Initial Borrowing Date, all of the Existing Indebtedness shall remain outstanding after giving effect to the Transaction and the other transactions contemplated hereby without any default or event of default existing thereunder or arising as a result of the Transaction and the other transactions contemplated hereby (except to the extent amended or waived by the parties thereto on terms and conditions satisfactory to the Agents and the Required Banks), and there shall not be any amendments or modifications to the Existing Indebtedness Agreements other than as requested or approved by the Agents or the Required Banks. (d) The Administrative Agent shall have received evidence in form, scope and substance reasonably satisfactory to the Agents and the Required Banks that the matters set forth in this Section 5.09 have been satisfied on the Initial Borrowing Date. 5.10 Security Documents; etc. (a) On the Initial Borrowing Date, ------------------------ each of the Credit Parties shall have duly authorized, executed and delivered a Pledge Agreement in the form of Exhibit G (as amended, restated, modified and/or supplemented from time to time in accordance with the terms thereof and hereof, the "Pledge Agreement") and shall have delivered to the Collateral Agent, as pledgee thereunder, all of the Pledged Securities referred to therein then owned by such Credit Parties and required to be pledged pursuant to the terms thereof, endorsed in blank in the case of promissory notes or accompanied by executed and undated stock powers in the case of capital stock, along with evidence that all other actions necessary or, in the reasonable opinion of the Collateral Agent, desirable, to perfect the security interests purported to be created by the Pledge Agreement have been taken, and the Pledge Agreement shall be in full force and effect. (b) On the Initial Borrowing Date, each of the Credit Parties shall have duly authorized, executed and delivered a Security Agreement in the form of Exhibit H (as amended, restated, modified and/or supplemented from time to time in accordance with the terms thereof and hereof, the "Security Agreement") covering all of the Security Agreement Collateral, together with: (i) executed copies of financing statements (Form UCC-1 and PPSA Form 1-C) or appropriate local equivalent in appropriate form for filing under the UCC, the PPSA or appropriate local equivalent of each jurisdiction as may be necessary or, in the reasonable opinion of the Collateral Agent, desirable to perfect the security interests purported to be created by the Security Agreement; (ii) certified copies of Requests for Information or Copies (Form UCC-11), or equivalent reports, each of a recent date listing all effective financing statements that name the Borrower or any of its Subsidiaries as debtor and that are filed in the jurisdictions referred to in clause (i) above, together with copies of such financing statements (none of which shall cover the Collateral except (x) those with respect to which appropriate termination statements executed by the secured lender thereunder have been delivered to the Administrative Agent and (y) to the extent evidencing Permitted Liens); (iii) evidence of the completion of all other recordings and filings of, or with respect to, the Security Agreement as may be necessary or, in the reasonable opinion of the Collateral Agent, desirable, to perfect the security interests purported to be created by the Security Agreement; and (iv) evidence that all other actions necessary or, in the reasonable opinion of the Collateral Agent, desirable, to perfect the security interests purported to be created by the Security Agreement have been taken; and the Security Agreement shall be in full force and effect. 5.11 Subsidiaries Guaranty. On the Initial Borrowing Date, each --------------------- Subsidiary Guarantor shall have duly authorized, executed and delivered a Subsidiaries Guaranty in the form of Exhibit I (as amended, restated, modified and/or supplemented from time to time in accordance with the terms thereof and hereof, the "Subsidiaries Guaranty"), and the Subsidiaries Guaranty shall be in full force and effect. 5.12 Employee Benefit Plans; Shareholders' Agreements; Management ------------------------------------------------------------ Agreements; Employment Agreements; Collective Bargaining Agreements; Existing - ----------------------------------------------------------------------------- Indebtedness Agreements; Material Contracts; Tax Allocation Agreements. On or - ---------------------------------------------------------------------- prior to the Initial Borrowing Date, there shall have been delivered to the Administrative Agent true and correct copies, certified as true and complete by an appropriate officer of the Borrower of the following documents, in each case as same will be in effect on the Initial Borrowing Date after the consummation of the Transaction: (i) all Plans (and for each Plan that is required to file an annual report on Internal Revenue Service Form 5500-series, a copy of the most recent such report (including, to the extent required, the related financial and actuarial statements and opinions and other supporting statements, certifications, schedules and information), and for each Plan that is a "single-employer plan," as defined in Section 4001(a)(15) of ERISA, the most recently prepared actuarial valuation therefor) and any other "employee benefit plans," as defined in Section 3(3) of ERISA, and any other material agreements, plans or arrangements, with or for the benefit of current or former employees of the Borrower or any of its Subsidiaries or any ERISA Affiliate (provided that the foregoing shall apply in the case of any Multiemployer Plan, only to the extent that any document described therein is in the possession of the Borrower or any Subsidiary of the Borrower or any ERISA Affiliate) (collectively, the "Employee Benefit Plans"); (ii) all agreements (including, without limitation, shareholders' agreements, subscription agreements and registration rights agreements) entered into by the Borrower or any of its Subsidiaries governing the terms and relative rights of its capital stock and any agreements entered into by shareholders relating to any such entity with respect to its capital stock (collectively, the "Shareholders' Agreements"); (iii) all material agreements with members of, or with respect to, the management of the Borrower or any of its Subsidiaries after giving effect to the Transaction (collectively, the "Management Agreements"); (iv) any material employment agreements entered into by the Borrower or any of its Subsidiaries after giving effect to the Transaction (collectively, the "Employment Agreements"); (v) all collective bargaining agreements applying or relating to any employee of the Borrower or any of its Subsidiaries after giving effect to the Transaction (collectively, the "Collective Bargaining Agreements"); (vi) all agreements evidencing or relating to Existing Indebtedness of the Borrower or any of its Subsidiaries after giving effect to the Refinancing (collectively, the "Existing Indebtedness Agreements"); (vii) all other material contracts and licenses (other than certificates of need) of the Borrower and any of its Subsidiaries after giving effect to the Transaction (collectively, the "Material Contracts"); and (viii) any tax sharing or tax allocation agreements entered into by the Borrower or any of its Subsidiaries (collectively, the "Tax Allocation Agreements"); all of which Employee Benefit Plans, Shareholders' Agreements, Management Agreements, Employment Agreements, Collective Bargaining Agreements, Existing Indebtedness Agreements, Material Contracts and Tax Allocation Agreements shall be in form and substance satisfactory to the Agents and the Required Banks and shall be in full force and effect on the Initial Borrowing Date. 5.13 Consent Letter. On the Initial Borrowing Date, the -------------- Administrative Agent shall have received a letter from CT Corporation System, presently located at 1633 Broadway, New York, New York 10019, substantially in the form of Exhibit J, indicating its consent to its appointment by the Borrower as its agent to receive service of process as specified in Section 13.08. 5.14 Solvency Certificate; Insurance Certificates. On or before the -------------------------------------------- Initial Borrowing Date, the Administrative Agent shall have received: (a) a solvency certificate in the form of Exhibit K from the chief financial officer of the Borrower, dated the Initial Borrowing Date, and supporting the conclusion that, after giving effect to the Transaction and the incurrence of all financings contemplated herein, the Borrower (on a stand-alone basis) and the Borrower and its Subsidiaries (on a consolidated basis), in each case, are not insolvent and will not be rendered insolvent by the indebtedness incurred in connection herewith, will not be left with unreasonably small capital with which to engage in its or their respective businesses and will not have incurred debts beyond its or their ability to pay such debts as they mature and become due; and (b) evidence of insurance complying with the requirements of Section 8.03 for the business and properties of the Borrower and its Subsidiaries, in scope, form and substance reasonably satisfactory to the Agents and the Required Banks and naming the Collateral Agent as an additional insured and/or loss payee, and stating that such insurance shall not be canceled or revised without at least 30 days' prior written notice by the insurer to the Collateral Agent. 5.15. Financial Statements; Projections. (a) On or prior to the --------------------------------- Initial Borrowing Date, there shall have been delivered to the Administrative Agent (i) true and correct copies of the financial statements referred to in Section 7.10(b) and (ii) an unaudited pro forma consolidated balance sheet of --- ----- the Borrower and its Subsidiaries as of April 2, 1999 and, after giving effect to the Transaction and the incurrence of all Indebtedness (including the Loans and the Senior Subordinated Notes) contemplated herein (the "Pro Forma Balance --- ----- Sheet"), together with a related funds flow statement, which financial statements, Pro Forma Balance Sheet and funds flow statement shall be reasonably --- ----- satisfactory to the Agents and the Required Banks. (b) On or prior to the Initial Borrowing Date, there shall have been delivered to the Administrative Agent detailed projected consolidated financial statements of the Borrower and its Subsidiaries certified by the chief financial officer or the chief operating officer of the Borrower for the five fiscal years ended after the Initial Borrowing Date (the "Projections"), which Projections (x) shall reflect the forecasted consolidated financial conditions and income and expenses of the Borrower and its Subsidiaries after giving effect to the Transaction and the related financing thereof and the other transactions contemplated hereby and (y) shall be reasonably satisfactory in form and substance to the Agents and the Required Banks. 5.16 Payment of Fees. On the Initial Borrowing Date, all costs, fees ---------------- and expenses, and all other compensation due to the Agents or the Banks (including, without limitation, legal fees and expenses) shall have been paid to the extent due. SECTION 6. Conditions Precedent to All Credit Events. The obligation ----------------------------------------- of each Bank to make Loans (including Loans made on the Initial Borrowing Date but excluding Mandatory Borrowings made thereafter, which shall be made as provided in Section 1.01(d)), and the obligation of a Letter of Credit Issuer to issue any Letter of Credit, is subject, at the time of each such Credit Event (except as hereinafter indicated), to the satisfaction of the following conditions: 6.01 No Default; Representations and Warranties. At the time of each ------------------------------------------ such Credit Event and also after giving effect thereto (i) there shall exist no Default or Event of Default and (ii) all representations and warranties contained herein or in any other Credit Document shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on the date of such Credit Event (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct in all material respects only as of such specified date). 6.02 Notice of Borrowing; Letter of Credit Request. (a) Prior to --------------------------------------------- the making of each Loan (excluding Swingline Loans and Mandatory Borrowings), the Administrative Agent shall have received a Notice of Borrowing meeting the requirements of Section 1.03(a). Prior to the making of any Swingline Loan, BTCo shall have received the notice required by Section 1.03(b)(i). (b) Prior to the issuance of each Letter of Credit, the Administrative Agent and the respective Letter of Credit Issuer shall have received a Letter of Credit Request meeting the requirements of Section 2.02(a). The occurrence of the Initial Borrowing Date and the acceptance of the benefits or proceeds of each Credit Event shall constitute a representation and warranty by the Borrower to each Agent and each of the Banks that all the conditions specified in Section 5 and in this Section 6 and applicable to such Credit Event (other than such conditions that are subject to the satisfaction of the Agents and/or the Required Banks) exist as of that time. All of the Notes, certificates, legal opinions and other documents and papers referred to in Section 5 and in this Section 6, unless otherwise specified, shall be delivered to the Administrative Agent at the Notice Office for the account of each of the Banks and, except for the Notes, in sufficient counterparts or copies for each of the Banks and shall be in form and substance satisfactory to the Banks. SECTION 7. Representations and Warranties. In order to induce the ------------------------------ Banks to enter into this Agreement and to make the Loans and issue and/or participate in the Letters of Credit provided for herein, the Borrower makes the following representations and warranties to the Banks, in each case after giving effect to the Transaction, all of which shall survive the execution and delivery of this Agreement, the making of the Loans and the issuance of the Letters of Credit (with the occurrence of the Initial Borrowing Date and each Credit Event on and after the Initial Borrowing Date being deemed to constitute a representation and warranty by the Borrower that the matters specified in this Section 7 are true and correct in all material respects on and as of the Initial Borrowing Date and the date of each such Credit Event, unless stated to relate to a specific earlier date in which case such representations and warranties shall be true and correct in all material respects as of such earlier date): 7.01 Company Status. Each of the Borrower and each of its -------------- Subsidiaries (i) is a duly organized and validly existing Company in good standing under the laws of the jurisdiction of its organization, (ii) has the Company power and authority to own its property and assets and to transact the business in which it is engaged and presently proposes to engage and (iii) is duly qualified and is authorized to do business and is in good standing in all jurisdictions where it is required to be so qualified and where the failure to be so qualified would have a Material Adverse Effect. 7.02 Company Power and Authority. Each Credit Party has the Company --------------------------- power and authority to execute, deliver and carry out the terms and provisions of the Documents to which it is a party and has taken all necessary Company action to authorize the execution, delivery and performance of the Documents to which it is a party. Each Credit Party has duly executed and delivered each Document to which it is a party and each such Document constitutes the legal, valid and binding obligation of such Credit Party enforceable in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws generally affecting creditors' rights and by equitable principles (regardless of whether enforcement is sought in equity or at law). 7.03 No Violation. Neither the execution, delivery or performance by ------------ any Credit Party of the Documents to which it is a party, nor compliance by any Credit Party with the terms and provisions thereof, nor the consummation of the transactions contemplated herein or therein, (i) will contravene any material provision of any applicable law, statute, rule or regulation, or any order, writ, injunction or decree of any court or governmental instrumentality, (ii) will conflict or be inconsistent with or result in any breach of, any of the terms, covenants, conditions or provisions of, or constitute a default under, or (other than pursuant to the Security Documents) result in the creation or imposition of (or the obligation to create or impose) any Lien upon any of the property or assets of such Credit Party or any of its Subsidiaries pursuant to the terms of any indenture, mortgage, deed of trust, loan agreement, credit agreement or any other material agreement or instrument to which such Credit Party or any of its Subsidiaries is a party or by which it or any of its property or assets are bound or to which such Credit Party and any of its Subsidiaries may be subject (including, without limitation, the Existing Indebtedness Agreements and the Senior Subordinated Notes Indenture) or (iii) will violate any provision of the certificate of incorporation, by-laws, certificate of partnership, partnership agreement, certificate of limited liability company, limited liability company agreement or equivalent organizational document, as the case may be, of such Credit Party or any of its Subsidiaries. 7.04 Litigation. There are no actions, suits, proceedings or ---------- investigations pending or, to the best knowledge of the Borrower, threatened (i) with respect to any Credit Document, (ii) with respect to the Transaction or any other Document, or (iii) with respect to the Borrower or any of its Subsidiaries (x) that could reasonably be expected to have a Material Adverse Effect or (y) that could reasonably be expected to have a material adverse effect on the rights or remedies of the Agents or the Banks or on the ability of any Credit Party to perform its respective obligations to the Agents or the Banks hereunder and under the other Credit Documents to which it is, or will be, a party. Additionally, there does not exist any judgment, order or injunction prohibiting or imposing material adverse conditions upon the occurrence of any Credit Event. 7.05 Use of Proceeds; Margin Regulations. (a) The proceeds of the ----------------------------------- Term Loans shall be utilized by the Borrower on the Initial Borrowing Date solely to (x) finance the Recapitalization, the Refinancing and the Pacer Logistics Acquisition and (y) pay fees and expenses (not to exceed $24.3 million) incurred in connection with the Transaction. (b) The proceeds of all Revolving Loans and Swingline Loans shall be utilized by the Borrower for the general corporate and working capital purposes of the Borrower and its Subsidiaries (including, but not limited to, Permitted Acquisitions but excluding payments in connection with the Transaction). (c) Neither the making of any Loan, nor the use of the proceeds thereof, nor the occurrence of any other Credit Event, will violate or be inconsistent with the provisions of Regulation T, U or X of the Board of Governors of the Federal Reserve System and no part of any Credit Event (or the proceeds thereof) will be used to purchase or carry any Margin Stock or to extend credit for the purpose of purchasing or carrying any Margin Stock. 7.06 Governmental Approvals. Except as may have been obtained or ---------------------- made on or prior to the Initial Borrowing Date (and which remain in full force and effect on the Initial Borrowing Date), no order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by, any foreign or domestic governmental or public body or authority, or any subdivision thereof, is required to authorize or is required in connection with (i) the execution, delivery and performance of any Document or (ii) the legality, validity, binding effect or enforceability of any Document. 7.07 Investment Company Act. Neither the Borrower nor any of its ---------------------- Subsidiaries is an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. 7.08 Public Utility Holding Company Act. Neither the Borrower nor ---------------------------------- any of its Subsidiaries is a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935, as amended. 7.09 True and Complete Disclosure. All factual information (taken as ---------------------------- a whole) heretofore or contemporaneously furnished by or on behalf of the Borrower or any of its Subsidiaries in writing to any Agent or any Bank (including, without limitation, all information contained in the Documents) for purposes of or in connection with this Agreement or any transaction contemplated herein or therein is, and all other such factual information (taken as a whole) hereafter furnished by or on behalf of any such Persons in writing to any Agent or any Bank will be, true and accurate in all material respects on the date as of which such information is dated or certified and not incomplete by omitting to state any material fact necessary to make such information (taken as a whole) not misleading at such time in light of the circumstances under which such information was provided, it being understood and agreed that for purposes of this Section 7.09, such factual information shall not include the Projections or any pro forma financial information. --- ----- 7.10 Financial Condition; Financial Statements. (a) On and as of ----------------------------------------- the Initial Borrowing Date, on a pro forma basis after giving effect to the --- ----- Transaction and to all Indebtedness (including the Loans and the Senior Subordinated Notes) incurred, and to be incurred, and Liens created, and to be created, by each Credit Party in connection therewith, with respect to the Borrower (on a stand-alone basis) and the Borrower and its Subsidiaries (on a consolidated basis), (x) the sum of the assets, at a fair valuation, of the Borrower (on a stand-alone basis) and the Borrower and its Subsidiaries (on a consolidated basis) will exceed its or their debts, (y) it has or they have not incurred nor intended to, nor believes or believe that it or they will, incur debts beyond its or their ability to pay such debts as such debts mature and (z) it or they will have sufficient capital with which to conduct its or their business. For purposes of this Section 7.10, "debt" means any liability on a claim, and "claim" means (i) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (ii) right to an equitable remedy for breach of performance if such breach gives rise to a payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. (b) (I) (i) The audited statements of assets, liabilities and divisional control account of American President Lines Stacktrain Services (a division of Land Transport Services, Inc.) as of December 27, 1996, December 26, 1997 and December 25, 1998 for the fiscal years ended as of said dates, (ii) the audited statements of operations and cash flows of American President Lines Stacktrain Services for the fiscal year ended December 27, 1996, the period commencing December 28, 1996 and ending November 12, 1997, the period commencing November 13, 1997 and ending December 26, 1997 and the fiscal year ended December 25, 1998, (iii) the unaudited statements of assets, liabilities and divisional control account of American President Lines Stacktrain Services as of December 25, 1998 and April 2, 1999 for the fiscal year or three-month period, as the case may be, ended as of said dates, (iv) the unaudited statements of operations and cash flows of American President Lines Stacktrain Services for the three-month periods ended April 3, 1998 and April 2, 1999 and (v) the Pro --- Forma Balance Sheet, in each case furnished to each Bank prior to the Initial - ----- Borrowing Date pursuant to Section 5.15(a), present fairly in all material respects the consolidated financial condition of the Borrower at the dates of said financial statements and the results for the periods covered thereby (or, in the case of the Pro Forma Balance Sheet, presents a good faith estimate of --- ----- the consolidated pro forma financial condition of the Borrower (after giving --- ----- effect to the Transaction at the date thereof)), subject, in the case of unaudited financial statements, to normal year-end adjustments. All such financial statements (other than the aforesaid Pro Forma Balance Sheet) have --- ----- been prepared in accordance with GAAP consistently applied except to the extent provided in the notes to said financial statements and subject, in the case of the three-month statements, to normal year-end audit adjustments (all of which are of a recurring nature and none of which, individually or in the aggregate, would be material) and the absence of footnotes. (II) (i) The audited consolidated balance sheets of Pacer Logistics and its Subsidiaries at March 31, 1997, December 31, 1997 and December 31, 1998 for the three-month period or fiscal years ended, as the case may be, as of said dates (ii) the audited statements of operations, cash flows and changes in shareholders' equity of Pacer Logistics for the fiscal year ended December 31, 1996, the period commencing January 1, 1997 and ending March 31, 1997, the period commencing March 31, 1997 and ending December 31, 1997 and the fiscal year ended December 31, 1998, (iii) the unaudited consolidated balance sheets of Pacer Logistics and its Subsidiaries at December 31, 1998 and March 31, 1999 for the fiscal year or three-month period, as the case may be, ended as of said dates and (iv) the unaudited statements of operations and cash flows for the three-month periods ended March 31, 1998 and March 31, 1999, in each case furnished to each Bank prior to the Initial Borrowing Date pursuant to Section 5.15(a), present fairly in all material respects the consolidated financial condition of Pacer Logistics at the dates of said financial statements and the results for the periods covered thereby, subject, in the case of unaudited financial statements, to normal year-end adjustments. All such financial statements have been prepared in accordance with GAAP consistently applied except to the extent provided in the notes to said financial statements and subject, in the case of the three-month statements, to normal year-end audit adjustments (all of which are of a recurring nature and none of which, individually or in the aggregate, would be material) and the absence of footnotes. (c) Since December 31, 1998 (but after giving effect to the Transaction as if same had occurred prior thereto), nothing has occurred that has had or could reasonably be expected to have a Material Adverse Effect. (d) Except as fully reflected in the financial statements described in Section 7.10(b) and the Indebtedness incurred under this Agreement and the Senior Subordinated Notes (i) as of the Initial Borrowing Date (and after giving effect to any Loans made on such date), there were no liabilities or obligations (excluding current obligations incurred in the ordinary course of business) with respect to the Borrower or any of its Subsidiaries of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether or not due) which, either individually or in the aggregate, could reasonably be expected to be material to the Borrower and its Subsidiaries taken as a whole and (ii) the Borrower does not know of any basis for the assertion against it or any of its Subsidiaries of any such liability or obligation which, either individually or in the aggregate, are or would be reasonably likely to have, a Material Adverse Effect. (e) The Projections have been prepared on a basis consistent with the financial statements referred to in Section 7.10(b), and have been prepared in good faith and are based on reasonable assumptions under the then known facts and circumstances. On the Initial Borrowing Date, the management of the Borrower believes that the Projections are reasonable and attainable based upon the then known facts and circumstances (it being understood that nothing contained in this Section 7.10(e) shall constitute a representation that the results forecasted in such Projections will in fact be achieved). There is no fact known to the Borrower or any of its Subsidiaries which could reasonably be expected to have a Material Adverse Effect, which has not been disclosed herein or in such other documents, certificates and statements furnished to the Banks for use in connection with the transactions contemplated hereby. 7.11 Security Interests. On and after the Initial Borrowing Date, ------------------ each of the Security Documents creates (or after the execution and delivery thereof will create), as security for the Obligations, a valid and enforceable perfected security interest in and Lien on all of the Collateral subject thereto, superior to and prior to the rights of all third Persons, and subject to no other Liens (except that (i) the Security Agreement Collateral may be subject to Permitted Liens relating thereto and (ii) the Pledge Agreement Collateral may be subject to the Liens described in clauses (a) and (e) of Section 9.03), in favor of the Collateral Agent. No filings or recordings are required in order to perfect and/or render enforceable as against third parties the security interests created under any Security Document except for filings or recordings required in connection with any such Security Document which shall have been made on or prior to the Initial Borrowing Date as contemplated by Section 5.10 or on or prior to the execution and delivery thereof as contemplated by Sections 8.11, 8.12 and 9.15. 7.12 Compliance with ERISA. (a) Part A of Schedule V sets forth --------------------- each Plan and each Multiemployer Plan; except as set forth in Part B of Schedule V, each Plan (and each related trust, insurance contract or fund) is in substantial compliance with its terms and with all applicable laws, including without limitation ERISA and the Code; except as set forth in Part C of Schedule V, each Plan (and each related trust, if any) which is intended to be qualified under Section 401(a) of the Code has received a determination letter from the Internal Revenue Service to the effect that it meets the requirements of Sections 401(a) and 501(a) of the Code; no Reportable Event has occurred; to the best knowledge of the Borrower after due inquiry, no Multiemployer Plan is insolvent or in reorganization; no Plan has an Unfunded Current Liability; no Plan which is subject to Section 412 of the Code or Section 302 of ERISA has an accumulated funding deficiency, within the meaning of such sections of the Code or ERISA, or has applied for or received a waiver of an accumulated funding deficiency or an extension of any amortization period, within the meaning of Section 412 of the Code or Section 303 or 304 of ERISA; all contributions required to be made with respect to a Plan, a Multiemployer Plan and a Foreign Pension Plan have been timely made by the Borrower and each Subsidiary of the Borrower; neither the Borrower nor any Subsidiary of the Borrower has incurred any material liability (including any indirect, contingent or secondary liability) to or on account of a Plan pursuant to Section 409, 502(i) or 502(l) of ERISA or Section 401(a)(29), 4971 or 4975 of the Code or expects to incur any such liability under any of the foregoing sections with respect to any Plan; neither the Borrower nor any Subsidiary of the Borrower nor any ERISA Affiliate has incurred any material liability (including any indirect, contingent or secondary liability) to or on account of a Plan pursuant to Section 4062, 4063, 4064 or 4069 of ERISA or Section 401(a)(29) or 4971 of the Code or expects to incur any such liability under any of the foregoing sections with respect to any Plan; to the knowledge of the Borrower and its Subsidiaries, neither the Borrower nor any Subsidiary of the Borrower nor any ERISA Affiliate has incurred any material liability (including any indirect, contingent or secondary liability) to or on account of a Multiemployer Plan pursuant to Section 515, 4201, 4204, or 4212 of ERISA; no condition exists which presents a material risk to the Borrower or any Subsidiary of the Borrower or any ERISA Affiliate of incurring a liability to or on account of a Plan or, to the best knowledge of the Borrower after due inquiry, a Multiemployer Plan pursuant to the foregoing provisions of ERISA and the Code; no proceedings have been instituted to terminate or appoint a trustee to administer any Plan which is subject to Title IV of ERISA; except as set forth in Part D of Schedule V, no action, suit, proceeding, hearing, audit or investigation with respect to the administration, operation or the investment of assets of any Plan (other than routine claims for benefits) is pending, expected or, to the best knowledge of the Borrower after due inquiry, threatened; using actuarial assumptions and computation methods consistent with Part 1 of subtitle E of Title IV of ERISA, the aggregate liabilities of the Borrower and its Subsidiaries and its ERISA Affiliates to all Multiemployer Plans in the event of a complete withdrawal therefrom, as of the close of the most recent fiscal year of each such Multiemployer Plan ended prior to the date of the most recent Credit Event, would not exceed an amount that could reasonably be expected to have a Material Adverse Effect; each group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) maintained by the Borrower or any Subsidiary which covers or has covered employees or former employees of the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate has at all times been operated in compliance with the provisions of Part 6 of subtitle B of Title I of ERISA and Section 4980B of the Code; no lien imposed under the Code or ERISA on the assets of the Borrower or any Subsidiary of the Borrower or any ERISA Affiliate exists or is likely to arise on account of any Plan; and the Borrower and its Subsidiaries may cease contributions to or terminate any employee benefit plan maintained by any of them without incurring any material liability. (b) Each Foreign Pension Plan has been maintained in substantial compliance with its terms and with the requirements of any and all applicable laws, statutes, rules, regulations and orders and has been maintained, where required, in good standing with applicable regulatory authorities. Neither the Borrower nor any of its Subsidiaries has incurred any liability in connection with the termination of or withdrawal from any Foreign Pension Plan that has not been accrued or otherwise properly reserved on the Borrower's or such Subsidiary's balance sheet. With respect to each Foreign Pension Plan that is required by applicable local law or by its terms to be funded through a separate funding vehicle, the present value of the accrued benefit liabilities (whether or not vested) under each such Foreign Pension Plan, determined as of the latest valuation date for such Foreign Pension Plan on the basis of actuarial assumptions, each of which is reasonable, did not exceed the current value of the assets of such Foreign Pension Plan allocable to such benefit liabilities by an amount which, when added to the aggregate amount of the accrued benefit liabilities with respect to all other Foreign Pension Plans, could reasonably be expected to have a Material Adverse Effect. 7.13 Capitalization. On the Initial Borrowing Date and after giving -------------- effect to the Transaction, the authorized capital stock of the Borrower shall consist of (i) 20,000,000 shares of common stock, $.01 par value per share (such authorized shares of common stock, together with any subsequently authorized shares of common stock of the Borrower, the "Borrower Common Stock"), 10,440,000 of which shares shall be issued and outstanding and (ii) 1,000,000 shares of Preferred Stock, $.01 par value per share, none of which shares shall be issued and outstanding. All such outstanding shares have been duly and validly issued, are fully paid and nonassessable and have been issued free of preemptive rights. Except as set forth on Schedule X hereto, the Borrower does not have outstanding any securities convertible into or exchangeable for its capital stock or outstanding any rights to subscribe for or to purchase, or any options for the purchase of, or any agreements providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any character relating to, its capital stock. 7.14 Subsidiaries. (a) Prior to the consummation of the ------------ Transaction, Acquisition Corp. has no Subsidiaries. (b) On and as of the Initial Borrowing Date and after giving effect to the Transaction, the Borrower has no Subsidiaries other than those Subsidiaries listed on Schedule VII. Schedule VII correctly sets forth, as of the Initial Borrowing Date and after giving effect to the Transaction, the percentage ownership (direct and indirect) of the Borrower in each class of capital stock or other equity interests of each of its Subsidiaries and also identifies the direct owner thereof. All outstanding shares of capital stock of each Subsidiary of the Borrower have been duly and validly issued, are fully paid and non-assessable and have been issued free of preemptive rights. No Subsidiary of the Borrower has outstanding any securities convertible into or exchangeable for its capital stock or outstanding any right to subscribe for or to purchase, or any options or warrants for the purchase of, or any agreement providing for the issuance (contingent or otherwise) of or any calls, commitments or claims of any character relating to, its capital stock or any stock appreciation or similar rights. 7.15 Intellectual Property, etc. Each of the Borrower and each of --------------------------- its Subsidiaries owns or has a valid existing license to use all patents, trademarks, permits, service marks, trade names, copyrights, licenses, franchises and other rights with respect to the foregoing reasonably necessary for the conduct of its business, without any known conflict with the rights of others which, or the failure to obtain which, as the case may be, would result in a Material Adverse Effect. 7.16 Compliance with Statutes, etc. Each of the Borrower and each of ------------------------------ its Subsidiaries is in compliance with all applicable statutes, regulations, rules and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property, except such non-compliance as is not reasonably likely to, individually or in the aggregate, have a Material Adverse Effect. 7.17 Environmental Matters. (a) Each of the Borrower and its --------------------- Subsidiaries has complied with, and on the date of each Credit Event is in material compliance with, all applicable Environmental Laws and the requirements of any permits issued under such Environmental Laws and neither the Borrower nor any of its Subsidiaries is liable for any material penalties, fines or forfeitures for failure to comply with any of the foregoing. There are no pending or past or, to the best knowledge of the Borrower after due inquiry, threatened Environmental Claims against the Borrower or any of its Subsidiaries, or against any Real Property owned or operated by the Borrower or any of its Subsidiaries. There are no facts, circumstances, conditions or occurrences with respect to the business or operations of the Borrower or any of its Subsidiaries or any Real Property at any time owned or operated by the Borrower or any of its Subsidiaries or any property adjoining or in the vicinity of any such Real Property that would reasonably be expected (i) to form the basis of an Environmental Claim against the Borrower or any of its Subsidiaries or any such Real Property or (ii) to cause any such Real Property to be subject to any restrictions on the ownership, occupancy, use or transferability of such Real Property by the Borrower or any of its Subsidiaries under any applicable Environmental Law. (b) Hazardous Materials have not at any time been generated, used, treated or stored on, or transported by the Borrower or any of its Subsidiaries or by any Person acting for or under contract to the Borrower or any of its Subsidiaries or, to the knowledge of the Borrower, by any other Person, to or from any Real Property owned or operated by the Borrower or any of its Subsidiaries except in material compliance with all applicable Environmental Laws and as reasonably required in connection with the operation, use and maintenance of such Real Property or by the Borrower's or such Subsidiary's business. Hazardous Materials have not at any time been Released by the Borrower or any of its Subsidiaries or by any Person acting for or under contract to the Borrower or any of its Subsidiaries or, to the knowledge of the Borrower, by any other Person on or from any Real Property owned or operated by the Borrower or any of its Subsidiaries, except in compliance with all applicable Environmental Laws and as reasonably required in connection with the operation, use and maintenance of such Real Property or by the Borrower's or such Subsidiary's business. Except as set forth on Schedule XII, there are not now any underground storage tanks located on any Real Property owned or operated by the Borrower or any of its Subsidiaries. (c) Notwithstanding anything to the contrary in this Section 7.17, the representations made in this Section 7.17 shall only be untrue if the aggregate effect of all conditions, failures, noncompliances, Environmental Claims, Releases and presence of underground storage tanks, in each case of the types described above, would reasonably be expected to have a Material Adverse Effect. 7.18 Properties. All Real Property owned by the Borrower or any of ---------- its Subsidiaries and all material Leaseholds leased by the Borrower or any of its Subsidiaries, in each case as of the Initial Borrowing Date and after giving effect to the Transaction, and the nature of the interest therein, is correctly set forth in Schedule III. Each of the Borrower and each of its Subsidiaries has good and marketable title to, or a validly subsisting leasehold interest in, all material properties owned or leased by it, including all Real Property reflected in Schedule III and in the financial statements (including the Pro --- Forma Balance Sheet) referred to in Section 7.10(b) (except such properties sold - ----- in the ordinary course of business since the dates of the respective financial statements referred to therein), free and clear of all Liens, other than Permitted Liens. 7.19 Labor Relations. Neither the Borrower nor any of its --------------- Subsidiaries is engaged in any unfair labor practice that could reasonably be expected to have a Material Adverse Effect. There is (i) no unfair labor practice complaint pending against the Borrower or any of its Subsidiaries or, to the best knowledge of the Borrower and its Subsidiaries, threatened against any of them, before the National Labor Relations Board, and no grievance or arbitration proceeding arising out of or under any collective bargaining agreement is so pending against the Borrower or any of its Subsidiaries or, to the best knowledge of the Borrower and its Subsidiaries, threatened against any of them, (ii) no strike, labor dispute, slowdown or stoppage pending against the Borrower or any of its Subsidiaries or, to the best knowledge of the Borrower and its Subsidiaries, threatened against the Borrower or any of its Subsidiaries and (iii) no union representation question existing with respect to the employees of the Borrower or any of its Subsidiaries and, to the best knowledge of the Borrower and its Subsidiaries, no union organizing activities are taking place, except (with respect to any matter specified in clause (i), (ii) or (iii) above, either individually or in the aggregate) such as is not reasonably likely to have a Material Adverse Effect. 7.20 Tax Returns and Payments. Each of the Borrower and each of its ------------------------ Subsidiaries has filed all federal income tax returns and all other material tax returns, domestic and foreign, required to be filed by it and has paid all material taxes and assessments payable by it which have become due, except for those contested in good faith and fully provided for on the financial statements of the Borrower and its Subsidiaries in accordance with generally accepted accounting principles. Each of the Borrower and each of its Subsidiaries has provided adequate reserves (in the good faith judgment of the management of the Borrower) for the payment of all federal, state and foreign income taxes which have not yet become due. There is no material action, suit, proceeding, investigation, audit, or claim now pending or, to the knowledge of the Borrower or any of its Subsidiaries, threatened by any authority regarding any taxes relating to the Borrower or any of its Subsidiaries. Neither the Borrower nor any of its Subsidiaries has entered into an agreement or waiver or been requested to enter into an agreement or waiver extending any statute of limitations relating to the payment or collection of taxes of the Borrower or any of its Subsidiaries, or is aware of any circumstances that would cause the taxable years or other taxable periods of the Borrower or any of its Subsidiaries not to be subject to the normally applicable statute of limitations, in each case except to the extent the liability for taxes of the Borrower or such Subsidiary giving rise to any extension of any such normally applicable statute of limitation is not material. 7.21 Existing Indebtedness. Schedule IV sets forth a true and --------------------- complete list of all Existing Indebtedness of the Borrower and its Subsidiaries as of the Initial Borrowing Date after giving effect to the Transaction, in each case showing the aggregate principal amount thereof and the name of the respective borrower and any other entity which directly or indirectly guaranteed such debt. 7.22 Insurance. Set forth on Schedule VIII hereto is a true, correct --------- and complete summary of all insurance carried by each Credit Party on and as of the Initial Borrowing Date, with the amounts insured set forth therein. 7.23 Representations and Warranties in Other Documents. All ------------------------------------------------- representations and warranties set forth in the other Documents were true and correct in all material respects at the time as of which such representations and warranties were made (or deemed made) and shall be true and correct in all material respects as of the Initial Borrowing Date as if such representations or warranties were made on and as of such date, unless stated to relate to a specific earlier date, in which case such representations or warranties shall be true and correct in all material respects as of such earlier date. 7.24 The Transaction. At the time of consummation thereof, the --------------- Transaction shall have been consummated in all material respects in accordance with the terms of the relevant Documents therefor and all applicable laws. At the time of consummation thereof, all material consents and approvals of, and filings and registrations with, and all other actions in respect of, all governmental agencies, authorities or instrumentalities required in order to make or consummate the Transaction in accordance with the terms of the relevant Documents therefor and all applicable laws have been obtained, given, filed or taken and are or will be in full force and effect (or effective judicial relief with respect thereto has been obtained). All applicable waiting periods with respect thereto have or, prior to the time when required, will have, expired without, in all such cases, any action being taken by any competent authority which restrains, prevents, or imposes material adverse conditions upon the Transaction. Additionally, there does not exist any judgment, order or injunction prohibiting or imposing material adverse conditions upon any element of the Transaction, the occurrence of any Credit Event, or the performance by the Borrower and its Subsidiaries of their respective obligations under the Documents and all applicable laws. 7.25 Special Purpose Corporation. Pacer Logistics Acquisition Corp. --------------------------- was formed to effect the Pacer Logistics Acquisition. Prior to the consummation of the Transaction, Pacer Logistics Acquisition Corp. had no significant assets or liabilities (other than those liabilities under the Pacer Logistics Acquisition Documents and such other liabilities arising in connection with the Pacer Logistics Acquisition). 7.26 Subordination. The subordination provisions contained in the ------------- Senior Subordinated Notes Documents and, on and after the execution and delivery thereof, each of the agreements or instruments relating to the Shareholder Subordinated Notes, Permitted Subordinated Refinancing Indebtedness and Permitted Subordinated Indebtedness, are enforceable against the Borrower, the Subsidiary Guarantors and the holders of such Indebtedness, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws generally affecting creditors' rights and by equitable principles (regardless of whether enforcement is sought in equity or at law), and all Obligations hereunder and all obligations of the Credit Parties under the other Credit Documents (including without limitation, the Subsidiaries Guaranty) are within the definitions of "Senior Debt" (or "Guarantor Senior Debt" in the case of the obligations of any Subsidiary Guarantor) and "Designated Senior Debt" included in such subordination provisions. 7.27 Year 2000 Representation. Any reprogramming required to permit ------------------------ the proper functioning, in and following the year 2000, of (i) the Borrower's and its Subsidiaries' computer systems and (ii) equipment containing embedded microchips (including systems and equipment supplied by others or with which the Borrower's and its Subsidiaries' systems interface) and the testing of all such systems and equipment, as so reprogrammed, will be completed by November 15, 1999, except to the extent the failure to complete such reprogramming would not reasonably be expected to result in a Default, an Event of Default or a Material Adverse Effect. The cost to the Borrower and its Subsidiaries of such reprogramming and testing and of the reasonably foreseeable consequences of year 2000 to the Borrower and its Subsidiaries (including, without limitation, reprogramming errors and the failure of others' systems or equipment) could not reasonably be expected to result in a Default, an Event of Default or a Material Adverse Effect. Except for such of the reprogramming referred to in the preceding sentence as may be necessary, the computer and management information systems of the Borrower and its Subsidiaries are and, with ordinary course upgrading and maintenance, will continue for the term of this Agreement to be, sufficient to permit the Borrower and its Subsidiaries to conduct their respective businesses without a Material Adverse Effect. SECTION 8. Affirmative Covenants. The Borrower hereby covenants and --------------------- agrees that as of the Effective Date and thereafter for so long as this Agreement is in effect and until the Total Commitment has terminated, no Letters of Credit or Notes are outstanding and the Loans and Unpaid Drawings, together with interest, Fees and all other Obligations (other than any indemnities described in Section 13.13 which are not then due and payable) incurred hereunder, are paid in full: 8.01 Information Covenants. The Borrower will furnish to each Bank: --------------------- (a) Monthly Reports. Within 60 days after the end of each fiscal --------------- month of the Borrower, (i) the consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal month and the related consolidated statements of income for such fiscal month and for the elapsed portion of the fiscal year ended with the last day of such fiscal month, in each case (x) without giving effect to any Permitted Acquisition consummated in the 60-day period prior to the end of such fiscal month and (y) setting forth comparative figures for the corresponding fiscal month in the prior fiscal year and comparable budgeted figures for such fiscal month as set forth in the respective budget delivered pursuant to Section 8.01(d) and (ii) the consolidated statements of income for such fiscal month for each Acquired Business acquired during the 60-day period prior to the end of such fiscal month, all of which shall be certified by the chief financial officer or other Authorized Officer of the Borrower, subject to normal year-end audit adjustments and the absence of footnotes. (b) Quarterly Financial Statements. Within 45 days after the close of the first three quarterly accounting periods in each fiscal year of the Borrower, (i) the consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such quarterly accounting period and the related consolidated statements of income and retained earnings and of cash flows for such quarterly accounting period and for the elapsed portion of the fiscal year ended with the last day of such quarterly accounting period and the budgeted figures for such quarterly period as set forth in the respective budget delivered pursuant to Section 8.01(d) and (ii) management's discussion and analysis of significant operational and financial developments during such quarterly period, all of which shall be in reasonable detail and certified by the chief financial officer or other Authorized Officer of the Borrower that they fairly present in all material respects the financial condition of the Borrower and its Subsidiaries as of the dates indicated and the results of their operations and changes in their cash flows for the periods indicated, subject to normal year-end audit adjustments and the absence of footnotes. If the Borrower has designated any Unrestricted Subsidiaries hereunder, then the quarterly financial information required by this Section 8.01(b) shall include a reasonably detailed presentation, either on the face of the financial statements or in the footnotes thereto, and in management's discussion and analysis of operational and financial developments, of the financial condition and results of operations of the Borrower and its Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of the Borrower. (c) Annual Financial Statements. Within 90 days after the close of --------------------------- each fiscal year of the Borrower, the consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal year and the related consolidated statements of income and retained earnings and of cash flows for such fiscal year and setting forth comparative consolidated figures for the preceding fiscal year and comparable budgeted figures for such fiscal year as set forth in the respective budget delivered pursuant to Section 8.01(d) and (except for such comparable budgeted figures) certified by PriceWaterhouseCoopers LLC or such other independent certified public accountants of recognized national standing as shall be reasonably acceptable to the Administrative Agent, in each case to the effect that such statements fairly present in all material respects the financial condition of the Borrower and its Subsidiaries as of the dates indicated and the results of their operations and changes in financial position for the periods indicated in conformity with GAAP applied on a basis consistent with prior years, together with a certificate of such accounting firm stating that in the course of its regular audit of the business of the Borrower and its Subsidiaries, which audit was conducted in accordance with generally accepted auditing standards, no Default or Event of Default which has occurred and is continuing has come to their attention or, if such a Default or an Event of Default has come to their attention, a statement as to the nature thereof. If the Borrower has designated any Unrestricted Subsidiaries hereunder, then the annual financial information required by this Section 8.01(c) shall include a reasonably detailed presentation, either on the face of the financial statements or in the footnotes thereto, and in management's discussion and analysis of operational and financial developments, of the financial condition and results of operations of the Borrower and its Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of the Borrower. (d) Budgets, etc. Not more than 60 days after the commencement of ------------- each fiscal year of the Borrower, consolidated budgets of the Borrower and its Subsidiaries (x) in reasonable detail for each of the four fiscal quarters of such fiscal year and (y) in summary form for each of the five fiscal years immediately following such fiscal year, in each case as customarily prepared by management for its internal use setting forth, with appropriate discussion, the principal assumptions upon which such budgets are based. Together with each delivery of financial statements pursuant to Sections 8.01(b) and (c), a comparison of the current year to date financial results against the budgets required to be submitted pursuant to this clause (d) shall be presented. (e) Officer's Certificates. At the time of the delivery of the ---------------------- financial statements provided for in Sections 8.01(b) and (c), a certificate of the chief financial officer or other Authorized Officer of the Borrower to the effect that, to the best of such officer's knowledge, no Default or Event of Default exists or, if any Default or Event of Default does exist, specifying the nature and extent thereof, which certificate shall, (I) if delivered in connection with the financial statements in respect of a period ending on the last day of a fiscal quarter or fiscal year of the Borrower, set forth (x) the calculations required to establish whether the Borrower and its Subsidiaries were in compliance with the provisions of Sections 3.03, 4.02, 9.02, 9.04(d), (g), (j) and (k), 9.05(a), (f), (g), (l), (p) and (r), 9.09, 9.10 and 9.11 as at the end of such fiscal quarter or year, as the case may be, and (y) the calculation of the Total Leverage Ratio, the Adjusted Total Leverage Ratio and the Adjusted Senior Leverage Ratio as at the last day of the respective fiscal quarter or fiscal year of the Borrower, as the case may be and (II) if delivered with the financial statements required by Section 8.01(c), set forth in reasonable detail the amount of (and the calculations required to establish the amount of) Excess Cash Flow for the respective Excess Cash Flow Payment Period. (f) Notice of Default or Litigation. Promptly, and in any event ------------------------------- within three Business Days after an executive officer of the Borrower or any of its Subsidiaries obtains actual knowledge thereof, notice of (i) the occurrence of any event which constitutes a Default or an Event of Default, which notice shall specify the nature and period of existence thereof and what action the Borrower proposes to take with respect thereto, (ii) any litigation or proceeding pending or threatened (x) against the Borrower or any of its Subsidiaries which could reasonably be expected to have a Material Adverse Effect, (y) with respect to any material Indebtedness of the Borrower or any of its Subsidiaries or (z) with respect to any Document (other than such Documents referred to in clause (ix) of the definition thereof), (iii) any governmental investigation pending or threatened against the Borrower or any of its Subsidiaries and (iv) any other event which could reasonably be expected to have a Material Adverse Effect. (g) Auditors' Reports. Promptly upon receipt thereof, a copy of each ----------------- report or "management letter" submitted to the Borrower or any of its Subsidiaries by its independent accountants in connection with any annual, interim or special audit made by them of the books of the Borrower or any of its Subsidiaries and the management's non-privileged responses thereto. (h) Environmental Matters. Promptly after an executive officer of the --------------------- Borrower or any of its Subsidiaries obtains actual knowledge of any of the following (but only to the extent that any of the following, either individually or in the aggregate, could reasonably be expected to (x) have a Material Adverse Effect or (y) result in a remedial cost to the Borrower or any of its Subsidiaries in excess of $250,000, written notice of: (i) any pending or threatened Environmental Claim against the Borrower or any of its Subsidiaries or any Real Property owned or operated by the Borrower or any of its Subsidiaries; (ii) any condition or occurrence on any Real Property at any time owned or operated by the Borrower or any of its Subsidiaries that (x) results in noncompliance by the Borrower or any of its Subsidiaries with any applicable Environmental Law or (y) could reasonably be anticipated to form the basis of an Environmental Claim against the Borrower or any of its Subsidiaries or any such Real Property; (iii) any condition or occurrence on any Real Property owned or operated by the Borrower or any of its Subsidiaries that could reasonably be anticipated to cause such Real Property to be subject to any restrictions on the ownership, occupancy, use or transferability by the Borrower or such Subsidiary, as the case may be, of its interest in such Real Property under any Environmental Law; and (iv) the taking of any removal or remedial action in response to the actual or alleged presence of any Hazardous Material on any Real Property owned or operated by the Borrower or any of its Subsidiaries. All such notices shall describe in reasonable detail the nature of the claim, investigation, condition, occurrence or removal or remedial action and the Borrower's response or proposed response thereto. In addition, the Borrower agrees to provide the Banks with copies of all material communications by the Borrower or any of its Subsidiaries with any Person, government or governmental agency relating to Environmental Laws or to any of the matters set forth in clauses (i)-(iv) above, and such reasonably detailed reports relating to any of the matters set forth in clauses (i)- (iv) above as may reasonably be requested by the Administrative Agent or the Required Banks. (i) Annual Meetings with Banks. At the written request of the -------------------------- Administrative Agent, the Borrower shall within 120 days after the close of each of its fiscal years, hold a meeting (at a mutually agreeable location and time) open to all of the Banks at which meeting shall be reviewed the financial results of the previous fiscal year and the financial condition of the Borrower and its Subsidiaries and the budgets presented for the current fiscal year of the Borrower and its Subsidiaries. (j) Notice of Commitment Reductions and Mandatory Repayments. On or -------------------------------------------------------- prior to the date of any reduction to the Total Revolving Loan Commitment or any mandatory repayment of outstanding Term Loans pursuant to any of Sections 4.02(c) through (f), inclusive, the Borrower shall provide written notice of the amount of the respective reduction or repayment, as the case may be, to the Total Revolving Loan Commitment or the outstanding Term Loans, as applicable, and the calculation thereof (in reasonable detail). (k) Special Reports Relating to Tractor Trailers. At the time of the --------------------------------------------- delivery of the financial statements provided for in Sections 8.01(c), a schedule of all of the Tractor Trailers owned by the Borrower or any of its Subsidiaries as of the fiscal quarter most recently ended, which schedule shall specify (i) the state in which the respective Tractor Trailer is registered or titled, (ii) whether a security interest has been recorded on the certificate of title for the respective Tractor Trailer in favor of the Collateral Agent for the benefit of the Secured Creditors, (iii) whether the certificate of title for the respective Tractor Trailer (as modified to reflect the security interest in favor of the Collateral Agent) has been reregistered with the appropriate state governmental agency (and, if not, the date by which such reregistration must be accomplished in accordance with the terms of the relevant Security Agreement), (iv) in the case of Tractor Trailers operated in Canada, whether a financing statement or hypothec registration has been filed with the appropriate province, (v) the date of the acquisition of each new Tractor Trailer acquired on or after the Initial Borrowing Date, and (vi) each Tractor Trailer listed thereon acquired since the date of the delivery of the previous schedule pursuant to this Section 8.01(k). (l) Other Information. Promptly upon transmission thereof, copies ----------------- of any filings and registrations with, and reports to, the SEC by the Borrower or any of its Subsidiaries and copies of all financial statements, proxy statements, notices and reports as the Borrower or any of its Subsidiaries shall send generally to analysts and the holders of their capital stock or of any Permitted Debt or the Senior Subordinated Notes, in their capacity as such holders (to the extent not theretofore delivered to the Banks pursuant to this Agreement) and, with reasonable promptness, such other information or documents (financial or otherwise) as any Agent on its own behalf or on behalf of the Required Banks may reasonably request from time to time. 8.02 Books, Records and Inspections. The Borrower will, and will ------------------------------ cause each of its Subsidiaries to, keep proper books of record and account in which full, true and correct entries in conformity with GAAP and all requirements of law shall be made of all dealings and transactions in relation to its business and activities. The Borrower will, and will cause each of its Subsidiaries to, permit, upon reasonable notice to the chief financial officer or other Authorized Officer of the Borrower, officers and designated representatives of any Agent or the Required Banks to visit and inspect under the guidance of officers of the Borrower any of the properties or assets of the Borrower and any of its Subsidiaries in whomsoever's possession, and to examine the books of account of the Borrower and any of its Subsidiaries and discuss the affairs, finances and accounts of the Borrower and of any of its Subsidiaries with, and be advised as to the same by, their officers and independent accountants, all at such reasonable times and intervals and to such reasonable extent as such Agent or the Required Banks may desire, provided that so long as -------- no Default or Event of Default is then in existence, the Borrower shall have the right to participate in any discussions of the Agents or the Banks with any independent accountants of the Borrower. 8.03 Insurance. (a) The Borrower will, and will cause each of its --------- Subsidiaries to (i) maintain, with financially sound and reputable insurance companies, insurance on all its property in at least such amounts and against at least such risks as is consistent and in accordance with industry practice and (ii) furnish to the Administrative Agent and each of the Banks, upon request, full information as to the insurance carried. In addition to the requirements of the immediately preceding sentence, the Borrower will at all times cause insurance of the types described in Schedule VIII to be maintained (with the same scope of coverage as that described in Schedule VIII) at levels which are consistent with its practices immediately before the Initial Borrowing Date, taking into account the age and fair market value of equipment. Such insurance shall include physical damage insurance on all real and personal property (whether now owned or hereafter acquired) on an all risk basis and business interruption insurance. The provisions of this Section 8.03 shall be deemed supplemental to, but not duplicative of, the provisions of any Security Documents that require the maintenance of insurance. (b) The Borrower will, and will cause each of its Subsidiaries to, at all times keep the respective property of the Borrower and its Subsidiaries (except real or personal property leased or financed through third parties in accordance with this Agreement) insured in favor of the Collateral Agent, and all policies or certificates with respect to such insurance (and any other insurance maintained by, or on behalf of, the Borrower or any Subsidiary of the Borrower) (i) shall be endorsed to the Collateral Agent's satisfaction for the benefit of the Collateral Agent (including, without limitation, by naming the Collateral Agent as certificate holder, mortgagee and loss payee with respect to real property, certificate holder and loss payee with respect to personal property, additional insured with respect to general liability and umbrella liability coverage and certificate holder with respect to workers' compensation insurance), (ii) shall state that such insurance policies shall not be cancelled or materially changed without at least 30 days' prior written notice thereof by the respective insurer to the Collateral Agent and (iii) shall, upon the request of the Collateral Agent, be deposited with the Collateral Agent. (c) If the Borrower or any of its Subsidiaries shall fail to maintain all insurance in accordance with this Section 8.03, or if the Borrower or any of its Subsidiaries shall fail to so name the Collateral Agent as an additional insured, mortgagee or loss payee, as the case may be, or so deposit all certificates with respect thereto, the Administrative Agent and/or the Collateral Agent shall have the right (but shall be under no obligation) to procure such insurance, and the Credit Parties agree to jointly and severally reimburse the Administrative Agent or the Collateral Agent, as the case may be, for all costs and expenses of procuring such insurance. 8.04 Payment of Taxes. The Borrower will pay and discharge, and will ---------------- cause each of its Subsidiaries to pay and discharge, all material taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits, or upon any material properties belonging to it, prior to the date on which penalties attach thereto, and all material lawful claims for sums that have become due and payable which, if unpaid, might become a Lien not otherwise permitted under Section 9.03(a); provided, that neither the Borrower -------- nor any of its Subsidiaries shall be required to pay any such tax, assessment, charge, levy or claim which is being contested in good faith and by proper proceedings if it has maintained adequate reserves with respect thereto in accordance with GAAP. 8.05 Corporate Franchises. The Borrower will do, and will cause each -------------------- of its Subsidiaries to do, or cause to be done, all things necessary to preserve and keep in full force and effect its existence and its material rights, franchises, authority to do business, licenses and patents, except for rights, franchises, authority to do business, licenses and patents the loss of which (individually or in the aggregate) could not reasonably be expected to have a Material Adverse Effect; provided, however, that any transaction permitted by Section -------- ------- 9.02 will not constitute a breach of this Section 8.05. 8.06 Compliance with Statutes; etc. The Borrower will, and will ------------------------------ cause each of its Subsidiaries to, comply with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property, except for such noncompliances as would not, either individually or in the aggregate, have a Material Adverse Effect or a material adverse effect on the ability of any Credit Party to perform its obligations under any Credit Document to which it is a party. 8.07 Compliance with Environmental Laws. (a) (i) The Borrower will ---------------------------------- comply, and will cause each of its Subsidiaries to comply, in all material respects with all Environmental Laws applicable to their businesses or the ownership or use of its Real Property now or hereafter owned or operated by the Borrower or any of its Subsidiaries, will promptly pay or, with respect to any of its Subsidiaries, cause to be paid all costs and expenses incurred in connection with such compliance, and will keep or cause to be kept all such Real Property free and clear of any Liens imposed pursuant to such Environmental Laws and (ii) neither the Borrower nor any of its Subsidiaries will generate, use, treat, store, Release or dispose of, or permit the generation, use, treatment, storage, release or disposal of, Hazardous Materials on any Real Property owned or operated by the Borrower or any of its Subsidiaries other than in compliance with Environmental Laws and as required in connection with the normal business operations of the Borrower and its Subsidiaries, or transport or permit the transportation of Hazardous Materials other than in compliance with Environmental Laws and as required in connection with the normal business operations of the Borrower and its Subsidiaries, unless the failure to comply with the requirements specified in clause (i) or (ii) above, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. If the Borrower or any of its Subsidiaries or any tenant or occupant of any Real Property owned or operated by the Borrower or any of its Subsidiaries causes or permits any intentional or unintentional act or omission resulting in the presence or Release of any Hazardous Material in a quantity or concentration sufficient to require reporting or to trigger an obligation to undertake clean- up, removal or remedial action under applicable Environmental Laws, the Borrower agrees to undertake, and/or to cause any of its Subsidiaries, tenants or occupants to undertake, at their sole expense, any clean up, removal, remedial or other action required pursuant to Environmental Laws to remove and clean up any Hazardous Materials from any Real Property except where the failure to do so would not reasonably be expected to have a Material Adverse Effect; provided -------- that neither the Borrower nor any of its Subsidiaries shall be required to undertake any clean up, removal, remedial or other action while the requirement to undertake such clean up, removal, remedial or other action is being contested in good faith and by proper proceedings so long as it has maintained adequate reserves with respect to such clean up, removal, remedial or other action to the extent required in accordance with GAAP. Notwithstanding any provision of this Section 8.07(a), the Borrower shall not be required by this Section to exercise any degree of control over the operations of any of its Subsidiaries that could reasonably be construed under applicable Environmental Law to make the Borrower liable for Environmental Claims arising from or casually related to the Real Property or operations of such Subsidiary as an owner or an operator or upon any other basis. (b) At the written request of the Administrative Agent or the Required Banks, which request shall specify in reasonable detail the basis therefor, at any time and from time to time, the Borrower will provide, at its sole cost and expense, an environmental site assessment report concerning any Real Property now or hereafter owned or operated by the Borrower or any of its Subsidiaries, prepared by an environmental consulting firm approved by the Administrative Agent, addressing the matters in clause (i), (ii) or (iii) below which gives rise to such request (or, in the case of a request pursuant to following clause (i), addressing such matter as may be requested by the Administrative Agent or the Required Banks) and estimating the range of the potential costs of any removal, remedial or other corrective action in connection with any such matter, provided that in no event shall such request be -------- made unless (i) an Event of Default has occurred and is continuing, (ii) the Banks receive notice under Section 8.01(h) for any event for which notice is required to be delivered for any such Real Property or (iii) the Administrative Agent or the Required Banks reasonably believe that there was a breach of any representation, warranty or covenant contained in Section 7.17 or 8.07(a). If the Borrower fails to provide the same within 60 days after such request was made, the Administrative Agent may order the same, and the Borrower shall grant and hereby grants, to the Administrative Agent and the Banks and their agents access to such Real Property owned or operated by the Borrower or any of its Subsidiaries, and specifically grants the Administrative Agent and the Banks and their agents an irrevocable non-exclusive license, subject to the rights of tenants, to undertake such an assessment, all at the Borrower's expense. 8.08 ERISA. As soon as possible and, in any event, within ten ----- Business Days after the Borrower or any Subsidiary of the Borrower or any ERISA Affiliate knows or has reason to know of the occurrence of any of the following, the Borrower will deliver to each of the Banks a certificate of the chief financial officer of the Borrower setting forth the full details as to such occurrence and the action, if any, that the Borrower, such Subsidiary or such ERISA Affiliate is required or proposes to take, together with any notices required or proposed to be given to or filed with or by the Borrower, the Subsidiary, the ERISA Affiliate, the PBGC or any other governmental agency, a Plan or, to the extent received by the Borrower, Multiemployer Plan participant or the Plan or Multiemployer Plan administrator with respect thereto: that a Reportable Event has occurred (except to the extent that the Borrower has previously delivered to the Banks a certificate and notices (if any) concerning such event pursuant to the next clause hereof); that a contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan subject to Title IV of ERISA is subject to the advance reporting requirement of PBGC Regulation Section 4043.61 (without regard to subparagraph (b)(1) thereof), and an event described in subsection .62, .63, .64, .65, .66, .67 or .68 of PBGC Regulation Section 4043 is reasonably expected to occur within the following 30 days; that an accumulated funding deficiency, within the meaning of Section 412 of the Code or Section 302 of ERISA, has been incurred or an application has been made or is reasonably expected to be made for a waiver or modification of the minimum funding standard (including any required installment payments) or an extension of any amortization period under Section 412 of the Code or Section 303 or 304 of ERISA with respect to a Plan; that any contribution required to be made by the Borrower, any Subsidiary or any ERISA Affiliate with respect to a Plan, a Multiemployer Plan or Foreign Pension Plan has not been timely made; that a Plan or a Multiemployer Plan has been or is reasonably expected to be terminated, reorganized, partitioned or declared insolvent under Title IV of ERISA; that a Plan has an Unfunded Current Liability; that proceedings have been or are reasonably expected to be instituted to terminate or appoint a trustee to administer a Plan or a Multiemployer Plan which is subject to Title IV of ERISA; that a proceeding has been instituted against the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate pursuant to Section 515 of ERISA to collect a delinquent contribution to a Multiemployer Plan; that the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate will or is reasonably expected to incur any liability (including any indirect, contingent, or secondary liability) to or on account of the termination of or withdrawal from a Plan or a Multiemployer Plan under Section 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or with respect to a Plan under Section 401(a)(29), 4971 or 4980 of the Code or with respect to a group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) under Section 4980B of the Code; that the Borrower or any Subsidiary of the Borrower will or is reasonably expected to incur any liability (including any indirect, contingent, or secondary liability) with respect to a Plan under Section 4975 of the Code or Section 409, 502 (i) or 502(1) of ERISA; or that the Borrower or any Subsidiary of the Borrower will or is reasonably expected to incur any material liability pursuant to any employee welfare benefit plan (as defined in Section 3(1) of ERISA) that provides benefits to retired employees or other former employees (other than as required by Section 601 of ERISA) or any Plan. The Borrower will deliver to each of the Banks (i) at the request of any Bank on ten Business Days' notice a complete copy of the annual report (on Internal Revenue Service Form 5500-series) of each Plan (including, to the extent required, the related financial and actuarial statements and opinions and other supporting statements, certifications, schedules and information) required to be filed with the Internal Revenue Service and (ii) copies of any records, documents or other information that must be furnished to the PBGC with respect to any Plan pursuant to Section 4010 of ERISA. In addition to any certificates or notices delivered to the Banks pursuant to the first sentence hereof, copies of any material documents or other information required to be furnished to the PBGC, and any material notices received by the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate with respect to any Plan, Multiemployer Plan or Foreign Pension Plan shall be delivered to the Banks no later than ten Business Days after the date such documents and/or information has been furnished to the PBGC or such notice has been received by the Borrower, such Subsidiary or such ERISA Affiliate, as applicable. 8.09 Good Repair. The Borrower will, and will cause each of its ----------- Subsidiaries to, ensure that its material properties and equipment used in its business are kept in good repair, working order and condition, ordinary wear and tear excepted, and that from time to time there are made in such properties and equipment all needful and proper repairs, renewals, replacements, extensions, additions, betterments and improvements thereto, to the extent and in the manner useful or customary for companies in similar businesses. 8.10 End of Fiscal Years; Fiscal Quarters. The Borrower will, for ------------------------------------ financial reporting purposes, cause (i) each of its, and each of its Subsidiaries' (other than Pacer Logistics' and Pacer Logistics' Subsidiaries'), fiscal years to end on the Friday nearest to December 31 of each calendar year and (ii) each of its, and each of its Subsidiaries' (other than Pacer Logistics' and Pacer Logistics' Subsidiaries'), (x) first fiscal quarter in each fiscal year to end on last day of the 14/th/ week of such fiscal year, (y) the second and third fiscal quarters in each fiscal year to end on the last day of the 26/th/ and 38/th/ weeks, respectively, of such fiscal year and (z) the fourth fiscal quarter in each fiscal year to end on the last day of the 52nd week (or in the case of the fiscal year ending on the Friday nearest to December 31, 2004, the 53rd week) of such fiscal year. The Borrower will, for financial reporting purposes, cause (i) Pacer Logistics' and each of its Subsidiaries' fiscal years to end on December 31 of each calendar year and (ii) Pacer Logistics' and each of its Subsidiaries' fiscal quarters to end on March 31, June 30, September 30 and December 31 of each year. 8.11 Additional Security; Further Assurances. (a) The Borrower --------------------------------------- will, and will cause each of its Wholly-Owned Domestic Subsidiaries (and to the extent Section 8.12 is operative, each of its Wholly-Owned Foreign Subsidiaries) to, grant to the Collateral Agent security interests and mortgages in such assets and real property of the Borrower and its Subsidiaries as are not covered by the original Security Documents, in each case to the extent requested from time to time by the Administrative Agent or the Required Banks (collectively, the "Additional Security Documents"). All such security interests and mortgages shall be granted pursuant to documentation reasonably satisfactory in form and substance to the Collateral Agent and shall constitute valid and enforceable perfected security interests, hypothecations and mortgages superior to and prior to the rights of all third Persons and enforceable as against third parties and subject to no other Liens except for Permitted Liens. The Additional Security Documents or instruments related thereto shall have been duly recorded or filed in such manner and in such places as are required by law to establish, perfect, preserve and protect the Liens in favor of the Collateral Agent required to be granted pursuant to the Additional Security Documents and all taxes, fees and other charges payable in connection therewith shall have been paid in full. Notwithstanding the foregoing, this Section 8.11(a) shall not apply to (and the Borrower and its Subsidiaries shall not be required to grant a mortgage in) any Real Property the fair market value of which (as determined in good faith by senior management of the Borrower) is less than $5,000,000. (b) The Borrower will, and will cause each of its Subsidiaries to, at the expense of the Borrower, make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, real property surveys, reports and other assurances or instruments and take such further steps relating to the Collateral covered by any of the Security Documents as the Collateral Agent may reasonably require (including, without limitation, (x) reregistering the certificate of title of any Tractor Trailer in any state in which such Tractor Trailer primarily operates, to the extent the Collateral Agent determines, in its reasonable discretion, that such action is required to ensure the perfection or the enforceability as against third parties of its security interest in such Collateral and (y) furnishing a schedule of all units of Rolling Stock owned by the Borrower and its Subsidiaries and the serial or other identification number assigned to each such unit). Furthermore, the Borrower shall cause to be delivered to the Collateral Agent such opinions of counsel, title insurance and other related documents as may be reasonably requested by the Collateral Agent to assure itself that this Section 8.11 has been complied with. (c) The Borrower agrees that each action required above by this Section 8.11 shall be completed as soon as possible, but in no event later than 90 days after such action is either requested to be taken by the Administrative Agent, the Collateral Agent or the Required Banks or required to be taken by the Borrower and its Subsidiaries pursuant to the terms of this Section 8.11; provided that in no event will the Borrower or any of its Subsidiaries be - -------- required to take any action, other than using its commercially reasonable efforts, to obtain consents from third parties with respect to its compliance with this Section 8.11. 8.12 Foreign Subsidiaries Security. If following a change in the ----------------------------- relevant sections of the Code or the regulations, rules, rulings, notices or other official pronouncements issued or promulgated thereunder, counsel for the Borrower reasonably acceptable to the Administrative Agent does not within 30 days after a request from the Administrative Agent or the Required Banks deliver evidence, in form and substance mutually satisfactory to the Administrative Agent and the Borrower, with respect to any Foreign Subsidiary (and in the case of clause (i) below, any Foreign Unrestricted Subsidiary) of the Borrower which has not already had all of its stock pledged pursuant to the Pledge Agreement that (i) a pledge of more than 66-2/3% of the total combined voting power of all classes of capital stock of such Foreign Subsidiary (or Foreign Unrestricted Subsidiary) entitled to vote, (ii) the entering into by such Foreign Subsidiary of a security agreement in substantially the form of the Security Agreement, (iii) the entering into by such Foreign Subsidiary of a pledge agreement in substantially the form of the Pledge Agreement and (iv) the entering into by such Foreign Subsidiary of a guaranty in substantially the form of the Subsidiaries Guaranty, in any such case could reasonably be expected to cause (I) the undistributed earnings of such Foreign Subsidiary (or Foreign Unrestricted Subsidiary) as determined for Federal income tax purposes to be treated as a deemed dividend to such Foreign Subsidiary's (or Foreign Unrestricted Subsidiary's) United States parent for Federal income tax purposes or (II) other material adverse Federal income tax consequences to the Credit Parties, then in the case of a failure to deliver the evidence described in clause (i) above, that portion of such Foreign Subsidiary's (or Foreign Unrestricted Subsidiary's, as the case may be) outstanding capital stock so issued by such Foreign Subsidiary (or Foreign Unrestricted Subsidiary, as the case may be), in each case not theretofore pledged pursuant to the Pledge Agreement shall be pledged to the Collateral Agent for the benefit of the Secured Creditors pursuant to the Pledge Agreement (or another pledge agreement in substantially similar form, if needed), and in the case of a failure to deliver the evidence described in clause (ii) or (iii) above, such Foreign Subsidiary (to the extent same is a Wholly-Owned Foreign Subsidiary) shall execute and deliver the Security Agreement (or another security agreement in substantially similar form, if needed) or the Pledge Agreement (or another pledge agreement in substantially similar form, if needed), as the case may be, granting to the Collateral Agent for the benefit of the Secured Creditors a security interest in all of such Foreign Subsidiary's assets or the capital stock and promissory notes owned by such Foreign Subsidiary, as the case may be, and securing the obligations of the Borrower under the Credit Documents and under any Interest Rate Protection Agreement or Other Hedging Agreement and, in the event the Subsidiaries Guaranty shall have been executed by such Foreign Subsidiary, the obligations of such Foreign Subsidiary thereunder, and in the case of a failure to deliver the evidence described in clause (iv) above, such Foreign Subsidiary (to the extent same is a Wholly-Owned Foreign Subsidiary) shall execute and deliver the Subsidiaries Guaranty (or another guaranty in substantially similar form, if needed), guaranteeing the obligations of the Borrower under the Credit Documents and under any Interest Rate Protection Agreement or Other Hedging Agreement, in each case to the extent that the entering into of such Security Agreement, Pledge Agreement or Subsidiaries Guaranty (or substantially similar document) is permitted by the laws of the respective foreign jurisdiction and with all documents delivered pursuant to this Section 8.12 to be in form and substance reasonably satisfactory to the Administrative Agent and/or the Collateral Agent. 8.13 Use of Proceeds. All proceeds of the Loans shall be used as --------------- provided in Section 7.05. 8.14 Permitted Acquisitions. (a) Subject to the provisions of this ---------------------- Section 8.14 and the requirements contained in the definition of Permitted Acquisition, the Borrower and any of its Wholly-Owned Domestic Subsidiaries may from time to time effect Permitted Acquisitions, so long as (in each case except to the extent the Required Banks otherwise specifically agree in writing in the case of a specific Permitted Acquisition): (i) no Default or Event of Default shall be in existence at the time of the consummation of the proposed Permitted Acquisition or immediately after giving effect thereto; (ii) the Borrower shall have given the Administrative Agent and the Banks at least 5 Business Days' prior written notice of any Permitted Acquisition; (iii) calculations are made by the Borrower of compliance with the covenants contained in Sections 9.09 and 9.10 (in each case, giving effect to the last sentence appearing therein) for the period of four consecutive fiscal quarters (taken as one accounting period) most recently ended prior to the date of such Permitted Acquisition (each, a "Calculation Period"), on a Pro Forma Basis as if the respective Permitted --- ----- Acquisition (as well as all other Permitted Acquisitions theretofore consummated after the first day of such Calculation Period) had occurred on the first day of such Calculation Period, and such recalculations shall show that such financial covenants would have been complied with if the Permitted Acquisition had occurred on the first day of such Calculation Period (for this purpose, if the first day of the respective Calculation Period occurs prior to the Initial Borrowing Date, calculated as if the covenants contained in said Sections 9.09 and 9.10 (in each case, giving effect to the last sentence appearing therein) had been applicable from the first day of the Calculation Period); (iv) based on good faith projections prepared by the Borrower for the period from the date of the consummation of the Permitted Acquisition to the date which is one year thereafter, the level of financial performance measured by the covenants set forth in Sections 9.09 and 9.10 (in each case, giving effect to the last sentence appearing therein) shall be better than or equal to such level as would be required to provide that no Default or Event of Default would exist under the financial covenants contained in Sections 9.09 and 9.10 (in each case, giving effect to the last sentence appearing therein) through the date which is one year from the date of the consummation of the respective Permitted Acquisition; (v) calculations are made by the Borrower demonstrating compliance with an Adjusted Senior Leverage Ratio not to exceed 3.00:1.0 on the last day of the relevant Calculation Period, on a Pro Forma Basis as if the respective Permitted --- ----- Acquisition (as well as all other Permitted Acquisitions theretofore consummated after the first day of such Calculation Period) had occurred on the first day of such Calculation Period; (vi) the Maximum Permitted Consideration payable in connection with the proposed Permitted Acquisition does not exceed $25,000,000 (or, in the case of the acquisition of Conex pursuant to a Permitted Acquisition, $40,000,000); (vii) all representations and warranties contained herein and in the other Credit Documents shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date of such Permitted Acquisition (both before and after giving effect thereto), unless stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date; (viii) the Borrower provides to the Administrative Agent and the Banks as soon as available but not later than 5 Business Days after the execution thereof, a copy of any executed purchase agreement or similar agreement with respect to such Permitted Acquisition; (ix) after giving effect to such Permitted Acquisition and the payment of all post-closing purchase price adjustments required (in the good faith determination of the Borrower) in connection with such Permitted Acquisition (and all other Permitted Acquisitions for which such purchase price adjustments may be required to be made) and all capital expenditures (and the financing thereof) reasonably anticipated by the Borrower to be made in the business acquired pursuant to such Permitted Acquisition within the 90-day period (such period for any Permitted Acquisition, a "Post-Closing Period") following such Permitted Acquisition (and in the businesses acquired pursuant to all other Permitted Acquisitions with Post-Closing Periods ended during the Post-Closing Period of such Permitted Acquisition), the Total Unutilized Revolving Loan Commitment shall equal or exceed $15,000,000; and (x) the Borrower shall have delivered to the Administrative Agent an officer's certificate executed by an Authorized Officer of the Borrower, certifying to the best of his knowledge, compliance with the requirements of preceding clauses (i) through (ix), inclusive, and containing the calculations required by the preceding clauses (iii), (iv), (v), (vi) and (ix); provided, however, that so -------- ------- long as (x) the Maximum Permitted Consideration payable in connection with the proposed Permitted Acquisition does not exceed $2,500,000 and (y) the Maximum Permitted Consideration paid in connection with the proposed Permitted Acquisition, when combined with the Maximum Permitted Consideration paid in connection with all other Permitted Acquisitions consummated in the same fiscal quarter as such proposed Permitted Acquisition, does not exceed $5,000,000, the Borrower shall not be required to comply with clauses (ii) and (viii) above in connection with such Permitted Acquisition and the officer's certificate otherwise required to be delivered pursuant to clause (x) above shall instead be delivered to the Administrative Agent within 45 days following the end of the fiscal quarter in which such Permitted Acquisition is consummated. (b) At the time of each Permitted Acquisition involving the creation or acquisition of a Subsidiary, or the acquisition of capital stock or other equity interest of any Person, the capital stock or other equity interests thereof created or acquired in connection with such Permitted Acquisition shall be pledged for the benefit of the Secured Creditors pursuant to the Pledge Agreement in accordance with the requirements of Section 9.15. (c) The Borrower shall cause each Subsidiary which is formed to effect, or is acquired pursuant to, a Permitted Acquisition to comply with, and to execute and deliver, all of the documentation required by, Sections 8.11 and 9.15, to the reasonable satisfaction of the Administrative Agent. (d) The consummation of each Permitted Acquisition shall be deemed to be a representation and warranty by the Borrower that the certifications by the Borrower (or by one or more of its Authorized Officers) pursuant to Section 8.14(a) are true and correct and that all conditions thereto have been satisfied and that same is permitted in accordance with the terms of this Agreement, which representation and warranty shall be deemed to be a representation and warranty for all purposes hereunder, including, without limitation, Sections 6 and 10. 8.15 Performance of Obligations. The Borrower will, and will cause -------------------------- each of its Subsidiaries to, perform all of its obligations under the terms of each mortgage, deed of trust, indenture, loan agreement or credit agreement and each other material agreement, contract or instrument by which it is bound, except such non-performances as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 8.16 Maintenance of Company Separateness. The Borrower will, and ----------------------------------- will cause each of its Subsidiaries and Unrestricted Subsidiaries to, satisfy customary Company formalities, including, as applicable, the holding of regular board of directors' and shareholders' meetings or action by directors or shareholders without a meeting and the maintenance of Company offices and records. Neither the Borrower nor any of its Subsidiaries shall make any payment to a creditor of any Unrestricted Subsidiary in respect of any liability of any Unrestricted Subsidiary, and no bank account of any Unrestricted Subsidiary shall be commingled with any bank account of the Borrower or any of its Subsidiaries. Any financial statements distributed to any creditors of any Unrestricted Subsidiary shall clearly establish or indicate the Company separateness of such Unrestricted Subsidiary from the Borrower and its Subsidiaries. Finally, neither the Borrower nor any of its Subsidiaries shall take any action, or conduct its affairs in a manner, which is likely to result in the Company existence of the Borrower or any of its Subsidiaries or Unrestricted Subsidiaries being ignored, or in the assets and liabilities of the Borrower or any of its Subsidiaries being substantively consolidated with those of any other such Person or any Unrestricted Subsidiary in a bankruptcy, reorganization or other insolvency proceeding. 8.17 Year 2000 Compliance. The Borrower will ensure that its -------------------- Information Systems and Equipment are at all times after November 15, 1999 Year 2000 Compliant in all material respects, and shall notify the Administrative Agent and each Bank promptly upon detecting any failure of the Information Systems and Equipment to be Year 2000 Compliant. In addition, the Borrower shall provide the Administrative Agent and each Bank with such information about its year 2000 computer readiness (including, without limitation, information as to contingency plans, budgets and testing results) as the Administrative Agent or such Bank shall reasonably request. 8.18 338(h)(10) Election. The Borrower will timely file or shall -------------------- cause to be timely filed all forms required to be filed to effect a valid election under Section 338(h)(10) of the Code with respect to the Recapitalization, and the Borrower will timely satisfy or will cause to be timely satisfied any requirements imposed by any state or local government to give effect to an election analogous to the foregoing Section 338(h)(10) election for all applicable state or local tax purposes. 8.19 Name Change. Immediately after giving effect to the Pacer ------------ Logistics Acquisition, the Borrower shall cause an amendment to the Certificate of Incorporation of Pacer Logistics to be filed with the Secretary of State of the State of Delaware, which amendment shall change the name of Pacer Logistics from "Pacer International, Inc." to "Pacer Logistics, Inc." SECTION 9. Negative Covenants. The Borrower hereby covenants and ------------------ agrees that as of the Initial Borrowing Date and thereafter for so long as this Agreement is in effect and until the Total Commitment has terminated, no Letters of Credit or Notes are outstanding and the Loans, together with interest, Fees and all other Obligations (other than any indemnities described in Section 13.13 which are not then due and payable) incurred hereunder, are paid in full: 9.01 Changes in Business. (a) The Borrower will not, and will not ------------------- permit any of its Subsidiaries to, engage directly or indirectly in any business other than a Permitted Business. (b) No Unrestricted Subsidiary shall engage (directly or indirectly) in any business other than a Permitted Business. 9.02 Consolidation; Merger; Sale or Purchase of Assets; etc. The ------------------------------------------------------- Borrower will not, nor will the Borrower permit any of its Subsidiaries to, wind up, liquidate or dissolve its affairs or enter into any transaction of merger, amalgamation or consolidation, or convey, sell, lease or otherwise dispose of all or any part of its property or assets (other than inventory in the ordinary course of business), or enter into any sale-leaseback transactions, or purchase or otherwise acquire (in one or a series of related transactions) any part of the property or assets (other than purchases or other acquisitions of inventory, materials, general intangibles, equipment, goods and services in the ordinary course of business) of any Person or agree to do any of the foregoing at any future time, except that the following shall be permitted: (a) the Borrower and its Subsidiaries may, as lessee, enter into operating leases in the ordinary course of business with respect to real, personal, movable or immovable property; (b) Capital Expenditures by the Borrower and its Subsidiaries to the extent not in violation of Section 9.11; (c) Investments permitted pursuant to Section 9.05 and the disposition or liquidation of Cash Equivalents in the ordinary course of business; (d) the Borrower and any of its Subsidiaries may sell or otherwise dispose of assets (excluding capital stock of, or other equity interests in, Subsidiaries, Joint Ventures and Unrestricted Subsidiaries) which, in the reasonable opinion of such Person, are obsolete, uneconomic or no longer useful in the conduct of such Person's business, provided that -------- except with respect to asset dispositions or transfers arising out of, or in connection with, the events described in clauses (i) and (ii) of the definition of Recovery Event, (w) each such sale or disposition shall be for an amount at least equal to the fair market value thereof (as determined in good faith by senior management of the Borrower), (x) to the extent any such sale or disposition generates Net Sale Proceeds equal to or greater than $250,000, such sale or disposition (I) results in consideration at least 80% of which (taking into account the amount of cash, the principal amount of any promissory notes and the fair market value, as determined by the Borrower in good faith, of any other consideration) shall be in the form of cash or (II) in the case of an asset or assets subject to Capitalized Lease Obligations, results in the assumption of all of the Capitalized Lease Obligations or other purchase money obligations of the Borrower or such Subsidiary in respect of such asset by the purchaser thereof, (y) the aggregate Net Sale Proceeds from all assets sold or otherwise disposed of pursuant to this clause (d), when added to the aggregate amount of all Capitalized Lease Obligations and all other purchase money obligations assigned in connection with all assets sold or otherwise disposed of pursuant to this clause (d) shall not exceed $10,000,000 in the aggregate in any fiscal year of the Borrower and (z) in the case of any sale or disposition of an asset constituting an Asset Sale, the Net Sale Proceeds therefrom are either applied to repay Term Loans and/or reduce the Total Revolving Loan Commitment as provided in Section 4.02(c) or reinvested in replacement assets or retained to the extent permitted by Section 4.02(c) and/or the other relevant provisions of this Agreement; (e) any Subsidiary of the Borrower may convey, lease, license, sell or otherwise transfer all or any part of its business, properties and assets to the Borrower or to any Subsidiary Guarantor, so long as any security interests granted to the Collateral Agent for the benefit of the Secured Creditors pursuant to the Security Documents in the assets so transferred shall remain in full force and effect and perfected (to at least the same extent as in effect immediately prior to such transfer) and all actions required to maintain said perfected status have been taken; (f) any Subsidiary of the Borrower may merge with and into, or be dissolved or liquidated into, the Borrower or any Subsidiary Guarantor, so long as (i) the Borrower or such Subsidiary Guarantor is the surviving corporation of any such merger, dissolution or liquidation and (ii) any security interests granted to the Collateral Agent for the benefit of the Secured Creditors pursuant to the Security Documents in the assets of such Subsidiary shall remain in full force and effect and perfected (to at least the same extent as in effect immediately prior to such merger, dissolution or liquidation) and all actions required to maintain said perfected status have been taken; (g) any Foreign Subsidiary may be merged or amalgamated with and into, or be dissolved or liquidated into, or transfer any of its assets to, any Wholly-Owned Foreign Subsidiary of the Borrower, so long as (i) such Wholly-Owned Foreign Subsidiary is the surviving corporation of any such merger, amalgamation, dissolution or liquidation and (ii) any security interests granted to the Collateral Agent for the benefit of the Secured Creditors pursuant to the Security Documents in the assets of such Wholly- Owned Foreign Subsidiary and such Foreign Subsidiary shall remain in full force and effect and perfected (to at least the same extent as in effect immediately prior to such merger, amalgamation, dissolution, liquidation or transfer) and all actions required to maintain said perfected status have been taken; (h) the Borrower and its Wholly-Owned Domestic Subsidiaries shall be permitted to make Permitted Acquisitions, so long as such Permitted Acquisitions are effected in accordance with the requirements of Section 8.14; (i) the Recapitalization, the Pacer Logistics Acquisition and the Sale-Leaseback Transaction shall be permitted to the extent consummated in accordance with the relevant requirements of Section 5.08 of this Agreement; (j) the Borrower and its Subsidiaries may, in the ordinary course of business, license, as licensor or licensee, patents, trademarks, copyrights and know-how to or from third Persons or one another, so long as any such license by the Borrower or any of its Subsidiaries in its capacity as licensor is permitted to be assigned pursuant to the Security Agreement (to the extent that a security interest in such patents, trademarks, copyrights and know-how is granted thereunder) and does not otherwise prohibit the granting of a Lien by the Borrower or any of its Subsidiaries pursuant to the Security Agreement in the intellectual property covered by such license; (k) the Borrower and its Domestic Subsidiaries may transfer assets to Wholly-Owned Foreign Subsidiaries, so long as (x) no Default or Event of Default exists as the time of the respective transfer and (y) the aggregate fair market value of all such assets so transferred (determined in good faith by the Board of Directors or senior management of the Borrower) to all such Foreign Subsidiaries on and after the Effective Date does not exceed the sum of (i) $7,500,000 plus (ii) the aggregate fair market value ---- of all assets of Foreign Subsidiaries of the Borrower (as determined in good faith by senior management of the Borrower) transferred by such Foreign Subsidiaries to the Borrower and any Subsidiary Guarantor pursuant to Section 9.02(e) after the Effective Date; (l) the Borrower and any of its Subsidiaries may sell or otherwise dispose of the capital stock of, or other equity interests in, any of their respective Subsidiaries, Joint Ventures and Unrestricted Subsidiaries, provided that (v) in the case of a sale or other disposition of the capital -------- stock or other equity interests of any Wholly-Owned Subsidiary of the Borrower, 100% of the capital stock or other equity interests of such Subsidiary shall be so sold or disposed of, (w) each such sale or disposition shall be for an amount at least equal to the fair market value thereof (as determined in good faith by senior management of the Borrower), (x) each such sale results in consideration at least 80% of which (taking into account the amount of cash, the principal amount of any promissory notes and the fair market value, as determined by the Borrower in good faith, of any other consideration) shall be in the form of cash, (y) the aggregate Net Sale Proceeds of all assets sold or otherwise disposed of pursuant to this clause (l) after the Effective Date shall not exceed $15,000,000 in the aggregate and (z) the Net Sale Proceeds therefrom are either applied to repay Term Loans and/or reduce the Total Revolving Loan Commitment as provided in Section 4.02(c) or reinvested in replacement assets or retained to the extent permitted by Section 4.02(c) and/or the other relevant provisions of this Agreement; (m) the Borrower and its Subsidiaries may enter into agreements to effect acquisitions and dispositions of stock or assets, so long as the respective transaction is permitted pursuant to the provisions of this Section 9.02; provided that the Borrower and its Subsidiaries may enter -------- into agreements to effect acquisitions and dispositions of capital stock or assets in transactions not permitted by the provisions of this Section 9.02 at the time the respective agreement is entered into, so long as in the case of each such agreement, such agreement shall be expressly conditioned upon obtaining the requisite consent of the Required Banks under this Agreement or the repayment of all Obligations hereunder as a condition precedent to the consummation of the respective transaction and, if for any reason the transaction is not consummated because of a failure to obtain such consent, the aggregate liability of the Borrower and its Subsidiaries under any such agreement shall not exceed $2,500,000; and (n) the Borrower or any of its Subsidiaries may effect Permitted Sale-Leaseback Transactions in accordance with the definition thereof; provided that (x) the aggregate amount of all proceeds received by the -------- Borrower and its Subsidiaries from all Permitted Sale-Leaseback Transactions consummated on and after the Effective Date shall not exceed $15,000,000 and (y) the Net Sale Proceeds therefrom are applied to repay Term Loans and/or reduce the Total Revolving Loan Commitment as provided in Section 4.02(c) or reinvested in replacement assets or retained to the extent permitted by Section 4.02(c). To the extent the Required Banks waive the provisions of this Section 9.02 with respect to the sale or other disposition of any Collateral, or any Collateral is sold or otherwise disposed of as permitted by this Section 9.02, such Collateral (unless transferred to the Borrower or a Subsidiary thereof) shall (except as otherwise provided above) be sold or otherwise disposed of free and clear of the Liens created by the Security Documents and the Administrative Agent shall take such actions (including, without limitation, directing the Collateral Agent to take such actions) as are appropriate in connection therewith. 9.03 Liens. The Borrower will not, and will not permit any of its ----- Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with respect to any property or assets of any kind (real or personal, tangible or intangible, movable or immovable) of the Borrower or any of its Subsidiaries, whether now owned or hereafter acquired, or sell any such property or assets subject to an understanding or agreement, contingent or otherwise, to repurchase such property or assets (including sales of accounts receivable or notes with recourse to the Borrower or any of its Subsidiaries) or assign any right to receive income, except for the following (collectively, the "Permitted Liens"): (a) inchoate Liens for taxes, assessments or governmental charges or levies not yet due and payable or Liens for taxes, assessments or governmental charges or levies being contested in good faith and by appropriate proceedings for which adequate reserves have been established in accordance with GAAP; (b) Liens in respect of property or assets of the Borrower or any of its Subsidiaries imposed by law which were incurred in the ordinary course of business and which have not arisen to secure Indebtedness for borrowed money, such as carriers', materialmen's, warehousemen's and mechanics' Liens, statutory and common law landlord's Liens, and other similar Liens arising in the ordinary course of business, and which either (x) do not in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Borrower or any of its Subsidiaries or (y) are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the property or asset subject to such Lien; (c) Liens created by or pursuant to this Agreement and the Security Documents; (d) Liens in existence on the Initial Borrowing Date which are listed, and the property subject thereto described, in Schedule IX, without giving effect to any extensions or renewals thereof; (e) Liens arising from judgments, decrees, awards or attachments in circumstances not constituting an Event of Default under Section 10.09, provided that the amount of cash and property (determined on a fair market -------- value basis) deposited or delivered to secure the respective judgment or decree or subject to attachment shall not exceed $5,000,000 at any time; (f) Liens (other than any Lien imposed by ERISA) (x) incurred or deposits made in the ordinary course of business of the Borrower and its Subsidiaries in connection with workers' compensation, unemployment insurance and other types of social security, (y) to secure the performance by the Borrower and its Subsidiaries of tenders, statutory obligations (other than excise taxes), surety, stay, customs and appeal bonds, statutory bonds, bids, leases, government contracts, trade contracts, performance and return of money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money) or (z) to secure the performance by the Borrower and its Subsidiaries of leases of Real Property, to the extent incurred or made in the ordinary course of business consistent with past practices, provided that the aggregate amount -------- of deposits at any time pursuant to sub-clauses (y) and (z) above shall not exceed $5,000,000 in the aggregate; (g) licenses, sublicenses, leases or subleases granted to third Persons in the ordinary course of business not interfering in any material respect with the business of the Borrower or any of its Subsidiaries; (h) easements, rights-of-way, restrictions, minor defects or irregularities in title, encroachments and other similar charges or encumbrances, in each case not securing Indebtedness and not interfering in any material respect with the ordinary conduct of the business of the Borrower or any of its Subsidiaries; (i) Liens arising from precautionary UCC financing statements regarding operating leases; (j) Liens created pursuant to Capital Leases permitted pursuant to Section 9.04(d), provided that (x) such Liens only serve to secure the -------- payment of Indebtedness arising under such Capitalized Lease Obligation (and other Indebtedness permitted by Section 9.04(d) and incurred from the same Person as such Indebtedness) and (y) the Lien encumbering the asset giving rise to the Capitalized Lease Obligation does not encumber any other asset of the Borrower or any of its Subsidiaries (other than other assets subject to Capitalized Lease Obligations and/or Indebtedness incurred pursuant to Section 9.04(d), in each case owing to the same Person as such Capitalized Lease Obligation); (k) Permitted Encumbrances; (l) Liens arising pursuant to purchase money mortgages or security interests securing Indebtedness representing the purchase price (or financing of the purchase price within 90 days after the respective purchase) of assets acquired after the Effective Date, provided that (i) -------- any such Liens attach only to the assets so purchased, upgrades thereon and, if the asset so purchased is an upgrade, the original asset itself (and such other assets financed by the same financing source), (ii) the Indebtedness (other than Indebtedness incurred from the same financing source to purchase other assets and excluding Indebtedness representing obligations to pay installation and delivery charges for the property so purchased) secured by any such Lien does not exceed 100%, nor is less than 80%, of the lesser of the fair market value or the purchase price of the property being purchased at the time of the incurrence of such Indebtedness and (iii) the Indebtedness secured thereby is permitted to be incurred pursuant to Section 9.04(d); (m) Liens on property or assets acquired pursuant to a Permitted Acquisition, or on property or assets of a Subsidiary of the Borrower in existence at the time such Subsidiary is acquired pursuant to a Permitted Acquisition, provided that (i) any Indebtedness that is secured by such -------- Liens is permitted to exist under Section 9.04(d), and (ii) such Liens are not incurred in connection with, or in contemplation or anticipation of, such Permitted Acquisition and do not attach to any other asset of the Borrower or any of its Subsidiaries; (n) Liens arising out of consignment or similar arrangements for the sale of goods entered into by the Borrower or any of its Subsidiaries in the ordinary course of business; and (o) additional Liens incurred by the Borrower and its Subsidiaries, so long as the value of the property subject to such Liens, and the Indebtedness and other obligations secured thereby, do not exceed $5,000,000. 9.04 Indebtedness. The Borrower will not, and will not permit any of ------------ its Subsidiaries to, contract, create, incur, assume or suffer to exist any Indebtedness, except: (a) Indebtedness incurred pursuant to this Agreement and the other Credit Documents; (b) Existing Indebtedness outstanding on the Initial Borrowing Date and listed on Schedule IV (as reduced by any repayments thereof before, on or after the Initial Borrowing Date), without giving effect to any subsequent extension, renewal or refinancing thereof; (c) Indebtedness under (i) Interest Rate Protection Agreements entered into to protect the Borrower against fluctuations in interest rates in respect of Indebtedness otherwise permitted under this Agreement or (ii) Other Hedging Agreements providing protection against fluctuations in currency values in connection with the Borrower's or any of its Subsidiaries' operations, so long as management of the Borrower or such Subsidiary, as the case may be, has determined that the entering into of any such Other Hedging Agreement is a bona fide hedging activity (and is not for speculative purposes) and is in the ordinary course of business and consistent with its past practices; (d) (x) Indebtedness of a Subsidiary acquired pursuant to a Permitted Acquisition (or Indebtedness assumed by the Borrower or any Wholly-Owned Domestic Subsidiary pursuant to a Permitted Acquisition as a result of a merger or consolidation or the acquisition of an asset securing such Indebtedness) (the "Permitted Acquired Debt"), so long as (i) such Indebtedness was not incurred in connection with, or in anticipation or contemplation of, such Permitted Acquisition and (ii) such Indebtedness does not constitute debt for borrowed money (except to the extent such Indebtedness cannot be repaid in accordance with its terms at the time of its assumption pursuant to such Permitted Acquisition (without the payment of a penalty or premium) and the aggregate principal amount of all such Indebtedness for borrowed money permitted pursuant to this parenthetical does not exceed $15,000,000), it being understood and agreed that Capitalized Lease Obligations and purchase money Indebtedness shall not constitute debt for borrowed money for purposes of this clause (ii) and (y) Capitalized Lease Obligations and Indebtedness of the Borrower and its Subsidiaries representing purchase money Indebtedness secured by Liens permitted pursuant to Section 9.03(l), provided, that the sum of (I) the -------- aggregate principal amount of all Permitted Acquired Debt at any time outstanding plus (II) the aggregate amount of Capitalized Lease Obligations ---- incurred on and after the Initial Borrowing Date and outstanding at any time (including Indebtedness evidenced by Capitalized Lease Obligations arising from Permitted Sale-Leaseback Transactions) plus (III) the ---- aggregate principal amount of all such purchase money Indebtedness incurred on and after the Initial Borrowing Date and outstanding at any time, shall not exceed $20,000,000; (e) Indebtedness constituting Intercompany Loans to the extent permitted by Section 9.05(f); (f) Permitted Subordinated Refinancing Indebtedness, so long as no Default or Event of Default is in existence at the time of any incurrence thereof and immediately after giving effect thereto; (g) unsecured Indebtedness of the Borrower and the Subsidiary Guarantors incurred under the Senior Subordinated Notes and the other Senior Subordinated Notes Documents in an aggregate principal amount not to exceed $150,000,000 less the amount of any repayments of principal thereof ---- after the Initial Borrowing Date; (h) Indebtedness of the Borrower or any of its Subsidiaries which may be deemed to exist in connection with agreements providing for indemnification, purchase price adjustments and similar obligations in connection with acquisitions or sales of assets and/or businesses effected in accordance with the requirements of this Agreement (so long as any such obligations are those of the Person making the respective acquisition or sale, and are not guaranteed by any other Person); (i) Contingent Obligations of (x) the Borrower or any of its Subsidiaries as a guarantor of the lessee under any lease pursuant to which the Borrower or any of its Wholly-Owned Subsidiaries is the lessee so long as such lease is otherwise permitted hereunder, (y) the Borrower or any of its Subsidiaries as a guarantor of any Capitalized Lease Obligation to which a Joint Venture is a party or any contract entered into by such Joint Venture in the ordinary course of business; provided that the maximum -------- liability of the Borrower or any of its Subsidiaries in respect of any obligations as described pursuant to preceding clause (y) is permitted as an Investment on such date pursuant to the requirements of Section 9.05(l) and (z) the Borrower which may be deemed to exist pursuant to acquisition agreements entered into in connection with Permitted Acquisitions (including any obligation to pay the purchase price therefor and any indemnification, purchase price adjustment and similar obligations); (j) Indebtedness with respect to performance bonds, surety bonds, appeal bonds or customs bonds required in the ordinary course of business or in connection with the enforcement of rights or claims of the Borrower or any of its Subsidiaries or in connection with judgments that do not result in a Default or an Event of Default, provided that the aggregate -------- outstanding amount of all such performance bonds, surety bonds, appeal bonds and customs bonds permitted by this subsection (j) shall not at any time exceed $5,000,000; (k) Indebtedness of the Borrower under the Shareholder Subordinated Notes issued after the Effective Date in connection with a redemption or repurchase of Borrower Common Stock pursuant to Section 9.06(ii); and (l) (x) Permitted Subordinated Indebtedness incurred in accordance with the requirements of the definition thereof and (y) additional unsecured Indebtedness of the Borrower and its Subsidiaries not otherwise permitted pursuant to this Section 9.04, so long as the aggregate principal amount of all Indebtedness permitted by this clause (l), when added to the aggregate liquidation preference for all Disqualified Preferred Stock issued after the Initial Borrowing Date pursuant to Section 9.13(c), does not exceed $25,000,000 at any time outstanding. 9.05 Advances; Investments; Loans. The Borrower will not, and will ---------------------------- not permit any of its Subsidiaries to, lend money or extend credit or make advances to any Person, or purchase or acquire any stock, obligations or securities of, or any other interest in, or make any capital contribution to, any Person, or purchase or own a futures contract or otherwise become liable for the purchase or sale of currency or other commodities at a future date in the nature of a futures contract, or hold any cash or Cash Equivalents (any of the foregoing, an "Investment"), except: (a) the Borrower and its Subsidiaries may invest in cash and Cash Equivalents, provided that during any time that (i) Revolving Loans or -------- Swingline Loans are outstanding and (ii) the Total Revolving Loan Commitment exceeds $40,000,000, the aggregate amount of cash and Cash Equivalents held by the Borrower and its Subsidiaries shall not exceed $10,000,000 for any period of three consecutive Business Days; (b) the Borrower and its Subsidiaries may acquire and hold receivables owing to it, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms (including the dating of receivables) of the Borrower or such Subsidiary; (c) the Borrower and its Subsidiaries may acquire and own investments (including debt obligations and equity securities) received in connection with the bankruptcy or reorganization of suppliers and customers and in settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business; (d) Interest Rate Protection Agreements and Other Hedging Agreements entered into in compliance with Section 9.04(c) shall be permitted; (e) advances, loans and investments in existence on the Initial Borrowing Date and listed on Schedule VI shall be permitted, without giving effect to any additions thereto or replacements thereof, it being understood that any additional Investments made with respect to such existing Investments shall be permitted only if independently justified under the other provisions of this Section 9.05; (f) any Credit Party may make intercompany loans and advances to any other Credit Party and any Foreign Subsidiary (collectively, "Intercompany Loans"), provided, that (w) at no time shall the aggregate outstanding -------- principal amount of all Intercompany Loans made pursuant to this clause (f) by the Credit Parties to Foreign Subsidiaries, when added to the amount of contributions, capitalizations and forgivenesses theretofore made pursuant to Section 9.05(p), exceed $10,000,000 (determined without regard to any write-downs or write-offs of such loans and advances), (x) each Intercompany Loan shall be evidenced by an Intercompany Note and (y) each such Intercompany Note shall be pledged to the Collateral Agent pursuant to the Pledge Agreement; (g) loans and advances by the Borrower and its Subsidiaries to employees of the Borrower and its Subsidiaries in connection with relocations, purchases by such employees of Borrower Common Stock or options or similar rights to purchase Borrower Common Stock and other ordinary course of business purposes (including travel and entertainment expenses) shall be permitted, so long as the aggregate principal amount thereof at any time outstanding (determined without regard to any write- downs or write-offs of such loans and advances) shall not exceed $5,000,000; (h) the Borrower may acquire and hold obligations of one or more officers or other employees of the Borrower or its Subsidiaries in connection with such officers' or employees' acquisition of shares of Borrower Common Stock, so long as no cash is actually advanced by the Borrower or any of its Subsidiaries to such officers or employees in connection with the acquisition of any such obligations; (i) the Recapitalization and the Pacer Logistics Acquisition shall be permitted to be consummated in accordance with the requirements of Section 5.08; (j) the Borrower and any of its Wholly-Owned Domestic Subsidiaries may make Permitted Acquisitions in accordance with the relevant requirements of Section 8.14 and the component definitions as used therein; (k) the Borrower and its Subsidiaries may own the capital stock of their respective Subsidiaries created or acquired in accordance with the terms of this Agreement (so long as all amounts invested in such Subsidiaries are independently justified under another provision of this Section 9.05); (l) so long as no Default or Event of Default exists or would exist immediately after giving effect to the respective Investment, the Borrower and its Wholly-Owned Domestic Subsidiaries shall be permitted to make Investments in any Joint Venture or any Unrestricted Subsidiary on any date in an amount not to exceed the Available Basket Amount on such date (after giving effect to all prior and contemporaneous adjustments thereto, except as a result of such Investment), it being understood and agreed that (i) to the extent the Borrower or one or more other Credit Parties (after the respective Investment has been made) receives a cash return from the respective Joint Venture or Unrestricted Subsidiary of amounts previously invested pursuant to this clause (l) (which cash return may be made by way of repayment of principal in the case of loans and cash equity returns (whether as a distribution, dividend or redemption) in the case of equity investments) or a return in the form of an asset distribution from the respective Joint Venture or Unrestricted Subsidiary of any asset previously contributed pursuant to this clause (l), then the amount of such cash return of investment or the fair market value of such distributed asset (as determined in good faith by senior management of the Borrower), as the case may be, shall, upon the Administrative Agent's receipt of a certification of the amount of the return of investment from an Authorized Officer, apply to increase the Available Basket Amount, provided that the aggregate amount -------- of increases to the Available Basket Amount described above shall not exceed the amount of returned investment and, in no event, shall the amount of the increases made to the Available Basket Amount in respect of any Investment exceed the amount previously invested pursuant to this clause (l); (m) the Borrower and its Subsidiaries may receive and hold promissory notes and other non-cash consideration received in connection with any asset sale permitted by Sections 9.02(d) and (l); (n) the Borrower and its Subsidiaries may convey, lease, license, sell or otherwise transfer or acquire assets and properties to the extent permitted by Sections 9.02(e), (f), (g), (k) and (n); (o) the Borrower and its Subsidiaries may make advances in the form of a prepayment of expenses, so long as such expenses were incurred in the ordinary course of business and are being paid in accordance with customary trade terms of the Borrower or such Subsidiary; (p) the Borrower and its Domestic Subsidiaries may make cash capital contributions to Foreign Subsidiaries, and may capitalize or forgive any Indebtedness owed to them by a Foreign Subsidiary and outstanding under clause (f) of this Section 9.05, provided that the aggregate amount of such -------- contributions, capitalizations and forgiveness on and after the Initial Borrowing Date, when added to the aggregate outstanding principal amount of Intercompany Loans made to Foreign Subsidiaries under such clause (f) (determined without regard to any write-downs or write-offs thereof) shall not exceed an amount equal to $10,000,000; (q) the Borrower and any Subsidiary Guarantor may make cash equity contributions to any Subsidiary Guarantor; and (r) in addition to investments permitted by clauses (a) through (q) of this Section 9.05, the Borrower and its Subsidiaries may make additional loans, advances and other Investments to or in a Person in an aggregate amount for all loans, advances and other Investments made pursuant to this clause (r) (determined without regard to any write-downs or write-offs thereof), net of cash repayments of principal in the case of loans, sale proceeds in the case of Investments in the form of debt instruments and cash equity returns (whether as a distribution, dividend, redemption or sale) in the case of equity investments, not to exceed $15,000,000 at any time outstanding. 9.06 Dividends; etc. The Borrower will not, and will not permit any --------------- of its Subsidiaries to, declare or pay any dividends (other than dividends payable solely in common stock of the Borrower or any such Subsidiary, as the case may be) or return any capital to, its stockholders or authorize or make any other distribution, payment or delivery of property or cash to its stockholders as such, or redeem, retire, purchase or otherwise acquire, directly or indirectly, for a consideration, any shares of any class of its capital stock, now or hereafter outstanding (or any warrants for or options or stock appreciation rights in respect of any of such shares), or set aside any funds for any of the foregoing purposes, and the Borrower will not permit any of its Subsidiaries to purchase or otherwise acquire for consideration any shares of any class of the capital stock of the Borrower or any other Subsidiary, as the case may be, now or hereafter outstanding (or any options or warrants or stock appreciation rights issued by such Person with respect to its capital stock) (all of the foregoing "Dividends"), except that: (i) any Subsidiary of the Borrower may pay Dividends to the Borrower or any Subsidiary Guarantor; (ii) the Borrower may redeem or purchase shares of Borrower Common Stock or options to purchase Borrower Common Stock, as the case may be, held by former employees of the Borrower or any of its Subsidiaries following the termination of their employment (by death, disability or otherwise), provided that (x) the only consideration paid by the Borrower -------- in respect of such redemptions and/or purchases shall be cash, forgiveness of liabilities and/or Shareholder Subordinated Notes, (y) the sum of (A) the aggregate amount paid by the Borrower in cash in respect of all such redemptions and/or purchases plus (B) the aggregate amount of liabilities so forgiven and (C) the aggregate amount of all cash principal and interest payments made on Shareholder Subordinated Notes, in each case after the Initial Borrowing Date, shall not exceed $5,000,000, and (z) at the time of any cash payment or forgiveness of liabilities permitted to be made pursuant to this Section 9.06(ii), including any cash payment under a Shareholder Subordinated Note, no Default or Event of Default shall then exist or result therefrom; (iii) so long as no Default or Event of Default exists or would result therefrom, the Borrower may pay regularly accruing cash Dividends on Disqualified Preferred Stock issued pursuant to Section 9.13(c), with such Dividends to be paid in accordance with the terms of the respective certificate of designation therefor; (iv) any Subsidiary of the Borrower that is not a Wholly-Owned Subsidiary may pay cash Dividends to its shareholders or partners generally, so long as the Borrower or its respective Subsidiary which owns the equity interest or interests in the Subsidiary paying such Dividends receives at least its proportionate share thereof (based upon its relative holdings of equity interest in the Subsidiary paying such Dividends and taking into account the relative preferences, if any, of the various classes of equity interests in such Subsidiary or the terms of any agreements applicable thereto); (v) the Recapitalization shall be permitted; and (vi) Pacer Logistics may pay regularly accruing Dividends with respect to Pacer Logistics Preferred Stock through the issuance of additional shares of Pacer Logistics Preferred Stock in accordance with the terms of the relevant Equity Financing Documents governing the same; (vii) to the extent the issuance of Borrower Exchange PIK Preferred Stock or Borrower Common Stock in exchange for Pacer Logistics Preferred Stock may be deemed to constitute a Dividend, same shall be permitted so long as (x) in the case of any such issuance of Borrower Exchange PIK Preferred Stock, any such issuance (and exchange) is consummated in accordance (and consistent) with the requirements of Section 9.13(e) and (y) in the case of any issuance of Borrower Common Stock, any such issuance (and exchange) is consummated in accordance with (and consistent) with the requirements of the relevant Equity Financing Documents governing the Pacer Logistics Preferred Stock; (viii) on and after the issuance of Borrower Exchange PIK Preferred Stock in accordance with the requirements of Section 9.13(e), the Borrower may pay regularly accruing Dividends with respect thereto through the issuance of additional shares of Borrower Exchange PIK Preferred Stock in accordance with the terms of the Borrower Exchange PIK Preferred Stock Documents governing the same; and (ix) the Borrower may pay regularly accruing Dividends with respect to Qualified Preferred Stock through the issuance of additional shares of Qualified Preferred Stock (but not in cash) in accordance with the terms of the documentation governing the same. 9.07 Transactions with Affiliates and Unrestricted Subsidiaries. ---------------------------------------------------------- The Borrower will not, and will not permit any of its Subsidiaries to, enter into any transaction or series of transactions with any Affiliate of the Borrower or any of its Subsidiaries or any of its Unrestricted Subsidiaries other than on terms and conditions substantially as favorable to the Borrower or such Subsidiary as would be reasonably expected to be obtainable by the Borrower or such Subsidiary at the time in a comparable arm's-length transaction with a Person other than an Affiliate; provided, that the following shall in any event -------- be permitted: (i) the Transaction; (ii) intercompany transactions among the Borrower and its Subsidiaries to the extent expressly permitted by Sections 9.02, 9.04, 9.05 and 9.06 shall be permitted; (iii) so long as no Default or Event of Default is then in existence or would result therefrom, the payment, on a quarterly basis, of management fees to Apollo Group in an aggregate amount not to exceed $125,000 in any fiscal quarter of the Borrower pursuant to, and in accordance with the terms of, the Apollo Management Agreement, provided that if -------- during any fiscal quarter of the Borrower, a Default or Event of Default is in existence and such management fees cannot be paid as provided above, such fees shall continue to accrue and may be paid at such time as all Defaults and Events of Default have been cured or waived and so long as no Default or Event of Default will exist immediately after giving effect to the payment thereof; (iv) customary fees to non-officer directors of the Borrower and its Subsidiaries; (v) the Borrower and its Subsidiaries may enter into employment arrangements with respect to the procurement of services with their respective officers and employees in the ordinary course of business; (vi) the payment on the Initial Borrowing Date of one time consulting and advisory fees to Apollo Group in an aggregate amount not to exceed $1,500,000; (vii) the reimbursement of Apollo Group for its reasonable out-of-pocket expenses incurred in connection with performing management services to the Borrower and its Subsidiaries pursuant to the Apollo Management Agreement or in connection with the Transaction; (viii) so long as no Default or Event of Default is then in existence or would result therefrom, the payment to Apollo Group of merger advisory fees for each Permitted Acquisition in an amount not to exceed 1% of the fair market value of the business or assets acquired pursuant to such Permitted Acquisition (determined in good faith by senior management of the Borrower); and (ix) the payment of consulting, management or other fees to the Borrower or any Subsidiary Guarantor by any of their respective Subsidiaries in the ordinary course of business. In no event shall any management, consulting or similar fee be paid or payable by the Borrower or any of its Subsidiaries to any Person except as specifically provided in this Section 9.07. 9.08 Designated Senior Debt. The Borrower shall not designate any ---------------------- Indebtedness (other than the Obligations) as "Designated Senior Debt" (as defined in the Senior Subordinated Notes Indenture and, on and after the execution and delivery thereof, any agreement relating to Permitted Subordinated Indebtedness and Permitted Subordinated Refinancing Indebtedness). 9.09 Consolidated Interest Coverage Ratio. The Borrower will not ------------------------------------ permit the Consolidated Interest Coverage Ratio for any Test Period ending on the last day of any fiscal quarter of the Borrower specified below to be less than the ratio set forth opposite such fiscal quarter below: Fiscal Quarter Ended Closest to Ratio ------------------------------- ----- September 30, 1999 1.75:1.0 December 31, 1999 1.75:1.0 March 31, 2000 1.75:1.0 June 30, 2000 1.75:1.0 September 30, 2000 1.75:1.0 December 31, 2000 1.75:1.0 March 31, 2001 1.90:1.0 June 30, 2001 1.90:1.0 September 30, 2001 1.90:1.0 December 31, 2001 1.90:1.0 March 31, 2002 2.00:1.0 June 30, 2002 2.00:1.0 September 30, 2002 2.00:1.0 December 31, 2002 2.00:1.0 March 31, 2003 2.10:1.0 June 30, 2003 2.10:1.0 September 30, 2003 2.10:1.0 December 31, 2003 2.10:1.0 March 31, 2004 2.25:1.0 June 30, 2004 2.25:1.0 September 30, 2004 2.25:1.0 December 31, 2004 2.25:1.0 March 31, 2005 2.25:1.0 June 30, 2005 2.25:1.0 September 30, 2005 2.25:1.0 December 31, 2005 2.25:1.0 March 31, 2006 2.25:1.0 Notwithstanding anything to the contrary contained in this Agreement, all calculations of compliance with this Section 9.09 shall be made on a Pro Forma --- ----- Basis. 9.10 Adjusted Total Leverage Ratio. The Borrower will not permit the ----------------------------- Adjusted Total Leverage Ratio on the last day of any fiscal quarter specified below to exceed the respective ratio set forth opposite such fiscal quarter below: Fiscal Quarter Ended Closest to Ratio ------------------------------- ----- September 30, 1999 5.50:1.0 December 31, 1999 5.50:1.0 March 31, 2000 5.50:1.0 June 30, 2000 5.50:1.0 September 30, 2000 5.50:1.0 December 31, 2000 5.50:1.0 March 31, 2001 5.25:1.0 June 30, 2001 5.25:1.0 September 30, 2001 5.25:1.0 December 31, 2001 5.25:1.0 March 31, 2002 5.00:1.0 June 30, 2002 5.00:1.0 September 30, 2002 5.00:1.0 December 31, 2002 5.00:1.0 March 31, 2003 4.75:1.0 June 30, 2003 4.75:1.0 September 30, 2003 4.75:1.0 December 31, 2003 4.75:1.0 March 31, 2004 4.50:1.0 June 30, 2004 4.50:1.0 September 30, 2004 4.50:1.0 December 31, 2004 4.50:1.0 March 31, 2005 4.50:1.0 June 30, 2005 4.50:1.0 September 30, 2005 4.50:1.0 December 31, 2005 4.50:1.0 March 31, 2006 4.50:1.0 Notwithstanding anything contrary contained above or elsewhere in this Agreement, (i) all calculations of compliance with this Section 9.10 shall be made on a Pro Forma Basis and (ii) in no event shall the Adjusted Total Leverage --- ----- Ratio be greater than the Maximum Permitted Acquisition Leverage Ratio upon the consummation of, and after giving effect on a Pro Forma Basis to, any Permitted --- ----- Acquisition. 9.11 Capital Expenditures. (a) The Borrower will not, and will not -------------------- permit any of its Subsidiaries to, make any Capital Expenditures, except that during any fiscal year set forth below, the Borrower and its Subsidiaries may make Capital Expenditures, so long as the aggregate amount of such Capital Expenditures does not exceed in any fiscal year set forth below the sum of (x) the amount set forth opposite such fiscal year below plus (y) for each Acquired ---- Business acquired after the Effective Date and prior to the first day of the respective fiscal year set forth below, 25% of the Acquired EBITDA of such Acquired Business for the trailing twelve months of such Acquired Business immediately preceding its acquisition for which financial statements have been made available to the Borrower and the Banks plus (z) for each Acquired Business ---- acquired during the respective fiscal year, the amount for such Acquired Business specified in preceding clause (y) multiplied by a percentage, the numerator of which is the number of days in the fiscal year after the date of the respective acquisition and the denominator of which is 365 or 366, as the case may be: Fiscal Year Ending Amount ------------------ ------ December 31, 1999 $5,000,000 December 31, 2000 $5,500,000 December 31, 2001 $6,000,000 December 31, 2002 $6,500,000 December 31, 2003 $7,000,000 December 31, 2004 $7,500,000 December 31, 2005 $8,000,000 December 31, 2006 $4,250,000 (b) Notwithstanding the foregoing, in the event that the amount of Capital Expenditures permitted to be made by the Borrower and its Subsidiaries pursuant to clause (a) above in any fiscal year (before giving effect to any increase in such permitted expenditure amount pursuant to this clause (b)) is greater than the amount of such Capital Expenditures made by the Borrower and its Subsidiaries during such fiscal year, such excess (the "Rollover Amount") may be carried forward and utilized to make Capital Expenditures in succeeding fiscal years, provided that in no event shall the Rollover Amount available to -------- be utilized in succeeding fiscal years exceed $5,000,000 at any time. (c) Notwithstanding the foregoing, the Borrower and its Subsidiaries may make Capital Expenditures (which Capital Expenditures will not be included in any determination under the foregoing clause (a)) with the insurance proceeds received by the Borrower or any of its Subsidiaries from any Recovery Event so long as such Capital Expenditures are used to replace or restore any properties or assets in respect of which such proceeds were paid or committed to be paid within 360 days following the date of the receipt of such insurance proceeds, in each case to the extent such insurance proceeds do not require, or result in, a mandatory repayment of Term Loans and/or a mandatory reduction to the Total Revolving Loan Commitment pursuant to Section 4.02(f). (d) Notwithstanding the foregoing, the Borrower and its Subsidiaries may make Capital Expenditures (which Capital Expenditures will not be included in any determination under the foregoing clause (a)) with the Net Sale Proceeds of Asset Sales, to the extent such Net Sale Proceeds do not require, or result in, a mandatory repayment of Term Loans and/or a mandatory reduction to the Total Revolving Loan Commitment pursuant to Section 4.02(c) and such proceeds are reinvested as required by said Section 4.02(c). (e) Notwithstanding the foregoing, the Borrower and its Wholly-Owned Domestic Subsidiaries may make Capital Expenditures (which Capital Expenditures will not be included in any determination under the foregoing clause (a)) constituting Permitted Acquisitions effected in accordance with the requirements of Section 9.02(h). (f) Notwithstanding the foregoing, the Borrower may make Capital Expenditures (which Capital Expenditures shall not be included in any determination under foregoing clause (a)) pursuant to the Pacer Logistics Acquisition to the extent same is effected in accordance with the requirements of Section 5.08. (g) Notwithstanding the foregoing, the Borrower and its Subsidiaries may make additional Capital Expenditures (which Capital Expenditures will not be included in any determination under foregoing clause (a)) consisting of IT Upgrade Expenditures at any time and from time to time, so long as the aggregate amount of such additional Capital Expenditures made by the Borrower and its Subsidiaries pursuant to this clause (g) after the Effective Date does not exceed $25,000,000 (it being understood that IT Upgrade Expenditures may exceed the amounts set forth in this clause (g) so long as the Capital Expenditures made in connection therewith are independently justified under clause (a) or (b) above). (h) Notwithstanding the foregoing, the Borrower and its Subsidiaries may make additional Capital Expenditures (which Capital Expenditures will not be included in any determination under foregoing clause (a)) consisting of Container and Chassis Purchases at any time and from time to time, so long as (i) the aggregate amount of such additional Capital Expenditures made by the Borrower and its Subsidiaries pursuant to this clause (h) after the Effective Date does not exceed $25,000,000 and (ii) the aggregate amount of such additional Capital Expenditures made by the Borrower and its Subsidiaries pursuant to this clause (h) in any fiscal year of the Borrower does not exceed $10,000,000 (it being understood that Container and Chassis Purchases may exceed the amounts set forth in this clause (h) so long as the Capital Expenditures made in connection therewith are independently justified under clause (a) or (b) above). 9.12 Limitation on Voluntary Payments and Modifications of ----------------------------------------------------- Indebtedness; Modifications of Certificate of Incorporation, By-Laws and Certain - -------------------------------------------------------------------------------- Other Agreements; Issuances of Capital Stock; etc. The Borrower will not, and - ------------------------------------------------- will not permit any of its Subsidiaries to: (i) amend or modify, or permit the amendment or modification of, any provision of any Shareholder Subordinated Note, any Existing Indebtedness, or, after the incurrence or issuance thereof, any Qualified Preferred Stock, Pacer Logistics Preferred Stock, any Borrower Exchange PIK Preferred Stock Document, Disqualified Preferred Stock or Permitted Debt or of any agreement (including, without limitation, any purchase agreement, indenture, loan agreement, security agreement or certificate of designation) relating thereto in a manner that could reasonably be expected to in any way be adverse to the interests of the Banks; (ii) make (or give any notice in respect of) any voluntary or optional payment or prepayment on or redemption, repurchase or acquisition for value of (including, without limitation, by way of depositing with the trustee with respect thereto or any other Person money or securities before due for the purpose of paying when due), or any prepayment or redemption as a result of any asset sale, change of control or similar event of, any Senior Subordinated Notes (except, in the case of the Senior Subordinated Notes, through the issuance of Exchange Senior Subordinated Notes as contemplated in the definition of Senior Subordinated Notes and consistent with the requirements of the definition of Exchange Senior Subordinated Notes), any Permitted Subordinated Refinancing Indebtedness or any Permitted Subordinated Indebtedness; provided that, so long as no Default -------- or Event of Default then exists or would result therefrom, (x) any Senior Subordinated Notes may be refinanced with Permitted Subordinated Refinancing Indebtedness, (y) the Borrower may repurchase Senior Subordinated Notes on the open-market in an aggregate principal amount for all purchases made pursuant to this clause (y) not to exceed $25,000,000 so long as the Adjusted Total Leverage Ratio is less than 4.0:1.0 on the last day of the Test Period most recently ended prior to the consummation of the respective repurchase (as set forth in the officer's certificate most recently delivered pursuant to Section 8.01(e)) and (z) the Borrower and its Subsidiaries may make payments and prepayments in connection with Existing Indebtedness; (iii) make (or give any notice in respect of) any principal or interest payment on, or any redemption or acquisition for value of, any Shareholder Subordinated Note, except to the extent permitted by Section 9.06(ii); (iv) amend or modify, or permit the amendment or modification of, any provision of any Senior Subordinated Notes Document; or (v) amend, modify or change in any way which could reasonably be expected to be adverse to the interests of the Banks in any material respect any Tax Allocation Agreement, any Management Agreement, any Equity Financing Document, any Recapitalization Document, any Pacer Logistics Acquisition Document, any APL Limited Agreement its certificate of incorporation (including, without limitation, by the filing or modification of any certificate of designation other than any certificates of designation relating to Qualified Preferred Stock or Disqualified Preferred Stock issued as permitted herein), by-laws, certificate of partnership, partnership agreement, certificate of limited liability company, limited liability company agreement or any agreement entered into by it, with respect to its capital stock or other equity interest (including any Shareholders' Agreement), or enter into any new Tax Allocation Agreement, Management Agreement or agreement with respect to its capital stock or other equity interest which could reasonably be expected to in any way be adverse to the interests of the Banks or, in the case of any Management Agreement, which involves the payment by the Borrower or any of its Subsidiaries of any amount which could give rise to a violation of this Agreement; provided that the -------- foregoing clause shall not restrict the ability of the Borrower and its Subsidiaries to amend their respective certificates of incorporation to authorize the issuance of capital stock otherwise permitted to be issued pursuant to the terms of this Agreement. 9.13 Limitation on Issuance of Capital Stock. (a) The Borrower will --------------------------------------- not, and will not permit any of its Subsidiaries to, issue (i) any Preferred Stock (other than (x) Preferred Stock issued pursuant to clauses (c), (d) and (e) below, (y) Pacer Logistics Preferred Stock issued on the Initial Borrowing Date in accordance with the requirements of Section 5.08 and (z) the issuance of shares of Pacer Logistics Preferred Stock in payment of regularly accruing dividends on theretofore outstanding shares of Pacer Logistics Preferred Stock) or any options, warrants or rights to purchase Preferred Stock or (ii) any redeemable common stock unless, in either case, the issuance thereof is, and all terms thereof are, satisfactory to the Required Banks in their sole discretion. (b) The Borrower shall not permit any of its Subsidiaries to issue any capital stock (including by way of sales of treasury stock) or any options or warrants to purchase, or securities convertible into, capital stock, except (i) for transfers and replacements of then outstanding shares of capital stock, (ii) for stock splits, stock dividends and additional issuances which do not decrease the percentage ownership of the Borrower or any of its Subsidiaries in any class of the capital stock of such Subsidiaries, (iii) to qualify directors to the extent required by applicable law, (iv) Subsidiaries formed after the Initial Borrowing Date pursuant to Section 9.15 may issue capital stock in accordance with the requirements of Section 9.15, (v) that Subsidiaries may issue common stock to the Borrower and its Subsidiaries in connection with any transaction permitted by Section 9.05(p) or (q) and (vi) that Pacer Logistics may issue Pacer Logistics Preferred Stock in accordance with, and as contemplated by, clauses (y) and (z) of the parenthetical contained in Section 9.13(a)(i). All capital stock issued in accordance with this Section 9.13(b) shall, to the extent owned by any Credit Party and required by the Pledge Agreement, be delivered to the Collateral Agent for pledge pursuant to the Pledge Agreement. (c) The Borrower may issue Disqualified Preferred Stock so long as (i) no Default or Event of Default then exists or would exist immediately after giving effect to the respective issuance, (ii) the aggregate liquidation preference for all Disqualified Preferred Stock issued after the Initial Borrowing Date pursuant to this Section 9.13(c) shall not to exceed, when combined with the aggregate principal amount of all then outstanding Indebtedness permitted by Section 9.04(l), $25,000,000, (iii) with respect to each issue of Disqualified Preferred Stock, the gross cash proceeds therefrom (or in the case of Disqualified Preferred Stock directly issued as consideration for a Permitted Acquisition, the fair market value thereof (as determined in good faith by the Borrower) of the assets received therefor) shall not exceed the liquidation preference thereof at the time of issuance, (iv) calculations are made by the Borrower of compliance with the covenants contained in Sections 9.09 and 9.10 for the Calculation Period most recently ended prior to the date of the respective issuance of Disqualified Preferred Stock, on a Pro Forma Basis --- ----- after giving effect to the respective issuance of Disqualified Preferred Stock, and such calculations shall show that such financial covenants would have been complied with if such issuance of Disqualified Preferred Stock had been consummated on the first day of the respective Calculation Period, and (v) the Borrower shall furnish to the Administrative Agent a certificate by an Authorized Officer of the Borrower certifying to the best of his or her knowledge as to compliance with the requirements of this Section 9.13(c) and containing the pro forma --- ----- calculations required by the preceding clause (iv). (d) The Borrower may issue Qualified Preferred Stock (x) in payment of regularly accruing dividends on theretofore outstanding shares of Qualified Preferred Stock as contemplated by Section 9.06(ix) and (y) so long as, with respect to each other issue of Qualified Preferred Stock, the Borrower receives reasonably equivalent consideration (as determined in good faith by the Borrower). (e) The Borrower may issue Borrower Exchange PIK Preferred Stock in exchange for Pacer Logistics Preferred Stock pursuant to, and in accordance with the terms of, the Borrower Exchange PIK Preferred Stock Documents and in accordance with the terms of the relevant Equity Financing Documents governing the Pacer Logistics Preferred Stock. 9.14 Limitation on Certain Restrictions on Subsidiaries. The -------------------------------------------------- Borrower will not, and will not permit any of its Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective, any encumbrance or restriction on the ability of any such Subsidiary to (x) pay dividends or make any other distributions on its capital stock or any other interest or participation in its profits owned by the Borrower or any Subsidiary of the Borrower, or pay any Indebtedness owed to the Borrower or a Subsidiary of the Borrower, (y) make loans or advances to the Borrower or any Subsidiary of the Borrower or (z) transfer any of its properties or assets to the Borrower or any of its Subsidiaries, except for such encumbrances or restrictions existing under or by reason of (i) applicable law, (ii) this Agreement and the other Credit Documents, (iii) the provisions contained in the Existing Indebtedness, (iv) customary provisions restricting subletting or assignment of any lease governing a leasehold interest of the Borrower or a Subsidiary of the Borrower entered into in the ordinary course of business and consistent with past practices, (v) customary provisions restricting assignment of any contract entered into by the Borrower or any Subsidiary of the Borrower in the ordinary course of business, (vi) any agreement or instrument governing Permitted Acquired Debt, which encumbrance or restriction is not applicable to any Person or the properties or assets of any Person, other than the Person or the properties or assets of the Person acquired pursuant to the respective Permitted Acquisition and so long as the respective encumbrances or restrictions were not created (or made more restrictive) in connection with or in anticipation of the respective Permitted Acquisition, (vii) customary provisions restricting the assignment of licensing agreements, management agreements or franchise agreements entered into by the Borrower or any of its Subsidiaries in the ordinary course of business; (viii) restrictions applicable to any Joint Venture that is a Subsidiary existing at the time of the acquisition thereof as a result of an Investment pursuant to Section 9.05 or a Permitted Acquisition effected in accordance with Section 8.14, provided that the restrictions applicable to the -------- respective such Joint Venture are not made worse, or more burdensome, from the perspective of the Borrower and its Subsidiaries, than those as in effect immediately before giving effect to the consummation of the respective Investment or Permitted Acquisition, (ix) any restriction or encumbrance with respect to a Subsidiary imposed pursuant to an agreement which has been entered into for the sale or disposition of all or substantially all of the capital stock or assets of such Subsidiary, so long as such sale or disposition of all or substantially all of the capital stock or assets of such Subsidiary is permitted under this Agreement, (x) the documentation governing Permitted Debt (other than Permitted Acquired Debt) and (xi) the Senior Subordinated Note Documents. 9.15 Limitation on the Creation of Subsidiaries, Joint Ventures and -------------------------------------------------------------- Unrestricted Subsidiaries. (a) Notwithstanding anything to the contrary - ------------------------- contained in this Agreement, the Borrower will not, and will not permit any of its Subsidiaries to, establish, create or acquire after the Initial Borrowing Date any Subsidiary or Unrestricted Subsidiary (other than Joint Ventures permitted to be established in accordance with the requirements of Section 9.05(l)); provided that (A) the Borrower, any of its Wholly-Owned Domestic -------- Subsidiaries and any Unrestricted Subsidiary shall be permitted to establish or create an Unrestricted Subsidiary, so long as (i) if a Domestic Unrestricted Subsidiary of the Borrower, all of the capital stock or other equity interests of such new Domestic Unrestricted Subsidiary owned by the Borrower or any such Wholly-Owned Domestic Subsidiary shall be pledged pursuant to the Pledge Agreement and the certificates representing such stock or other equity interests, together with appropriate powers duly executed in blank, shall be delivered to the Collateral Agent, (ii) if a Foreign Unrestricted Subsidiary of the Borrower, all of the capital stock or other equity interests of such new Foreign Unrestricted Subsidiary owned by the Borrower or any such Wholly-Owned Domestic Subsidiary (except that not more than 65% of the outstanding voting stock of any Foreign Unrestricted Subsidiary need be so pledged, except in the circumstances contemplated by Section 8.12) shall be pledged pursuant to the Pledge Agreement and the certificates representing such stock or other equity interests, together with appropriate powers duly executed in blank, shall be delivered to the Collateral Agent and (iii) all Investments by the Borrower and its Subsidiaries in any Unrestricted Subsidiary are permitted pursuant to Section 9.05(l), (B) the Borrower and its Wholly-Owned Subsidiaries shall be permitted to establish or create Wholly-Owned Subsidiaries so long as, in each case, (i) at least 10 days' prior written notice thereof is given to the Administrative Agent (or such shorter period of time as is acceptable to the Administrative Agent), (ii) the capital stock or other equity interests of such new Subsidiary are promptly pledged pursuant to, and to the extent required by, this Agreement and the Pledge Agreement and the certificates, if any, representing such stock or other equity interests, together with stock or other appropriate powers duly executed in blank, are delivered to the Collateral Agent, (iii) in the case of a Domestic Subsidiary, such new Domestic Subsidiary promptly executes a counterpart of the Subsidiaries Guaranty, the Pledge Agreement and the relevant Security Documents, (iv) in the case of any Foreign Subsidiary, such new Foreign Subsidiary promptly executes a counterpart of the Subsidiaries Guaranty, the Pledge Agreement and the Security Agreement (or similar document) to the extent required pursuant to Section 8.12, and (v) to the extent requested by the Administrative Agent or the Required Banks, such new Subsidiary takes all actions required pursuant to Section 8.11 and (C) Subsidiaries may be acquired pursuant to Permitted Acquisitions so long as, in each such case (i) with respect to each Wholly-Owned Subsidiary acquired pursuant to a Permitted Acquisition, the actions specified in preceding clauses (B) and (C), as applicable, shall be taken and (ii) with respect to each Subsidiary which is not a Wholly-Owned Subsidiary and is acquired pursuant to a Permitted Acquisition, all capital stock or other equity interests thereof owned by any Credit Party shall be pledged pursuant to the Pledge Agreement. In addition, each new Subsidiary that is required to execute any Credit Document shall execute and deliver, or cause to be executed and delivered, all other relevant documentation of the type described in Section 5 as such new Subsidiary would have had to deliver if such new Subsidiary were a Credit Party on the Initial Borrowing Date. (b) The Borrower will not, nor will the Borrower permit any of its Subsidiaries to, enter into any Joint Venture, except to the extent permitted by Section 9.05(l). SECTION 10. Events of Default. Upon the occurrence of any of the ----------------- following specified events (each, an "Event of Default"): 10.01 Payments. The Borrower shall (i) default in the payment when -------- due of any principal of the Loans or (ii) default, and such default shall continue for three or more Business Days, in the payment when due of any Unpaid Drawing, any interest on the Loans or any Fees or any other amounts owing hereunder or under any other Credit Document; or 10.02 Representations, etc. Any representation, warranty or --------------------- statement made by any Credit Party herein or in any other Credit Document or in any statement or certificate delivered pursuant hereto or thereto shall prove to be untrue in any material respect on the date as of which made or deemed made; or 10.03 Covenants. Any Credit Party shall (a) default in the due --------- performance or observance by it of any term, covenant or agreement contained in Section 8.01(f)(i), 8.10, 8.13, 8.14 or 9, or (b) default in the due performance or observance by it of any term, covenant or agreement (other than those referred to in Section 10.01, 10.02 or clause (a) of this Section 10.03) contained in this Agreement and such default shall continue unremedied for a period of at least 30 days after notice to the defaulting party by the Administrative Agent or the Required Banks; or 10.04 Default Under Other Agreements. (a) The Borrower or any of ------------------------------ its Subsidiaries shall (i) default in any payment with respect to any Indebtedness (other than the Obligations) beyond the period of grace, if any, provided in the instrument or agreement under which Indebtedness was created or (ii) default in the observance or performance of any agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause (determined without regard to whether any notice is required), any such Indebtedness to become due prior to its stated maturity; or (b) any Indebtedness (other than the Obligations) of the Borrower or any of its Subsidiaries shall be declared to be due and payable, or shall be required to be prepaid other than by a regularly scheduled required prepayment or as a mandatory prepayment (unless such required prepayment or mandatory prepayment results from a default thereunder or an event of the type that constitutes an Event of Default), prior to the stated maturity thereof; provided, that it shall not constitute an Event of Default pursuant to clause - -------- (a) or (b) of this Section 10.04 unless the principal amount of any one issue of such Indebtedness, or the aggregate amount of all such Indebtedness referred to in clauses (a) and (b) above, exceeds $3,500,000 at any one time; or 10.05 Bankruptcy, etc. The Borrower or any of its Subsidiaries shall ---------------- commence a voluntary case concerning itself under Title 11 of the United States Code entitled "Bankruptcy," as now or hereafter in effect, or any successor thereto (the "Bankruptcy Code"); or an involuntary case is commenced against the Borrower or any of its Subsidiaries and the petition is not controverted within 20 days, or is not dismissed within 60 days, after commencement of the case; or a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or substantially all of the property of the Borrower or any of its Subsidiaries; or the Borrower or any of its Subsidiaries commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Borrower or any of its Subsidiaries; or there is commenced against the Borrower or any of its Subsidiaries any such proceeding which remains undismissed for a period of 60 days; or the Borrower or any of its Subsidiaries is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Borrower or any of its Subsidiaries suffers any appointment of any custodian or the like for it or any substantial part of its property to continue undischarged or unstayed for a period of 60 days; or the Borrower or any of its Subsidiaries makes a general assignment for the benefit of creditors; or any corporate action is taken by the Borrower or any of its Subsidiaries for the purpose of effecting any of the foregoing; or 10.06 ERISA. (a) (i) Any Plan or Multiemployer Plan shall fail to ----- satisfy the minimum funding standard required for any plan year or part thereof under Section 412 of the Code or Section 302 of ERISA or a waiver of such standard or extension of any amortization period is sought or granted under Section 412 of the Code or Section 303 or 304 of ERISA, (ii) a Reportable Event shall have occurred, (iii) a contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan subject to Title IV of ERISA shall be subject to the advance reporting requirement of PBGC Regulation Section 4043.61 (without regard to subparagraph (b)(1) thereof) and an event described in subsection .62, .63, .64, .65, .66, .67 or .68 of PBGC Regulation Section 4043 shall be reasonably expected to occur within the following 30 days, (iv) any Plan which is subject to Title IV of ERISA shall have had or is likely to have a trustee appointed to administer such Plan, (v) any Plan which is subject to Title IV of ERISA is, shall have been or is likely to be terminated or to be the subject of termination proceedings under ERISA, (vi) any Plan shall have an Unfunded Current Liability, (vii) a contribution required to be made by the Borrower or any Subsidiary of the Borrower with respect to a Plan, a Multiemployer Plan or a Foreign Pension Plan has not been timely made, (viii) the Borrower or any Subsidiary of the Borrower has incurred or is likely to incur any liability to or on account of a Plan or Multiemployer Plan under Section 409, 502(i) or 502(1) of ERISA or Section 4975 of the Code, (ix) the Borrower or any Subsidiary of any Borrower or any ERISA Affiliate has incurred or is likely to incur any liability to or on account of a Plan under Section 4062, 4063, 4064, 4069 of ERISA or Section 401(a)(29) or 4971 of the Code or on account of a group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) under Section 4980B of the Code, (x) the Borrower or any Subsidiary of the Borrower or any ERISA Affiliate has incurred or is likely to incur any liability to or on account of a Multiemployer Plan under Section 515, 4201, 4204 or 4212 of ERISA; or (ix) the Borrower or any Subsidiary of the Borrower has incurred or is likely to incur liabilities pursuant to one or more employee welfare benefit plans (as defined in Section 3(1) of ERISA) that provide benefits to retired employees or other former employees (other than as required by Section 601 of ERISA) or pursuant to any Plan or Foreign Pension Plan; (b) there shall result from any such event or events the imposition of a lien, the granting of a security interest, or a liability or a material risk of incurring a liability; and (c) such lien, security interest or liability, individually, and/or in the aggregate, in the opinion of the Required Banks, has had, or could reasonably be expected to have, a Material Adverse Effect; or 10.07 Security Documents. (a) Any Security Document shall cease to ------------------ be in full force and effect, or shall cease to give the Collateral Agent the Liens, rights, powers and privileges purported to be created thereby in favor of the Collateral Agent, superior to and prior to the rights of all third Persons (except as permitted by Section 9.03), and subject to no other Liens (except as permitted by Section 9.03), or (b) any Credit Party shall default in the due performance or observance of any term, covenant or agreement on its part to be performed or observed pursuant to any such Security Document and such default shall continue beyond any cure or grace period specifically applicable thereto pursuant to the terms of any such Security Document; or 10.08 Guaranties. Any Guaranty or any provision thereof shall cease ---------- to be in full force and effect, or any Guarantor or any Person acting by or on behalf of such Guarantor shall deny or disaffirm such Guarantor's obligations under the relevant Guaranty or any Guarantor shall default in the due performance or observance of any term, covenant or agreement on its part to be performed or observed pursuant to any Guaranty; or 10.09 Judgments. One or more judgments or decrees shall be entered --------- against the Borrower or any of its Subsidiaries involving a liability (to the extent not paid or not fully covered by insurance) in excess of $3,500,000 for all such judgments and decrees and all such judgments or decrees shall not have been vacated, discharged or stayed or bonded pending appeal within 60 days from the entry thereof; or 10.10 Ownership. A Change of Control Event shall have occurred; --------- then, and in any such event, and at any time thereafter, if any Event of Default shall then be continuing, the Administrative Agent shall, upon the written request of the Required Banks, by written notice to the Borrower, take any or all of the following actions, without prejudice to the rights of any Agent or any Bank to enforce its claims against any Guarantor or the Borrower, except as otherwise specifically provided for in this Agreement (provided, that if an -------- Event of Default specified in Section 10.05 shall occur with respect to the Borrower, the result which would occur upon the giving of written notice by the Administrative Agent as specified in clauses (i), (ii) and (iii) below shall occur automatically without the giving of any such notice): (i) declare the Total Commitment terminated, whereupon the Commitment of each Bank shall forthwith terminate immediately and any Commitment Fees shall forthwith become due and payable without any other notice of any kind; (ii) declare the principal of and any accrued interest in respect of all Loans and all Obligations owing hereunder (including Unpaid Drawings) to be, whereupon the same shall become, forthwith due and payable by the Borrower without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; (iii) enforce, as Collateral Agent (or direct the Collateral Agent to enforce), any or all of the Liens and security interests created pursuant to the Security Documents; (iv) terminate any Letter of Credit which may be terminated in accordance with its terms; (v) direct the Borrower to pay (and the Borrower hereby agrees upon receipt of such notice, or upon the occurrence of any Event of Default specified in Section 10.05, to pay) to the Collateral Agent at the Payment Office such additional amounts of cash, to be held as security for the Borrower's reimbursement obligations in respect of Letters of Credit then outstanding, equal to the aggregate Stated Amount of all Letters of Credit then outstanding; and (vi) apply any cash collateral as provided in Section 4.02. SECTION 11. Definitions. As used herein, the following terms shall ----------- have the meanings herein specified unless the context otherwise requires. Defined terms in this Agreement shall include in the singular number the plural and in the plural the singular: "Acquired Business" shall mean any Person or business, division or product line acquired pursuant to a Permitted Acquisition. "Acquired EBITDA" shall mean, for any Acquired Business for any period, the Consolidated EBITDA as determined for such Acquired Business on a basis substantially the same (with necessary reference changes) as provided in the first sentence of the definition of Consolidated EBITDA contained herein (without giving effect to the proviso thereto), except that (i) all references therein and in the component definitions used in determining Consolidated EBITDA to "the Borrower and its Subsidiaries" shall be deemed to be references to the respective Acquired Business and (ii) the adjustments contained in clause (ii) of the definition of Consolidated EBITDA shall not be made. All calculations of Acquired EBITDA shall be made on a Pro Forma Basis (for such purpose treating --- ----- (x) each reference to "Consolidated EBITDA" contained in the definition of Pro Forma Basis as if it were a reference to "Acquired EBITDA", (y) clause (v) of said definition as if same applied to a determination of Acquired EBITDA for purposes of Section 9.11, and (z) the text "the two fiscal quarters comprising the respective Test Period" appearing in clause (v) of said definition as if same were a reference to "the trailing twelve month period immediately preceding the respective Permitted Acquisition" and disregarding subclauses (y) and (z) of clause (v) of said definition). "Acquired Person" shall have the meaning provided in the definition of Permitted Acquisition. "Acquisition Corp." shall mean Coyote Acquisition LLC, a Delaware limited liability company. "Acquisition" shall have the meaning provided in Section 5.08(a). "Additional Security Documents" shall have the meaning provided in Section 8.11. "Adjusted Certificate of Deposit Rate" shall mean, on any day, the sum (rounded to the nearest 1/100 of 1%) of (1) the rate obtained by dividing (x) the most recent weekly average dealer offering rate for negotiable certificates of deposit with a three-month maturity in the secondary market as published in the most recent Federal Reserve System publication entitled "Select Interest Rates", published weekly on Form H.15 as of the date hereof, or if such publication or a substitute containing the foregoing rate information shall not be published by the Federal Reserve System for any week, the weekly average offering rate determined by the Administrative Agent on the basis of quotations for such certificates received by it from three certificate of deposit dealers in New York of recognized standing or, if such quotations are unavailable, then on the basis of other sources reasonably selected by the Administrative Agent, by (y) a percentage equal to 100% minus the stated maximum rate of all reserve requirements as specified in Regulation D applicable on such day to a three- month certificate of deposit of a member bank of the Federal Reserve System in excess of $100,000 (including, without limitation, any marginal, emergency, supplemental, special or other reserves), plus (2) the then daily net annual ---- assessment rate as estimated by the Administrative Agent for determining the current annual assessment payable by BTCo to the Federal Deposit Insurance Corporation for insuring three month certificates of deposit. "Adjusted Consolidated Net Income" for any period shall mean Consolidated Net Income for such period plus, without duplication, (i) the sum of the amount of all net non-cash charges (including, without limitation, depreciation, amortization, deferred tax expense and non-cash interest expense but excluding any net non-cash charges reflected in Adjusted Consolidated Working Capital) and net non-cash losses which were included in arriving at Consolidated Net Income for such period less (ii) all net non-cash gains (exclusive of items reflected in Adjusted Consolidated Working Capital) included in arriving at Consolidated Net Income for such period. "Adjusted Consolidated Working Capital" at any time shall mean Consolidated Current Assets (but excluding therefrom all cash and Cash Equivalents) less Consolidated Current Liabilities. "Adjusted RL Percentage" shall mean (x) at a time when no Bank Default exists, for each Bank, such Bank's RL Percentage and (y) at a time when a Bank Default exists, (i) for each Bank that is a Defaulting Bank, zero and (ii) for each Bank that is a Non-Defaulting Bank, the percentage determined by dividing such Bank's Revolving Loan Commitment at such time by the Adjusted Total Revolving Loan Commitment at such time, it being understood that all references herein to Revolving Loan Commitments and the Adjusted Total Revolving Loan Commitment at a time when the Total Revolving Loan Commitment or Adjusted Total Revolving Loan Commitment, as the case may be, has been terminated shall be references to the Revolving Loan Commitments or Adjusted Total Revolving Loan Commitment, as the case may be, in effect immediately prior to such termination, provided that (A) no Bank's Adjusted RL Percentage shall change upon the - -------- occurrence of a Bank Default from that in effect immediately prior to such Bank Default if after giving effect to such Bank Default, and any repayment of Revolving Loans and Swingline Loans at such time pursuant to Section 4.02(a) or otherwise, the sum of (i) the aggregate outstanding principal amount of Revolving Loans of all Non-Defaulting Banks, plus (ii) the aggregate outstanding principal amount of Swingline Loans, plus (iii) the Letter of Credit Outstandings, exceed the Adjusted Total Revolving Loan Commitment; (B) the changes to the Adjusted RL Percentage that would have become effective upon the occurrence of a Bank Default but that did not become effective as a result of the preceding clause (A) shall become effective on the first date after the occurrence of the relevant Bank Default on which the sum of (i) the aggregate outstanding principal amount of the Revolving Loans of all Non-Defaulting Banks, plus (ii) the aggregate outstanding principal amount of Swingline Loans, plus (iii) the Letter of Credit Outstandings, is equal to or less than the Adjusted Total Revolving Loan Commitment; and (C) if (i) a Non-Defaulting Bank's Adjusted RL Percentage is changed pursuant to the preceding clause (B) and (ii) any repayment of such Bank's Revolving Loans or of Unpaid Drawings or of Swingline Loans that were made during the period commencing after the date of the relevant Bank Default and ending on the date of such change to its Adjusted RL Percentage must be returned to the Borrower as a preferential or similar payment in any bankruptcy or similar proceeding of the Borrower, then the change to such Non- Defaulting Bank's Adjusted RL Percentage effected pursuant to said clause (B) shall be reduced to that positive change, if any, as would have been made to its Adjusted RL Percentage if (x) such repayments had not been made and (y) the maximum change to its Adjusted RL Percentage would have resulted in the sum of the outstanding principal of Revolving Loans made by such Bank plus such Bank's new Adjusted RL Percentage of the outstanding principal amount of Swingline Loans and of Letter of Credit Outstandings equaling such Bank's Revolving Loan Commitment at such time. "Adjusted Senior Leverage Ratio" shall mean the Adjusted Total Leverage Ratio, except that references to "Consolidated Debt" and "Adjusted Total Leverage Ratio" therein shall instead be references to "Consolidated Senior Debt" and "Adjusted Senior Leverage Ratio", respectively. "Adjusted Total Revolving Loan Commitment" shall mean at any time the Total Revolving Loan Commitment less the aggregate Revolving Loan Commitments of ---- all Defaulting Banks. "Adjusted Total Leverage Ratio" shall mean, on any date, the ratio of (i) Consolidated Debt on such date to (ii) Consolidated EBITDA for the Test Period most recently ended on or prior to such date. All calculations of the Adjusted Total Leverage Ratio shall be made on a Pro Forma Basis, with --- ----- determinations of Adjusted Total Leverage Ratio to give effect to all adjustments (including, without limitation, those specified in clauses (iv) and (v)) contained in the definition of "Pro Forma Basis" contained herein. --- ----- "Administrative Agent" shall have the meaning provided in the first paragraph of this Agreement and shall include any successor to the Administrative Agent appointed pursuant to Section 12.10. "Affected Loans" shall have the meaning provided in Section 4.02(i). "Affiliate" shall mean, with respect to any Person, any other Person directly or indirectly controlling (including but not limited to all directors and officers of such Person), controlled by, or under direct or indirect common control with such Person; provided, however, that for purposes of Section 9.07, -------- ------- an Affiliate of the Borrower shall include any Person that directly or indirectly owns more than 5% of any class of the capital stock of the Borrower and any officer or director of the Borrower or any such Person. "Agent" shall have the meaning provided in the first paragraph of this Agreement. "Agreement" shall mean this Credit Agreement, as the same may be from time to time modified, amended and/or supplemented. "APL" shall mean APL Limited, a Delaware corporation. "APL Limited Agreements" shall mean and include each of the Non- Competition Agreement, Administrative Services Agreement, Information Technology Outsourcing and License Agreement, Stacktrain Services Agreement, TPI Chassis Sublet Agreement, Equipment Supply Agreement and Primary Obligation and Guaranty Agreement, in each case referred to in the Offering Memorandum with respect to the Senior Subordinated Notes, dated as of May 24, 1999, as such agreements may be amended, modified or supplemented from time to time pursuant to the terms hereof and thereof. "Apollo Equity Financing" shall have the meaning provided in Section 5.08(c). "Apollo Group" shall mean Apollo Advisors, L.P., Apollo Investment Fund, L.P., Apollo Investment Fund IV, L.P. and Apollo Overseas Partners IV, L.P., all Delaware limited partnerships. "Apollo Management Agreement" shall mean the management agreement, dated as of May 28, 1999, between Apollo Advisors, L.P. and the Borrower, as the same may be amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. "Applicable Excess Cash Flow Percentage" shall mean, with respect to any Excess Cash Flow Payment Date, 75%; provided that so long as no Default or -------- Event of Default is then in existence, if on the last day of the relevant Excess Cash Flow Payment Period, the Adjusted Total Leverage Ratio for the Test Period then most recently ended (as established pursuant to the officer's certificate delivered (or required to be delivered) pursuant to Section 8.01(e)) (i) is less than 3.50:1.00 but greater than or equal to 3.00:1.00, then the Applicable Excess Cash Flow Percentage shall instead be 50%, (ii) is less than 3.00:1.00 but greater than or equal to 2.5:1.00, then the Applicable Excess Cash Flow Percentage shall instead be 25% or (iii) is less than 2.50:1.0, then the Applicable Excess Cash Flow Percentage shall instead be 0%. "Applicable Margin" initially shall mean a percentage per annum equal to (i) in the case of Revolving Loans maintained as (x) Base Rate Loans, 1.50% and (y) Eurodollar Loans, 2.50%, (ii) in the case of Term Loans maintained as (x) Base Rate Loans, 2.00% and (y) Eurodollar Loans, 3.00%, (iii) in the case of Swingline Loans, 1.50% and (iv) in the case of the Commitment Fee, 0.50%. From and after each day of delivery of any certificate delivered in accordance with the first sentence of the following paragraph indicating a different margin than that described in the immediately preceding sentence (each, a "Start Date") to and including the applicable End Date described below, the Applicable Margin shall (subject to any adjustment pursuant to the immediately succeeding paragraph) be that set forth below opposite the Total Leverage Ratio indicated to have been achieved in any certificate delivered in accordance with the following sentence:
- --------------------------------------------------------------------------------------------------- Revolving Loan Revolving Term Loan Term Loan Applicable Total Leverage Eurodollar Loan Base Eurodollar Base Rate Commitment Ratio Margin Rate Margin Margin Margin Fee - --------------------------------------------------------------------------------------------------- Equal to or greater 2.75% 1.75% 3.00% 2.00% 0.500% than 5.0:1 - --------------------------------------------------------------------------------------------------- Equal to or greater 2.50% 1.50% 3.00% 2.00% 0.500% than 4.0:1 but less than 5.0:1 - --------------------------------------------------------------------------------------------------- Equal to or greater 2.25% 1.25% 2.75% 1.75% 0.375% than 3.50:1 but less than 4.0:1 - --------------------------------------------------------------------------------------------------- Less than 3.50:1 2.00% 1.00% 2.50% 1.50% 0.375% - ---------------------------------------------------------------------------------------------------
The Total Leverage Ratio shall be determined based on the delivery of a certificate of the Borrower by an Authorized Officer of the Borrower to the Administrative Agent (with a copy to be sent by the Administrative Agent to each Bank), within 45 days of the last day of any fiscal quarter of the Borrower, which certificate shall set forth the calculation of the Total Leverage Ratio as at the last day of the Test Period ended immediately prior to the relevant Start Date (but determined on a Pro Forma Basis to give effect to any Permitted Acquisition effected on or prior to the date of the delivery of such certificate) and the Applicable Margins which shall be thereafter applicable (until same are changed or cease to apply in accordance with the following sentences); provided that at the time of the consummation of any Permitted -------- Acquisition or any issuance of Permitted Debt or Disqualified Preferred Stock, an Authorized Officer of the Borrower shall deliver to the Administrative Agent a certificate setting forth the calculation of the Total Leverage Ratio on a Pro --- Forma Basis as of the last day of the last Calculation Period ended prior to the - ----- date on which such Permitted Acquisition is consummated or such Permitted Debt or Disqualified Preferred Stock is/are issued for which financial statements have been made available (or were required to be made available) pursuant to Section 8.01(b) or (c), as the case may be, and the date of such consummation shall be deemed to be a Start Date and the Applicable Margins which shall be thereafter applicable (until same are changed or cease to apply in accordance with the following sentence) shall be based upon the Total Leverage Ratio as so calculated. The Applicable Margins so determined shall apply, except as set forth in the succeeding sentence, from the relevant Start Date to the earliest of (x) the date on which the next certificate is delivered to the Administrative Agent, (y) the date on which the next Permitted Acquisition is consummated or Permitted Debt or Disqualified Preferred Stock is/are issued or (z) the date which is 45 days following the last day of the Test Period in which the previous Start Date occurred (such earliest date, the "End Date"), at which time, if no certificate has been delivered to the Administrative Agent indicating an entitlement to new Applicable Margins (and thus commencing a new Start Date), the Applicable Margins shall be those set forth in the table above determined as if the Total Leverage Ratio were greater than 5.0:1.0 (such Applicable Margins as so determined, the "Highest Applicable Margins"). Notwithstanding anything to the contrary contained above in this definition, (x) the Applicable Margins shall be the Highest Applicable Margins at all times during which there shall exist any Default or Event of Default, (y) prior to the date of delivery of the financial statements pursuant to Section 8.01(c) for the fiscal year ended December 31, 1999, in no event shall the Applicable Margins be less than those described in the first sentence of this definition and (z) the Applicable Margin for the Commitment Fee as otherwise determined above shall be increased by 0.25% for each day that both (i) the Total Unutilized Revolving Loan Commitment exceeds 75% of the Total Revolving Loan Commitment then in effect and (ii) the Total Revolving Loan Commitment then in effect exceeds $40,000,000. "Applicable Prepayment Percentage" shall mean, at any time, (i) for purposes of Sections 4.02(c) and (d), 100%, provided that if at any time the -------- Adjusted Total Leverage Ratio is less than 3.50 to 1.00 (as established pursuant to the officer's certificate last delivered (or required to be delivered) pursuant to Section 8.01(e)), the Applicable Prepayment Percentage shall instead be 75% and (ii) for purposes of Section 4.02(e), 50%, provided that if at any -------- time the Adjusted Total Leverage Ratio is less than 3.50 to 1.00 (as established pursuant to the officer's certificate last delivered (or required to be delivered) pursuant to Section 8.01(e)), the Applicable Prepayment Percentage shall instead be 0%. Notwithstanding anything to the contrary in this definition, at any time a Default or Event of Default is then in existence, the Applicable Prepayment Percentage for purposes of (x) Sections 4.02(c) and (d) shall be 100% and (y) Section 4.02(e) shall be 50%. "Asset Sale" shall mean any sale, transfer or other disposition by the Borrower or any of its Subsidiaries to any Person other than the Borrower or any Wholly-Owned Subsidiary of the Borrower of any asset (including, without limitation, any capital stock or other securities of another Person, but excluding the sale by such Person of its own capital stock) of the Borrower or such Subsidiary other than (i) sales, transfers or other dispositions of inventory made in the ordinary course of business, (ii) dispositions or transfers arising out of, or in connection with, the events described in clauses (i) and (ii) of the definition of Recovery Event, (iii) any sale or other disposition of Cash Equivalents in the ordinary course of business, (iv) any merger, consolidation or liquidation permitted by Sections 9.02(f) and (g), (v) any transfer of assets permitted pursuant to Section 9.02(e), (g) or (k), (vi) any transaction permitted pursuant to Section 9.02(j) or (n), (vii) the Sale- Leaseback Transaction to the extent consummated in accordance with the requirements of Section 5.08 and (viii) any other sales and dispositions that generate Net Sale Proceeds of less than $750,000 in the aggregate in any fiscal year of the Borrower. "Assignment and Assumption Agreement" shall mean the Assignment and Assumption Agreement substantially in the form of Exhibit L (appropriately completed). "Authorized Officer" shall mean, with respect to (i) the delivery of Notices of Borrowing, Notices of Conversion, Letter of Credit Requests and similar notices, the chief financial officer, the chief operating officer, any treasurer or other financial officer of the Borrower, (ii) delivery of financial information and officer's certificates pursuant to this Agreement, the chief operating officer, any treasurer or other financial officer of the Borrower and (iii) any other matter in connection with this Agreement or any other Credit Document, any officer (or a person or persons so designated by any two officers) of the Borrower, in each case to the extent reasonably acceptable to the Administrative Agent. "Available Basket Amount" shall mean, on any date of determination, an amount equal to the sum of (i) $20,000,000 minus (ii) the aggregate amount of ----- Investments made (including for such purpose the fair market value of any assets contributed to any Joint Venture or Unrestricted Subsidiary (as determined in good faith by senior management of the Borrower), net of Indebtedness and, without duplication, Capitalized Lease Obligations assigned to, and assumed by, the respective Joint Venture or Unrestricted Subsidiary in connection therewith) pursuant to Section 9.05(l) after the Effective Date, minus (iii) the aggregate ----- amount of Indebtedness or other obligations (whether absolute, accrued, contingent or otherwise and whether or not due) of any Joint Venture or Unrestricted Subsidiary for which the Borrower or any of its Subsidiaries (other than the respective Joint Venture or Unrestricted Subsidiary) is liable, minus ----- (iv) all payments made by the Borrower or any of its Subsidiaries (other than the respective Joint Venture or Unrestricted Subsidiary) in respect of Indebtedness or other obligations of the respective Joint Venture or Unrestricted Subsidiary (including, without limitation, payments in respect of obligations described in preceding clause (iii)) after the Effective Date, plus ---- (v) the amount of any increase to the Available Basket Amount made after the Effective Date in accordance with the provisions of Section 9.05(l). In connection with the foregoing, it is understood that the acquisition of an Acquired Person which has ownership interests in one or more Joint Ventures, pursuant to a Permitted Acquisition effected in accordance with the relevant requirements of this Agreement shall not be deemed to constitute an Investment pursuant to Section 9.05(l) and the Available Basket Amount shall not be reduced as a result of the payment of consideration owing to effect the Permitted Acquisition (although the Available Basket Amount would be affected to the extent preceding clauses (iii) or (iv) apply with respect to the Joint Venture so acquired or to the extent additional Investments are made in the respective Joint Venture pursuant to Section 9.05(l)). "Bank" shall have the meaning provided in the first paragraph of this Agreement. "Bank Default" shall mean (i) the refusal (which has not been retracted) of a Bank to make available its portion of any Borrowing (including a Mandatory Borrowing) or to fund its portion of any unreimbursed payment under Section 2.03 or (ii) a Bank having notified the Administrative Agent and/or the Borrower that it does not intend to comply with the obligations under Section 1.01(b), 1.01(d) or 2.03, in the case of either clause (i) or (ii) above as a result of the appointment of a receiver or conservator with respect to such Bank at the direction or request of any regulatory agency or authority. "Bankruptcy Code" shall have the meaning provided in Section 10.05. "Base Rate" at any time shall mean the highest of (x) the rate which is 1/2 of 1% in excess of the Adjusted Certificate of Deposit Rate, (y) the rate which is 1/2 of 1% in excess of the Federal Funds Rate and (z) the Prime Lending Rate. "Base Rate Loan" shall mean each Loan bearing interest at the rates provided in Section 1.08(a). "Borrower" shall have the meaning provided in the first paragraph of this Agreement. "Borrower Common Stock" shall have the meaning provided in Section 7.13. "Borrower Exchange PIK Preferred Stock" shall mean the Series A Preferred Nonparticipating Pay-In-Kind Stock, par value $.01 per share, of the Borrower to be issued, at the option of the Borrower, after the Initial Borrowing Date pursuant to the Borrower Exchange PIK Preferred Stock Certificate of Designation in exchange for Pacer Logistics Preferred Stock. "Borrower Exchange PIK Preferred Stock Certificate of Designation" shall mean the Certificate of Designation of the Borrower substantially in the form of Exhibit O, as the same may be amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. "Borrower Exchange PIK Preferred Stock Documents" shall mean and include, on and after the issuance thereof, the Borrower Exchange PIK Preferred Stock, the Borrower Exchange PIK Preferred Stock Certificate of Designation and the other documents and instruments entered into in connection with the issuance of the Borrower Exchange PIK Preferred Stock, as the same may be amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. "Borrowing" shall mean and include (i) the borrowing of Swingline Loans from BTCo on a given date and (ii) the borrowing of one Type of Loan pursuant to a single Tranche by the Borrower from all of the Banks having Commitments with respect to such Tranche on a pro rata basis on a given date (or --- ---- resulting from conversions on a given date), having in the case of Eurodollar Loans the same Interest Period; provided, that Base Rate Loans incurred pursuant -------- to Section 1.10(b) shall be considered part of any related Borrowing of Eurodollar Loans. "BTCo" shall mean Bankers Trust Company, in its individual capacity, and any successor corporation thereto by merger, consolidation or otherwise. "Business Day" shall mean (i) for all purposes other than as covered by clause (ii) below, any day except Saturday, Sunday and any day which shall be in New York City a legal holiday or a day on which banking institutions are authorized or required by law or other government action to close and (ii) with respect to all notices and determinations in connection with, and payments of principal and interest on, Eurodollar Loans, any day which is a Business Day described in clause (i) above and which is also a day for trading by and between banks in U.S. dollar deposits in the New York or London interbank Eurodollar market. "Calculation Period" shall have the meaning provided in Section 8.14. "Capital Expenditures" shall mean, with respect to any Person, for any period, all expenditures by such Person which should be capitalized in accordance with GAAP during such period, including all such expenditures with respect to fixed or capital assets (including, without limitation, expenditures for maintenance and repairs which should be capitalized in accordance with GAAP) and, without duplication, the amount of all Capitalized Lease Obligations incurred by such Person during such period. "Capital Lease," as applied to any Person, shall mean any lease of any property (whether real, personal or mixed) by that Person as lessee which, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that Person. "Capitalized Lease Obligations" shall mean all obligations under Capital Leases of the Borrower or any of its Subsidiaries, in each case taken at the amount thereof accounted for as liabilities in accordance with GAAP. "Cash Equivalents" shall mean, as to any Person, (i) securities issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof (provided that the full faith and credit of the -------- United States is pledged in support thereof) having maturities of not more than six months from the date of acquisition, (ii) time deposits, certificates of deposit and bankers' acceptances of any Bank or any commercial bank having, or which is the principal banking subsidiary of a bank holding company organized under the laws of the United States, any State thereof, the District of Columbia or any foreign jurisdiction having capital, surplus and undivided profits aggregating in excess of $200,000,000 and having a long-term unsecured debt rating of at least "A" or the equivalent thereof from S&P or "A2" or the equivalent thereof from Moody's, with maturities of not more than six months from the date of acquisition by such Person, (iii) repurchase agreements with a term of not more than 30 days, involving securities of the types described in preceding clause (i), and entered into with commercial banks meeting the requirements of preceding clause (ii), (iv) commercial paper issued by any Person incorporated in the United States rated at least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody's and in each case maturing not more than six months after the date of acquisition by such Person, (v) investments in money market funds substantially all of whose assets are comprised of securities of the types described in clauses (i) through (iv) above and (vi) overnight deposits and demand deposit accounts (in the respective local currencies) maintained in the ordinary course of business. "Change of Control Event" shall mean, (I) at any time prior to the consummation of a Qualified IPO, (a) Apollo Group and its Affiliates shall cease to own on a fully diluted basis in the aggregate at least 40% of the economic and voting interest in the Borrower's capital stock (for such purpose excluding any Qualified Preferred Stock and any Disqualified Preferred Stock, in each case to the extent same is not Voting Stock) or (b) Apollo Group and its Affiliates, together with the Management Participants and other investors which own shares of Borrower Common Stock on the Initial Borrowing Date, shall cease to own on a fully diluted basis in the aggregate at least a majority of the outstanding Voting Stock of the Borrower or (c) any Person or "group" (within the meaning of Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as in effect on the Effective Date), other than the Permitted Holders, shall (A) have acquired, directly or indirectly, beneficial ownership on a fully diluted basis of a percentage of the voting and/or economic interest in the Borrower's capital stock that exceeds the percentage of the voting and/or economic interest in the Borrower's capital stock then beneficially owned, directly or indirectly, on a fully diluted basis by Apollo Group and its Affiliates or (B) obtained the power (whether or not exercised) to elect a majority of the Borrower's directors or (d) the Board of Directors of the Borrower shall cease to consist of a majority of Continuing Directors or (e) a "change of control" or similar event shall occur as provided in any Senior Subordinated Note Document or any Existing Indebtedness, Permitted Debt, Pacer Logistics Preferred Stock, Borrower Exchange PIK Preferred Stock Document, Disqualified Preferred Stock, Qualified Preferred Stock or the documentation governing the same, to the extent the outstanding principal amount or liquidation preference, as the case may be, of such Existing Indebtedness, Permitted Debt, Pacer Logistics Preferred Stock, Borrower Exchange PIK Preferred Stock Document, Disqualified Preferred Stock or Qualified Preferred Stock exceeds $5,000,000 or (II) at any time after a Qualified IPO, (a) any Person or "group" (within the meaning of Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as in effect on the Effective Date), other than the Permitted Holders, shall have acquired beneficial ownership of 25% or more on a fully diluted basis of the voting and/or economic interest in the Borrower's capital stock and Apollo Group and its Affiliates shall own less than such Person or "group" on a fully diluted basis of the economic and voting interest in the Borrower's capital stock or (b) the Board of Directors of the Borrower shall cease to consist of a majority of Continuing Directors or (c) a "change of control" or similar event shall occur as provided in any Senior Subordinated Note Document or any Existing Indebtedness, Permitted Debt, Pacer Logistics Preferred Stock, Borrower Exchange PIK Preferred Stock Document, Disqualified Preferred Stock, Qualified Preferred Stock or the documentation governing the same to the extent the outstanding principal amount or liquidation preference, as the case may be, of such Existing Indebtedness, Permitted Debt, Pacer Logistics Preferred Stock, Borrower Exchange PIK Preferred Stock Document, Disqualified Preferred Stock or Qualified Preferred Stock exceeds $5,000,000. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated thereunder. Section references to the Code are to the Code, as in effect at the date of this Agreement and any subsequent provisions of the Code, amendatory thereof, supplemental thereto or substituted therefor. "Collateral" shall mean all property (whether real or personal, movable or immovable) with respect to which any security interests have been granted (or purported to be granted) pursuant to any Security Document, including, without limitation, all Pledge Agreement Collateral, all Security Agreement Collateral and all cash and Cash Equivalents delivered as collateral pursuant to any Credit Document. "Collateral Agent" shall mean the Administrative Agent acting as collateral agent for the Secured Creditors. "Collective Bargaining Agreements" shall have the meaning provided in Section 5.12. "Commitment" shall mean any of the commitments of any Bank, i.e., whether the Term Loan Commitment or the Revolving Loan Commitment. "Commitment Fee" shall have the meaning provided in Section 3.01(a). "Company" shall mean any corporation, limited liability company, partnership or other business entity (or the adjectival form thereof, where appropriate). "Conex" shall mean Conex Freight Systems, Inc., a California corporation. "Consolidated Current Assets" shall mean, at any time, the current assets of the Borrower and its Subsidiaries at such time determined on a consolidated basis. "Consolidated Current Liabilities" shall mean, at any time, the current liabilities of the Borrower and its Subsidiaries determined on a consolidated basis, but excluding the current portion of, and accrued but unpaid interest on, any Indebtedness under this Agreement and any other long-term Indebtedness which would otherwise be included therein. "Consolidated Debt" shall mean, at any time, the sum of (without duplication) (i) all Indebtedness of the Borrower and its Subsidiaries as would be required to be reflected on the liability side of a balance sheet of such Person in accordance with GAAP as determined on a consolidated basis, (ii) all Indebtedness of the Borrower and its Subsidiaries of the type described in clause (vii) of the definition of Indebtedness, (iii) unreimbursed drawings on all letters of credit issued for the account of the Borrower or any of its Subsidiaries and (iv) all Contingent Obligations of the Borrower and its Subsidiaries in respect of Indebtedness of other Persons (i.e., Persons other ---- than the Borrower or any of its Subsidiaries) of the type referred to in preceding clauses (i), (ii) and (iii) of this definition; provided, that for -------- purposes of this definition, (x) the amount of Indebtedness in respect of Interest Rate Protection Agreements and Other Hedging Agreements shall be at any time the aggregate unrealized net loss position, if any, of the Borrower and/or its Subsidiaries thereunder on a marked-to-market basis determined no more than one month prior to such time, (y) any Disqualified Preferred Stock of the Borrower, any Preferred Stock of any of its Subsidiaries (other than the Pacer Logistics Preferred Stock) and, on and after the Pacer Logistics Preferred Stock Trigger Date, any Pacer Logistics Preferred Stock shall be treated as Indebtedness, with an amount equal to the greater of the liquidation preference or the maximum mandatory fixed repurchase price of any such outstanding Preferred Stock deemed to be a component of Consolidated Debt and (z) the amount available to be drawn under letters of credit issued for the account of the Borrower or any of its Subsidiaries (other than unreimbursed drawings) shall be excluded in making any determination of "Consolidated Debt". "Consolidated EBIT" shall mean, for any period, the Consolidated Net Income of the Borrower and its Subsidiaries, determined on a consolidated basis, before Consolidated Interest Expense (to the extent deducted in arriving at Consolidated Net Income) and provision for taxes based on income, in each case that were included in arriving at Consolidated Net Income. "Consolidated EBITDA" shall mean, for any period, Consolidated EBIT, adjusted by adding thereto (in each case to the extent deducted in determining Consolidated Net Income for such period and not already added back in determining Consolidated EBIT) the amount of (i) all amortization and depreciation and other non-cash items and (ii) any management fees and consulting fees paid pursuant to, and in accordance with the requirements of, clauses (iii) and (vi) of Section 9.07 during such period, in each case that were deducted in arriving at Consolidated EBIT for such period; provided that -------- Consolidated EBITDA for each Test Period ending on or prior to March 31, 2000 shall mean the sum of (x) Consolidated EBITDA for such Test Period as determined without regard to this proviso plus (y) the amount set forth in Schedule XI ---- hereto as applicable to Consolidated EBITDA for such Test Period. Notwithstanding anything to the contrary contained above, to the extent Consolidated EBITDA is to be determined for any Test Period which ends prior to the first anniversary of the Initial Borrowing Date, Consolidated EBITDA for all portions of such period occurring prior to the Initial Borrowing Date shall be calculated in accordance with the definition of Test Period contained herein. "Consolidated Interest Coverage Ratio" for any period shall mean the ratio of Consolidated EBITDA to Consolidated Interest Expense for such period. All calculations of the Consolidated Interest Coverage Ratio shall be made on a Pro Forma Basis, with determinations of Consolidated Interest Coverage Ratio to - --- ----- give effect to all adjustments (including, without limitation, those specified in clauses (iv) and (v)) contained in the definition of "Pro Forma Basis" --- ----- contained herein. "Consolidated Interest Expense" shall mean, for any period, the total consolidated interest expense of the Borrower and its Subsidiaries for such period (calculated without regard to any limitations on the payment thereof) plus, without duplication, (i) that portion of Capitalized Lease Obligations of - ---- the Borrower and its Subsidiaries representing the interest factor for such period, and capitalized interest expense, plus (ii) the product of (x) the ---- amount of all cash Dividend requirements (whether or not declared or paid) on Disqualified Preferred Stock of the Borrower and on any Preferred Stock of any of its Subsidiaries (other than, at any time prior to the Pacer Logistics Preferred Stock Trigger Date, any Pacer Logistics Preferred Stock) paid, accrued or scheduled to paid or accrued during such period multiplied by (y) a fraction, the numerator of which is one and the denominator of which is one minus the then current effective consolidated Federal, state, local and foreign tax rate (expressed as a decimal number between one and zero) of the Borrower as reflected in the audited consolidated financial statements of the Borrower for its most recently completed fiscal year, which amounts described in preceding clause (ii) shall be treated as interest expense of the Borrower and its Subsidiaries for purposes of this definition regardless of the treatment of such amounts under GAAP, in each case net of the total consolidated cash interest income of the Borrower and its Subsidiaries for such period, but excluding the amortization of any deferred financing costs or of any costs in respect of any Interest Rate Protection Agreement. Notwithstanding anything to the contrary contained above, to the extent Consolidated Interest Expense is to be determined for any Test Period which ends prior to the first anniversary of the Initial Borrowing Date, Consolidated Interest Expense for all portions of such period occurring prior to the Initial Borrowing Date shall be calculated in accordance with the definition of Test Period contained herein. "Consolidated Net Income" shall mean, for any period, the net after- tax income of the Borrower and its Subsidiaries determined on a consolidated basis, without giving effect to any after-tax non-recurring gains or losses or after-tax items classified as extraordinary gains or losses, any other non-cash expenses incurred or payments made in connection with the Transaction, and without giving effect to gains and losses from the sale or disposition of assets (other than sales or dispositions of inventory, equipment, raw materials and supplies in the ordinary course of business) by the Borrower and its Subsidiaries; provided that the following items shall be excluded in computing -------- Consolidated Net Income (without duplication): (i) the net income or net losses of any Person in which any other Person or Persons (other than the Borrower and its Wholly-Owned Domestic Subsidiaries) has an equity interest or interests, except to the extent of the amount of dividends or other distributions actually paid to the Borrower or such Wholly-Owned Subsidiaries by such Person during such period, (ii) except for determinations expressly required to be made on a Pro Forma Basis, the net income (or loss) of any Person accrued prior to the - --- ----- date it becomes a Subsidiary or all or substantially all of the property or assets of such Person are acquired by a Subsidiary and (iii) the net income of any Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary of such net income is not at the time permitted by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Subsidiary. "Consolidated Senior Debt" shall mean, at any time, (x) Consolidated Debt less (y) the sum of (i) the aggregate outstanding principal amount of the ---- Senior Subordinated Notes at such time, (ii) the aggregate principal amount of all other subordinated debt incurred pursuant to Sections 9.04 (f), (k) and (l) and outstanding at such time and otherwise included in Consolidated Debt and (iii) the aggregate liquidation preference of all Disqualified Preferred Stock issued pursuant to Section 9.13(c) and otherwise included in Consolidated Debt. "Container and Chassis Purchases" shall mean purchases of containers and chassis by the Borrower and its Wholly-Owned Domestic Subsidiaries to be used in a Permitted Business. "Contingent Obligations" shall mean as to any Person any obligation of such Person guaranteeing or intended to guarantee any Indebtedness, leases, dividends or other obligations ("primary obligations") of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent, (a) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (b) to advance or supply funds (x) for the purchase or payment of any such primary obligation or (y) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (d) otherwise to assure or hold harmless the owner of such primary obligation against loss in respect thereof; provided, however, that the term Contingent Obligation shall -------- ------- not include endorsements of instruments for deposit or collection or standard contractual indemnities entered into, in each case in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith. "Continuing Directors" shall mean the directors of the Borrower on the Effective Date and each other director if such director's nomination for the election to the Board of Directors of the Borrower is recommended by a majority of the then Continuing Directors. "Credit Documents" shall mean this Agreement, the Notes, each Guaranty and each Security Document. "Credit Event" shall mean the making of a Loan (other than a Revolving Loan made pursuant to a Mandatory Borrowing) or the issuance of a Letter of Credit. "Credit Party" shall mean the Borrower and each Subsidiary Guarantor. "CSFB" shall mean Credit Suisse First Boston in its individual capacity and any successor thereto. "Default" shall mean any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default. "Defaulting Bank" shall mean any Bank with respect to which a Bank Default is in effect. "Disqualified Preferred Stock" shall mean any Preferred Stock of the Borrower other than Qualified Preferred Stock. "Dividend" shall have the meaning provided in Section 9.06. "Documentation Agent" shall have the meaning provided in the first paragraph of this Agreement and shall include any successor to the Documentation Agent designated pursuant to Section 12.10. "Documents" shall mean and include (i) the Credit Documents, (ii) the Equity Financing Documents, (iii) the Recapitalization Documents, (iv) the Refinancing Documents, (v) the Senior Subordinated Notes Documents, (vi) the Pacer Logistics Acquisition Documents, (vii) the Sale-Leaseback Transaction Documents, (viii) the APL Limited Documents and (ix) all other documents, agreements and instruments executed in connection with the Transaction. "Domestic Subsidiary" shall mean each Subsidiary of the Borrower incorporated or organized in the United States or any State or territory thereof. "Domestic Unrestricted Subsidiary" shall mean any Unrestricted Subsidiary which is not a Foreign Unrestricted Subsidiary. "Effective Date" shall have the meaning set forth in Section 13.10. "Eligible Transferee" shall mean and include a commercial bank, insurance company, mutual fund, financial institution, a "qualified institutional buyer" (as defined in Rule 144A of the Securities Act), any fund that invests in bank loans or any other "accredited investor" (as defined in Regulation D of the Securities Act) (other than an individual). "Employee Benefit Plans" shall have the meaning set forth in Section 5.12. "Employment Agreements" shall have the meaning set forth in Section 5.12. "End Date" shall have the meaning provided in the definition of Applicable Margin. "Environmental Claims" shall mean any and all administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of non-compliance or violation, investigations or proceedings relating in any way to any violation (or alleged violation) by the Borrower or any of its Subsidiaries under any Environmental Law (hereafter "Claims") or any permit issued to the Borrower or any of its Subsidiaries under any such law, including, without limitation, (a) any and all Claims by governmental or regulatory authorities for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law, and (b) any and all Claims by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment. "Environmental Law" shall mean any federal, state, provincial, foreign or local policy, statute, law, rule, regulation, ordinance, code or rule of common law now or hereafter in effect and in each case as amended, and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent, decree or judgment (for purposes of this definition (collectively, "Laws")), relating to the environment, or Hazardous Materials or health and safety to the extent such health and safety issues arise under the Occupational Safety and Health Act of 1970, as amended, or any such similar Laws. "Equity Financing" shall have the meaning provided in Section 5.08(c). "Equity Financing Documents" shall mean the documents and agreements entered into in connection with the Equity Financing. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. Section references to ERISA are to ERISA, as in effect at the date of this Agreement and any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor. "ERISA Affiliate" shall mean each person (as defined in Section 3(9) of ERISA) which together with the Borrower or a Subsidiary of the Borrower would be deemed to be a "single employer" within the meaning of Section 414(b), (c), (m) or (o) of the Code. "Eurodollar Loans" shall mean each Loan bearing interest at the rates provided in Section 1.08(b). "Eurodollar Rate" shall mean with respect to each Interest Period for a Eurodollar Loan, (i) the arithmetic average (rounded to the nearest 1/100 of 1%) of the offered quotation to first-class banks in the interbank Eurodollar market by BTCo for U.S. dollar deposits of amounts in same day funds comparable to the outstanding principal amount of the Eurodollar Loan of BTCo for which an interest rate is then being determined with maturities comparable to the Interest Period to be applicable to such Eurodollar Loan, determined as of 10:00 A.M. (New York time) on the date which is two Business Days prior to the commencement of such Interest Period divided (and rounded upward to the next whole multiple of 1/16 of 1%) by (ii) a percentage equal to 100% minus the then stated maximum rate of all reserve requirements (including, without limitation, any marginal, emergency, supplemental, special or other reserves) applicable to any member bank of the Federal Reserve System in respect of Eurocurrency liabilities as defined in Regulation D (or any successor category of liabilities under Regulation D). "Event of Default" shall have the meaning provided in Section 10. "Excess Cash Flow" shall mean, for any period, the remainder of (a) the sum of (i) Adjusted Consolidated Net Income for such period, and (ii) the decrease, if any, in Adjusted Consolidated Working Capital from the first day to the last day of such period, minus (b) the sum of (i) the amount of Capital Expenditures made by the Borrower and its Subsidiaries on a consolidated basis during such period pursuant to and in accordance with Sections 9.11(a) and (b), except to the extent financed with the proceeds of Indebtedness (other than the proceeds of Revolving Loans) or pursuant to Capitalized Lease Obligations, (ii) the aggregate amount of permanent principal payments of Indebtedness for borrowed money of the Borrower and its Subsidiaries and the permanent repayment of the principal component of Capitalized Lease Obligations of the Borrower and its Subsidiaries (excluding (1) payments with proceeds of asset sales, (2) payments with the proceeds of Indebtedness or equity and (3) payments of Loans or other Obligations, provided that repayment of Loans shall be deducted in determining Excess Cash Flow if such payments were (x) required as a result of a Scheduled Repayment under Section 4.02(b) or (y) made as a voluntary prepayment pursuant to Section 4.01 with internally generated funds (but in the case of a voluntary prepayment of Revolving Loans, only to the extent accompanied by a voluntary reduction to the Total Revolving Loan Commitment)) during such period, (iii) the increase, if any, in Adjusted Consolidated Working Capital from the first day to the last day of such period and (iv) without duplication of amounts deducted in the preceding clauses (b)(i), (ii) and (iii), the amount of cash expended in respect of Permitted Acquisitions during such period, except to the extent financed with Indebtedness. "Excess Cash Flow Payment Date" shall mean the date occurring 90 days after the last day of a fiscal year of the Borrower. "Excess Cash Flow Payment Period" shall mean, with respect to the repayment required on each Excess Cash Flow Payment Date, the immediately preceding fiscal year of the Borrower. "Exchange Senior Subordinated Notes" means Senior Subordinated Notes which are substantially identical securities to the Senior Subordinated Notes issued on or prior to the Initial Borrowing Date, which Exchange Senior Subordinated Notes shall be issued pursuant to a registered exchange offer or private exchange offer for the Senior Subordinated Notes and pursuant to the Senior Subordinated Notes Indenture. In no event will the issuance of any Exchange Senior Subordinated Notes increase the aggregate principal amount of Senior Subordinated Notes then outstanding or otherwise result in an increase in an interest rate applicable to the Senior Subordinated Notes. "Existing Indebtedness" shall have the meaning provided in Section 5.09(c). "Existing Indebtedness Agreements" shall have the meaning provided in Section 5.12. "Existing Letter of Credit" shall have the meaning provided in Section 2.01(e) "Facing Fee" shall have the meaning provided in Section 3.01(c). "Federal Funds Rate" shall mean, for any period, a fluctuating interest rate equal for each day during such period to the weighted average of the rates on overnight Federal Funds transactions with members of the Federal Reserve System arranged by Federal Funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal Funds brokers of recognized standing selected by the Administrative Agent. "Fees" shall mean all amounts payable pursuant to, or referred to in, Section 3.01. "FNBC" shall mean First National Bank of Chicago in its individual capacity and any successor thereto. "Foreign Pension Plan" means any plan, fund (including, without limitation, any superannuation fund) or other similar program established or maintained outside the United States of America by the Borrower or any one or more of its Subsidiaries primarily for the benefit of employees of the Borrower or any of its Subsidiaries residing outside the United States of America, which plan, fund or other similar program provides, or results in, retirement income, a deferral of income in contemplation of retirement or payments to be made upon termination of employment, and which plan is not subject to ERISA or the Code. "Foreign Subsidiary" shall mean each Subsidiary of the Borrower other than a Domestic Subsidiary. "Foreign Unrestricted Subsidiary" shall mean each Unrestricted Subsidiary that is incorporated under the laws of any jurisdiction other than the United States of America, any State thereof, the United States Virgin Islands or Puerto Rico. "GAAP" shall mean generally accepted accounting principles in the United States of America as in effect from time to time; it being understood and agreed that determinations in accordance with GAAP for purposes of Section 9, including defined terms as used therein, are subject (to the extent provided therein) to Section 13.07(a). "Gross-Up Amount" shall have the meaning provided in Section 4.04(a). "Guaranties" shall mean and include the Subsidiaries Guaranty and each guaranty entered into pursuant to Section 8.12 or 8.14. "Guarantors" shall mean each Subsidiary Guarantor and any other Person party to a Guaranty. "Hazardous Materials" shall mean (a) any petrochemical or petroleum products, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation, transformers or other equipment that contain dielectric fluid containing levels of polychlorinated biphenyls, and radon gas; and (b) any chemicals, materials or substances defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "restricted hazardous materials," "extremely hazardous wastes," "restrictive hazardous wastes," "toxic pollutants," "contaminants" or "pollutants" under any Environmental Law, or words of similar meaning and regulatory effect. "Indebtedness" of any Person shall mean, without duplication, (i) all indebtedness of such Person for borrowed money, (ii) the deferred purchase price of assets or services payable to the sellers thereof or any of such seller's assignees which in accordance with GAAP would be shown on the liability side of the balance sheet of such Person but excluding deferred rent as determined in accordance with GAAP, (iii) the face amount of all letters of credit issued for the account of such Person and, without duplication, all drafts drawn thereunder, (iv) all Indebtedness of a second Person secured by any Lien on any property owned by such first Person, whether or not such Indebtedness has been assumed, (v) all Capitalized Lease Obligations of such Person, (vi) all obligations of such Person to pay a specified purchase price for goods or services whether or not delivered or accepted, i.e., take-or-pay ---- and similar obligations, (vii) all obligations under Interest Rate Protection Agreements and Other Hedging Agreements and (viii) all Contingent Obligations of such Person, provided, that Indebtedness shall not include trade payables and -------- accrued expenses, in each case arising in the ordinary course of business. "Information Systems and Equipment" shall mean all computer hardware, firmware and software, as well as other information processing systems, or any equipment containing embedded microchips, whether directly owned, licensed, leased, operated or otherwise controlled by the Borrower or any of its Subsidiaries, including through third-party service providers, and which, in whole or in part, are used, operated, relied upon, or integral to, the Borrower's or any of its Subsidiaries' conduct of their business. "Initial Borrowing Date" shall mean the date upon which the initial Borrowing of Loans occurs. "Intercompany Loan" shall have the meaning provided in Section 9.05(f). "Intercompany Notes" shall mean promissory notes, in the form of Exhibit M, evidencing Intercompany Loans. "Interest Determination Date" shall mean, with respect to any Eurodollar Loan, the second Business Day prior to the commencement of any Interest Period relating to such Eurodollar Loan. "Interest Period," with respect to any Eurodollar Loan, shall mean the interest period applicable thereto, as determined pursuant to Section 1.09. "Interest Rate Protection Agreement" shall mean any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedging agreement or other similar agreement or arrangement. "Investment" shall have the meaning provided in the preamble to Section 9.05. "IT Upgrade Expenditures" means expenditures relating to the upgrade of the Borrower's and its Subsidiaries' information technology systems to the extent these expenditures would have been capitalized by the Borrower and its Subsidiaries in accordance with their accounting policies in effect on the Initial Borrowing Date. "Joint Venture" shall mean any Person, other than an individual or a Wholly-Owned Subsidiary of the Borrower, (i) in which the Borrower or a Subsidiary of the Borrower holds or acquires an ownership interest (whether by way of capital stock, partnership or limited liability company interest, or other evidence of ownership) and (ii) which is engaged in a Permitted Business. "L/C Supportable Indebtedness" shall mean obligations of the Borrower or its Wholly-Owned Subsidiaries incurred in the ordinary course of business and otherwise permitted to exist pursuant to the terms of this Agreement. "Leasehold" of any Person shall mean all of the right, title and interest of such Person as lessee or licensee in, to and under leases or licenses of land, improvements and/or fixtures. "Letter of Credit" shall have the meaning provided in Section 2.01(a). "Letter of Credit Fees" shall have the meaning provided in Section 3.01(b). "Letter of Credit Issuer" shall mean BTCo, FNBC and any other Bank which, at the request of the Borrower and with the consent of the Administrative Agent, agrees in such Bank's sole discretion to become a Letter of Credit Issuer for purposes of issuing Letters of Credit pursuant to Section 2. The sole Letter of Credit Issuers on the Initial Borrowing Date are BTCo and FNBC. "Letter of Credit Outstandings" shall mean, at any time, the sum of, without duplication, (i) the aggregate Stated Amount of all outstanding Letters of Credit and (ii) the aggregate amount of all Unpaid Drawings in respect of all Letters of Credit. "Letter of Credit Request" shall have the meaning provided in Section 2.02(a). "Lien" shall mean any mortgage, pledge, security interest, encumbrance, lien, hypothec or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any financing or similar statement or notice filed under the UCC or any similar recording or notice statute, and any lease having substantially the same effect as the foregoing). "Loan" shall mean each Term Loan, each Revolving Loan and each Swingline Loan. "LTS Equity Rollover" shall have the meaning provided in Section 5.08(a). "Management Agreements" shall have the meaning provided in Section 5.12. "Management Participants" shall mean members of senior management of the Borrower and its Subsidiaries acceptable to the Administrative Agent. "Mandatory Borrowing" shall have the meaning provided in Section 1.01(d). "Margin Stock" shall have the meaning provided in Regulation U. "Material Adverse Effect" shall mean a material adverse effect on the business, properties, assets, liabilities, condition (financial or otherwise) or prospects of (i) the Borrower or the Borrower and its Subsidiaries taken as a whole and (ii) in the case of any condition or representation and warranty to be satisfied or made, as the case may be, on the Initial Borrowing Date, Pacer Logistics and its Subsidiaries taken as a whole. "Material Contracts" shall have the meaning provided in Section 5.12. "Maturity Date", with respect to any Tranche of Loans, shall mean the Term Loan Maturity Date, the Revolving Loan Maturity Date or the Swingline Expiry Date, as the case may be. "Maximum Permitted Acquisition Leverage Ratio" shall mean, at any time, the maximum Adjusted Leverage Ratio which may exist pursuant to Section 9.10 without giving rise to a Default or Event of Default at such time, adjusted by reducing the ratio appearing in such maximum Adjusted Leverage Ratio by 0.25. "Maximum Permitted Consideration" shall mean, with respect to any Permitted Acquisition, the sum (without duplication) of (i) the aggregate liquidation preference of Preferred Stock issued by the Borrower as consideration in connection with such Permitted Acquisition, (ii) the aggregate principal amount of Permitted Acquired Debt acquired or assumed by the Borrower or any of its Subsidiaries in connection with such Permitted Acquisition, (iii) the aggregate principal amount of all cash paid (or to be paid) by the Borrower or any of its Subsidiaries in connection with such Permitted Acquisition (including payments of fees and costs and expenses in connection therewith), (iv) the aggregate principal amount of all other Indebtedness assumed, incurred and/or issued in connection with such Permitted Acquisition to the extent permitted by Section 9.04 and (v) the fair market value (determined in good faith by senior management of the Borrower) of all other consideration payable in connection with such Permitted Acquisition (other than Borrower Common Stock). "Maximum Swingline Amount" shall mean $2,500,000. "Minimum Borrowing Amount" shall mean (i) for Revolving Loans, $1,000,000, (ii) for Term Loans, $5,000,000 and (iii) for Swingline Loans, $500,000. "Moody's" shall mean Moody's Investors Service, Inc. "Morgan" shall mean Morgan Stanley Senior Funding, Inc. in its individual capacity and any successor thereto. "Multiemployer Plan" shall mean any multiemployer plan as defined in Section 4001(a)(3) of ERISA, which is maintained or contributed to by (or to which there is an obligation to contribute of) the Borrower, a Subsidiary of the Borrower or an ERISA Affiliate, and each such plan for the five year period immediately following the latest date on which the Borrower, a Subsidiary of the Borrower or an ERISA Affiliate maintained, contributed to or had an obligation to contribute to such plan. "Net Cash Proceeds" shall mean for any event requiring a reduction of the Total Revolving Loan Commitment and/or repayment of Term Loans pursuant to Section 3.03 or 4.02, as the case may be, the gross cash proceeds (including any cash received by way of deferred payment pursuant to a promissory note, receivable or otherwise, but only as and when received) received from such event, net of reasonable transaction costs (including, as applicable, any underwriting, brokerage or other customary commissions and reasonable legal, advisory and other fees and expenses associated therewith) received from any such event. "Net Sale Proceeds" shall mean for any sale of assets, the gross cash proceeds (including any cash received by way of deferred payment pursuant to a promissory note, receivable or otherwise, but only as and when received) received from any sale of assets, net of (i) reasonable transaction costs (including, without limitation, any underwriting, brokerage or other customary selling commissions and reasonable legal, advisory and other fees and expenses, including title and recording expenses, associated therewith) and payments of unassumed liabilities relating to the assets sold at the time of, or within 30 days after, the date of such sale, (ii) the amount of such gross cash proceeds required to be used to repay any Indebtedness (other than Indebtedness of the Banks pursuant to this Agreement) which is secured by the respective assets which were sold, and (iii) the estimated marginal increase in income taxes which will be payable by the Borrower's consolidated group with respect to the fiscal year in which the sale occurs as a result of such sale; provided, however, that -------- ------- such gross proceeds shall not include any portion of such gross cash proceeds which the Borrower determines in good faith should be reserved for post-closing adjustments (including indemnification payments) (in the event such amount of gross cash proceeds so reserved exceeds $50,000, to the extent the Borrower delivers to the Banks a certificate signed by its chief financial officer or treasurer, controller or chief accounting officer as to such determination), it being understood and agreed that on the day that all such post-closing adjustments have been determined (which shall not be later than six months following the date of the respective asset sale), the amount (if any) by which the reserved amount in respect of such sale or disposition exceeds the actual post-closing adjustments payable by the Borrower or any of its Subsidiaries shall constitute Net Sale Proceeds on such date received by the Borrower and/or any of its Subsidiaries from such sale, lease, transfer or other disposition. The parties hereto acknowledge and agree that Net Sale Proceeds shall not include any trade-in-credits or purchase price reductions received by the Borrower or any of its Subsidiaries in connection with an exchange of equipment for replacement equipment that is the functional equivalent of such exchanged equipment. "New Withholding Regulations" shall have the meaning provided in Section 4.04(b). "Non-Defaulting Bank" shall mean each Bank other than a Defaulting Bank. "Non-Wholly Owned Entity" shall have the meaning provided in the definition of Permitted Acquisition. "Note" shall mean each Term Note, each Revolving Note and/or the Swingline Note, as the context may require. "Notice of Borrowing" shall have the meaning provided in Section 1.03(a). "Notice of Conversion" shall have the meaning provided in Section 1.06. "Notice Office" shall mean the office of the Administrative Agent located at One Bankers Trust Plaza, New York, New York 10006 or such other office as the Administrative Agent may designate to the Borrower and the Banks from time to time. "Obligations" shall mean all amounts, direct or indirect, contingent or absolute, of every type or description, and at any time existing, owing to the Administrative Agent, the Syndication Agent, the Documentation Agent, the Collateral Agent or any Bank pursuant to the terms of this Agreement or any other Credit Document. "Other Hedging Agreements" shall mean any foreign exchange contracts, currency swap agreements or other similar agreements or arrangements designed to protect against fluctuations in currency values. "Pacer Logistics" shall mean Pacer International, Inc., a Delaware corporation, which corporation shall be renamed Pacer Logistics, Inc. on the Initial Borrowing Date immediately after giving effect to the Transaction. "Pacer Logistics Acquisition" shall have the meaning provided in Section 5.08(b). "Pacer Logistics Acquisition Corp." shall mean Mile High Acquisition Corp. II, a Delaware corporation and a Wholly-Owned Subsidiary of the Borrower. "Pacer Logistics Merger Agreement" shall mean the Agreement and Plan of Merger, dated as of February 22, 1999, among the Borrower, Pacer Logistics Acquisition Corp. and Pacer Logistics (including the schedules and exhibits thereto), as the same may be amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. "Pacer Logistics Acquisition Documents" shall mean the Pacer Logistics Merger Agreement and all other agreements, instruments and documents entered into or delivered in connection with the Pacer Logistics Acquisition. "Pacer Logistics Equity Rollover" shall have the meaning provided in Section 5.08(b). "Pacer Logistics Preferred Stock" shall have the meaning provided in Section 5.08(b). "Pacer Logistics Preferred Stock Trigger Date" shall mean May 28, 2001. "Participant" shall have the meaning provided in Section 2.03(a). "Payment Office" shall mean the office of the Administrative Agent located at One Bankers Trust Plaza, New York, New York 10006 or such other office as the Administrative Agent may designate to the Borrower and the Banks from time to time. "PBGC" shall mean the Pension Benefit Guaranty Corporation established pursuant to Section 4002 of ERISA, or any successor thereto. "Permitted Acquired Debt" shall have the meaning set forth in Section 9.04(d). "Permitted Acquisition" shall mean the acquisition by the Borrower or any of its Wholly-Owned Domestic Subsidiaries of assets constituting a business, division or product line of any Person not already a Subsidiary of the Borrower or any of its Wholly-Owned Subsidiaries or of 100% of the capital stock or other equity interests of any such Person, provided that (A) the consideration paid by -------- the Borrower or such Wholly-Owned Subsidiary consists solely of cash (including proceeds of Revolving Loans), the issuance of the Borrower Common Stock, the issuance of any Qualified Preferred Stock or Disqualified Preferred Stock otherwise permitted in Section 9.13, the issuance of Indebtedness otherwise permitted in Section 9.04 (including Permitted Subordinated Indebtedness) and the assumption/acquisition of any Permitted Acquired Debt (calculated in accordance with GAAP) relating to such business, division, product line or Person which is permitted to remain outstanding in accordance with the requirements of Section 9.04, (B) those acquisitions that are structured as stock acquisitions shall be effected through a purchase of 100% of the capital stock or other equity interests of such Person by the Borrower or such Wholly- Owned Domestic Subsidiary or through a merger between such Person and a Wholly- Owned Domestic Subsidiary of the Borrower, so that after giving effect to such merger, 100% of the capital stock or other equity interests of the surviving corporation of such merger is owned by the Borrower or a Wholly-Owned Domestic Subsidiary, (C) in the case of the acquisition of 100% of the capital stock or other equity interests of any Person, such Person (the "Acquired Person") shall own no capital stock or other equity interests of any other Person unless either (x) the Acquired Person owns 100% of the capital stock or other equity interests of such other Person or (y) if the Acquired Person owns capital stock or equity interests in any other Person which is not a Wholly-Owned Subsidiary of the Acquired Person (a "Non-Wholly Owned Entity"), both (1) the Acquired Person shall not have been created or established in contemplation of, or for purposes of, the respective Permitted Acquisition and (2) any Non-Wholly Owned Entity of the Acquired Person shall have been non-wholly-owned prior to the date of the respective Permitted Acquisition and not created or established in contemplation thereof, (D) substantially all of the business, division or product line acquired pursuant to the respective Permitted Acquisition, or the business of the Acquired Person and its Subsidiaries taken as a whole, is in the United States, (E) the assets acquired, or the business of the Acquired Person and its Subsidiaries, shall be in a Permitted Business and (F) all applicable requirements of Sections 8.14 and 9.02 applicable to Permitted Acquisitions are satisfied. Notwithstanding anything to the contrary contained in the immediately preceding sentence, an acquisition which does not otherwise meet the requirements set forth above in the definition of "Permitted Acquisition" shall constitute a Permitted Acquisition if, and to the extent, the Required Banks agree in writing that such acquisition shall constitute a Permitted Acquisition for purposes of this Agreement. "Permitted Acquisition Additional Cost-Savings" shall mean, in connection with each Permitted Acquisition, those demonstrable cost-savings and other adjustments (in each case not included pursuant to clause (iii) or (iv) of the definition of Pro Forma Basis contained herein) --- ----- reasonably anticipated by the Borrower to be achieved in connection with such Permitted Acquisition for the 12 month period following the consummation of such Permitted Acquisition, which cost-savings and other adjustments shall be estimated on a good faith basis by the Borrower and, if requested by the Administrative Agent, be verified by a nationally recognized accounting firm or as otherwise agreed to by the Administrative Agent. "Permitted Business" shall mean the freight and transportation-related services and related businesses and including, without limitation, trucking (including flatbed and specialized heavy haul trucking), railway shipping, intermodal and other marketing (rail or over-the-road), transportation equipment maintenance and inspections, warehousing and freight handling, freight consolidation and deconsolidation, cross-dock, less-than-truckload common carrier services, cartage and drayage, general consumer and specialized freight services, comprehensive transportation management and services, traffic management, railroad signal project management, rail terminal management and logistics services to coordinate the foregoing services (including integrated freight transportation), in each case as such businesses are conducted by the Borrower and its Subsidiaries on the Effective Date and any other business or activities as may be substantially similar, incidental or related thereto, and reasonable extensions of the foregoing. "Permitted Debt" shall mean and include Permitted Acquired Debt, Permitted Subordinated Refinancing Indebtedness and Permitted Subordinated Indebtedness. "Permitted Encumbrances" shall mean (i) those liens, encumbrances, hypothecs and other matters affecting title to any Real Property and found reasonably acceptable by the Administrative Agent, (ii) as to any particular Real Property at any time, such easements, encroachments, covenants, rights of way, minor defects, irregularities or encumbrances on title which could not reasonably be expected to materially impair such Real Property for the purpose for which it is held by the mortgagor or grantor thereof, or the lien or hypothec held by the Collateral Agent, (iii) zoning and other municipal ordinances which are not violated in any material respect by the existing improvements and the present use made by the mortgagor or grantor thereof of the premises, (iv) general real estate taxes and assessments not yet delinquent, and (v) such other similar items as the Administrative Agent may consent to (such consent not to be unreasonably withheld). "Permitted Holders" shall mean Apollo Group and its Affiliates and the Management Participants (to the extent acting as a "group" within the meaning of Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as in effect on the Effective Date). "Permitted Liens" shall have the meaning provided in Section 9.03. "Permitted Sale-Leaseback Transaction" shall mean any sale by the Borrower or any of its Subsidiaries of any asset first acquired by the Borrower or such Subsidiary after the Effective Date which asset is then leased back to the Borrower or such Subsidiary, provided that (i) the proceeds of the -------- respective sale shall be entirely cash and in an amount at least equal to 85% of the aggregate amount expended by the Borrower or such Subsidiary in so acquiring such asset, (ii) such sale and leaseback are effected within 90 days of the acquisition by the Borrower or such Subsidiary of such asset, and (iii) the respective transaction is otherwise effected in accordance with the applicable requirements of Section 9.02(n). "Permitted Subordinated Indebtedness" shall mean subordinated Indebtedness of the Borrower incurred in connection with a Permitted Acquisition and in accordance with Section 8.14, which Permitted Subordinated Indebtedness and all terms and conditions thereof (including, without limitation, the maturity thereof, the interest rate applicable thereto, amortization, defaults, remedies, voting rights, subordination provisions, etc.), and the documentation therefor, shall be reasonably satisfactory to the Administrative Agent, provided, that in any event, unless the Required Banks otherwise expressly - -------- consent in writing prior to the incurrence thereof, (i) no such Indebtedness shall be guaranteed by any Subsidiary of the Borrower, (ii) no such Indebtedness shall be secured by any asset of the Borrower or any of its Subsidiaries and (iii) such Indebtedness has substantially the same (or, from the perspective of the Banks, more favorable) subordination provisions as are contained in the Senior Subordinated Notes Documents. The incurrence of Permitted Subordinated Indebtedness shall be deemed to be a representation and warranty by the Borrower that all conditions thereto have been satisfied in all material respects and that same is permitted in accordance with the terms of this Agreement, which representation and warranty shall be deemed to be a representation and warranty for all purposes hereunder, including, without limitation, Sections 6 and 10. "Permitted Subordinated Refinancing Indebtedness" shall mean Indebtedness of the Borrower issued or given in exchange for, or all the proceeds of which are used to refinance, all of the outstanding Senior Subordinated Notes, so long as (a) such Indebtedness has a weighted average life to maturity greater than or equal to the weighted average life to maturity of the Senior Subordinated Notes, (b) such refinancing does not (i) increase the amount of such Indebtedness outstanding immediately prior to such refinancing or (ii) add guarantors, obligors or security from that which applied to the Senior Subordinated Notes, (c) such Indebtedness has substantially the same (or, from the perspective of the Banks, more favorable) subordination provisions, if any, as applied to the Senior Subordinated Notes, and (d) all other terms of such refinancing (including, without limitation, with respect to the amortization schedules, redemption provisions, maturities, covenants, defaults and remedies), are not, taken as a whole, materially less favorable to the Borrower than those previously existing with respect to the Senior Subordinated Notes. "Person" shall mean any individual, partnership, joint venture, firm, corporation, limited liability company, association, trust or other enterprise or any government or political subdivision or any agency, department or instrumentality thereof. "Plan" shall mean any pension plan as defined in Section 3(2) of ERISA, which is maintained or contributed to by (or to which there is an obligation to contribute of) the Borrower or a Subsidiary of the Borrower or an ERISA Affiliate, and each such plan for the five year period immediately following the latest date on which the Borrower, or a Subsidiary of the Borrower or an ERISA Affiliate maintained, contributed to or had an obligation to contribute to such plan but excluding all Multiemployer Plans. "Pledge Agreement" shall have the meaning provided in Section 5.10(a). "Pledge Agreement Collateral" shall mean all of the "Collateral" as defined in the Pledge Agreement. "Pledged Securities" shall mean all the Pledged Securities as defined in the Pledge Agreement. "Post-Closing Period" shall have the meaning provided in Section 8.14(a). "Preferred Stock," as applied to the capital stock of any Person, means capital stock of such Person (other than common stock of such Person) of any class or classes (however designed) that ranks prior, as to the payment of dividends or as to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of such Person, to shares of capital stock of any other class of such Person, and shall include any Qualified Preferred Stock, Disqualified Preferred Stock, Pacer Logistics Preferred Stock and, on and after the issuance thereof, Borrower Exchange PIK Preferred Stock. "Prime Lending Rate" shall mean the rate which BTCo announces from time to time as its prime lending rate, the Prime Lending Rate to change when and as such prime lending rate changes. The Prime Lending Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. BTCo may make commercial loans or other loans at rates of interest at, above or below the Prime Lending Rate. "Pro Forma Balance Sheet" shall have the meaning provided in Section --- ----- 5.15. "Pro Forma Basis" shall mean, in connection with any calculation of --- ----- compliance with any financial covenant or financial term, the calculation thereof after giving effect on a pro forma basis to (w) if the relevant period --- ----- to be tested includes any period prior to the Initial Borrowing Date, the consummation of the Transaction as if the same had occurred on the first day of such period (for such purpose, without giving pro forma effect to synergies and --- ----- cost savings which have been, or may be, realized in connection with the Transaction, such synergies and cost savings having been independently accounted for in the proviso to the definition of "Consolidated EBITDA"), (x) the incurrence of any Indebtedness (other than revolving Indebtedness, except to the extent same is incurred to finance the Transaction, to refinance other outstanding Indebtedness or to finance Permitted Acquisitions) or Preferred Stock (other than Qualified Preferred Stock of the Borrower) after the first day of the relevant Calculation Period as if such Indebtedness or Preferred Stock had been incurred or issued (and the proceeds thereof applied) on the first day of the relevant Calculation Period, (y) the permanent repayment of any Indebtedness (other than revolving Indebtedness except to the extent paid with Permitted Debt or Disqualified Preferred Stock) or Preferred Stock (other than Qualified Preferred Stock of the Borrower) after the first day of the relevant Calculation Period as if such Indebtedness or Preferred Stock had been retired or redeemed on the first day of the relevant Calculation Period and (z) the Permitted Acquisition, if any, then being consummated as well as any other Permitted Acquisition consummated after the first day of the relevant Calculation Period and on or prior to the date of the respective Permitted Acquisition then being effected, with the following rules to apply in connection therewith: (i) all Indebtedness and Preferred Stock (other than Qualified Preferred Stock of the Borrower) (x) (other than revolving Indebtedness, except to the extent same is incurred to finance the Transaction, to refinance other outstanding Indebtedness, or to finance Permitted Acquisitions) incurred or issued after the first day of the relevant Calculation Period (whether incurred to finance a Permitted Acquisition, to refinance Indebtedness or otherwise) shall be deemed to have been incurred or issued (and the proceeds thereof applied) on the first day of the respective Calculation Period and remain outstanding through the date of determination (and thereafter in the case of projections pursuant to Section 8.14(a)(iv)) and (y) (other than revolving Indebtedness except to the extent paid with Permitted Debt or Disqualified Preferred Stock) permanently retired or redeemed after the first day of the relevant Calculation Period shall be deemed to have been retired or redeemed on the first day of the respective Calculation Period and remain retired through the date of determination (and thereafter in the case of projections pursuant to Section 8.14(a)(iv)); (ii) all Indebtedness or Preferred Stock (other than Qualified Preferred Stock of the Borrower) assumed to be outstanding pursuant to preceding clause (i) shall be deemed to have borne interest or accrued dividends, as the case may be, at (x) the rate applicable thereto, in the case of fixed rate Indebtedness or Preferred Stock or (y) the rates which would have been applicable thereto during the respective period when same was deemed outstanding, in the case of floating rate Indebtedness or Preferred Stock (although interest expense with respect to any Indebtedness or Preferred Stock for periods while same was actually outstanding during the respective period shall be calculated using the actual rates applicable thereto while same was actually outstanding); provided that for purposes of -------- calculations pursuant to Section 8.14(a)(iv), all Indebtedness or Preferred Stock (whether actually outstanding or deemed outstanding) bearing interest at a floating rate of interest shall be tested on the basis of the rates applicable at the time the determination is made pursuant to said provisions; (iii) in making any determination of Consolidated EBITDA, pro forma --- ----- effect shall be given to any Permitted Acquisition consummated after the first day of the respective period being tested, taking into account, for any portion of the relevant period being tested occurring prior to the consummation of such Permitted Acquisition, demonstrable cost savings actually achieved simultaneously with, or to be achieved within the one- year period following, the closing of the respective Permitted Acquisition, which cost savings would be permitted to be recognized in pro forma --- ----- statements prepared in accordance with Regulation S-X under the Securities Act, as if such cost-savings were realized on the first day of the relevant period; (iv) without duplication of adjustments provided above, in case of any Permitted Acquisition consummated after the first day of the relevant period being tested, pro forma effect shall be given to the termination or --- ----- replacement of operating leases with Capitalized Lease Obligations or other Indebtedness, and to any replacement of Capitalized Lease Obligations or other Indebtedness with operating leases, in each case effected at the time of the consummation of such Permitted Acquisition or thereafter, in each case if effected after the first day of the period being tested and prior to the date the respective determination is being made, as if such termination or replacement had occurred on the first day of the relevant period; and (v) in making any determination of Consolidated EBITDA for purposes of any calculation of the Adjusted Total Leverage Ratio, the Adjusted Senior Leverage Ratio and the Consolidated Interest Coverage Ratio only, (x) for any Permitted Acquisition which occurred during the last two fiscal quarters comprising the respective Test Period (and, in the case of Section 8.14, thereafter and on or prior to the relevant date of determination), there shall be added to Consolidated EBITDA the amount of Permitted Acquisition Additional Cost Savings, determined in accordance with the definition thereof contained herein, expected to be realized with respect to such Permitted Acquisition, (y) for any Permitted Acquisition effected in the second fiscal quarter of the respective Test Period, the Consolidated EBITDA shall be increased by 50% of the Permitted Acquisition Additional Cost Savings estimated to arise in connection with the respective Permitted Acquisition and (z) for any Permitted Acquisition effected in the first fiscal quarter of the respective Test Period, the Consolidated EBITDA shall be increased by 25% of the Permitted Acquisition Additional Cost Savings estimated to arise in connection with the respective Permitted Acquisition; provided that the aggregate additions to -------- Consolidated EBITDA, for any period being tested, pursuant to this clause (v) shall not exceed 15% of the amount which would have been Consolidated EBITDA in the absence of the adjustment pursuant to this clause (v). Notwithstanding anything to the contrary contained above, (x) for purposes of Sections 9.09 and 9.10 and, for purposes of all determinations of the Applicable Margins, pro forma effect (as otherwise provided above) shall only be --- ----- given for events or occurrences which occurred during the respective Test Period but not thereafter and (y) for purposes of Section 8.14, pro forma effect (as --- ----- otherwise provided above) shall be given for events or occurrences which occurred during the respective Test Period and thereafter but on or prior to the respective date of determination. "Projections" shall have the meaning provided in Section 5.15(b). "Qualified IPO" shall mean an underwritten public offering of Borrower Common Stock which generates cash proceeds to the Borrower of at least $50,000,000. "Qualified Preferred Stock" shall mean any Preferred Stock of the Borrower, the express terms of which shall provide that dividends thereon shall not be required to be paid at any time (and to the extent) that such payment would be prohibited by the terms of this Agreement or any other agreement of the Borrower relating to outstanding indebtedness and which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event (including any Change of Control Event), cannot mature and is not mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, and is not redeemable, or required to be repurchased, at the sole option of the holder thereof (including, without limitation, upon the occurrence of a Change of Control Event), in whole or in part, on or prior to the date occurring two years after the Maturity Date. "Quarterly Payment Date" shall mean the last Business Day of each March, June, September and December. "Real Property" of any Person shall mean all of the right, title and interest of such Person in and to land, immovable property, improvements and fixtures, including Leaseholds. "Recap Distribution" shall have the meaning provided in Section 5.08(a). "Recapitalization" shall mean and include the Acquisition, the LTS Equity Rollover, the Recap Distribution and such other transactions contemplated by the Recapitalization Documents. "Recapitalization Documents" shall mean and include (i) the Stock Purchase Agreement and (ii) all other agreements and documents governing, or relating to, the Recapitalization. "Recovery Event" shall mean the receipt by the Borrower or any of its Subsidiaries of any insurance or condemnation proceeds (other than proceeds from business interruption insurance) payable (i) by reason of theft, physical destruction or damage or any other similar event with respect to any properties or assets of the Borrower or any of its Subsidiaries, (whether under any policy of insurance required to be maintained under Section 8.03 or otherwise) and (ii) by reason of any condemnation, taking, seizing or similar event with respect to any properties or assets of the Borrower or any of its Subsidiaries. "Refinanced Indebtedness" shall have the meaning provided in Section 5.09(a). "Refinancing" shall mean the refinancing transactions described in Sections 5.09(a) and (b). "Refinancing Documents" shall mean each of the agreements, documents and instruments entered into in connection with the Refinancing. "Register" shall have the meaning provided in Section 13.17. "Regulation D" shall mean Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof establishing reserve requirements. "Regulation T" shall mean Regulation T of the Board of Governors of the Federal Reserve System as from to time in effect and any successor to all or any portion thereof. "Regulation U" shall mean Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof. "Regulation X" shall mean Regulation X of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or any portion thereof. "Release" means disposing, discharging, injecting, spilling, pumping, leaking, leaching, dumping, emitting, escaping, emptying, seeping, placing, pouring and the like, into or upon any land or water or air, or otherwise entering into the environment. "Replaced Bank" shall have the meaning provided in Section 1.13. "Replacement Bank" shall have the meaning provided in Section 1.13. "Reportable Event" shall mean an event described in Section 4043(c) of ERISA with respect to a Plan that is subject to Title IV of ERISA other than those events as to which the 30-day notice period is waived under subsection .22, .23, .25, .27, or .28 of PBGC Regulation Section 4043. "Required Banks" shall mean Non-Defaulting Banks, the sum of whose outstanding Term Loans and Revolving Loan Commitments (or after the termination thereof, outstanding Revolving Loans and Adjusted RL Percentage of outstanding Swingline Loans and Letter of Credit Outstandings) represent an amount greater than 50% of the sum of all outstanding Term Loans of Non-Defaulting Banks and the Adjusted Total Revolving Loan Commitment (or after the termination thereof, the sum of the then total outstanding Revolving Loans of Non-Defaulting Banks and the aggregate Adjusted RL Percentages of all Non-Defaulting Banks of the total outstanding Swingline Loans and Letter of Credit Outstandings at such time). "Revolving Loan" shall have the meaning provided in Section 1.01(b). "Revolving Loan Commitment" shall mean, with respect to each RL Bank, the amount set forth opposite such Bank's name in Schedule I directly below the column entitled "Revolving Loan Commitment," as the same may be reduced from time to time pursuant to Sections 3.02, 3.03, 4.02 and/or Section 10. "Revolving Loan Maturity Date" shall mean May 28, 2004. "Revolving Note" shall have the meaning provided in Section 1.05(a). "RL Bank" shall mean at any time each Bank with a Revolving Loan Commitment or with outstanding Revolving Loans. "RL Percentage" of any Bank at any time shall mean a fraction (expressed as a percentage) the numerator of which is the Revolving Loan Commitment of such Bank at such time and the denominator of which is the Total Revolving Loan Commitment at such time, provided that if the RL Percentage of -------- any Bank is to be determined after the Total Revolving Loan Commitment has been terminated, then the RL Percentages of the Banks shall be determined immediately prior (and without giving effect) to such termination. "Rolling Stock" shall mean railroad cars, locomotives, stacktrain cars and other rolling stock (including superstructures, racks and accessories thereto). "Rollover Amount" shall have the meaning provided in Section 9.11(a). "S&P" shall mean Standard & Poor's Ratings Services, a division of The McGraw Hill Companies, Inc. "Sale-Leaseback Transaction" shall have the meaning provided in Section 5.08(c). "Sale-Leaseback Transaction Documents" shall mean the Purchase, Sale and Lease Agreement, dated as of May 28, 1999, between the Borrower, as Lessee, and Transamerica Leasing Inc., as Lessor, and the other agreements and documents entered into in connection with the Sale-Leaseback Transaction, each as in effect on the Initial Borrowing Date and as the same may be amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. "Scheduled Repayment" shall have the meaning provided in Section 4.02(b). "SEC" shall mean the Securities and Exchange Commission or any successor thereto. "Section 4.04(b)(ii) Certificate" shall have the meaning provided in Section 4.04(b)(ii). "Secured Creditors" shall have the meaning provided in the Security Documents. "Securities Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "Security Agreement" shall have the meaning provided in Section 5.10(b). "Security Agreement Collateral" shall mean all of the "Collateral" as defined in the Security Agreement. "Security Documents" shall mean and include the Pledge Agreement, the Security Agreement and each Additional Security Document, if any. "Senior Subordinated Notes" shall mean the Borrower's 11-3/4% Senior Subordinated Notes due 2007, issued pursuant to the Senior Subordinated Note Indenture, as in effect on the Effective Date and as the same may be amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. As used herein, the term "Senior Subordinated Notes" shall include any Exchange Senior Subordinated Notes issued pursuant to the Senior Subordinated Notes Indenture in exchange for theretofore outstanding Senior Subordinated Notes, as contemplated by the Offering Memorandum, dated as of May 24, 1999, and the definition of Exchange Senior Subordinated Notes. "Senior Subordinated Notes Documents" shall mean the Senior Subordinated Notes, the Senior Subordinated Notes Indenture and all other documents executed and delivered with respect to the Senior Subordinated Notes or Senior Subordinated Notes Indenture, as in effect on the Effective Date and as the same may be amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. "Senior Subordinated Notes Indenture" shall mean the Indenture, dated as of May 28, 1999, among the Borrower, the Subsidiary Guarantors and the Senior Subordinated Notes Indenture Trustee, as in effect on the Effective Date and as thereafter amended, modified or supplemented from time to time in accordance with the requirements hereof and thereof. "Senior Subordinated Notes Indenture Trustee" shall mean Wilmington Trust Company or any successor thereto. "Shareholder Subordinated Note" shall mean an unsecured junior subordinated note issued by the Borrower (and not guaranteed or supported in any way by the Borrower or any of its Subsidiaries) in the form of Exhibit N. "Shareholders' Agreements" shall have the meaning provided in Section 5.12. "Standby Letter of Credit" shall have the meaning provided in Section 2.01(a). "Start Date" shall have the meaning provided in the definition of Applicable Margin. "Stated Amount" of each Letter of Credit shall mean the maximum amount available to be drawn thereunder (regardless of whether any conditions for drawing could then be met). "Stock Purchase Agreement" shall mean the Stock Purchase Agreement, dated as of March 15, 1999, between Acquisition Corp. and APL, as in effect on the Effective Date and as the same may be amended, modified or supplemented from time to time pursuant to the terms hereof and thereof. "STB" shall mean the Surface Transportation Board or any successor thereto. "Subsidiaries Guaranty" shall have the meaning provided in Section 5.11. "Subsidiary" of any Person shall mean and include (i) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person directly or indirectly through Subsidiaries and (ii) any partnership, association, joint venture or other entity (other than a corporation) in which such Person directly or indirectly through Subsidiaries, has more than a 50% equity interest at the time. Notwithstanding the foregoing (and except for purposes of Sections 7.01, 7.04, 7.12, 7.16, 7.17, 7.20, 8.01(h), 8.07, 8.08, 10.05, 10.06 and 10.09, and the definitions of Unrestricted Subsidiary and Wholly-Owned Unrestricted Subsidiary contained herein), an Unrestricted Subsidiary shall be deemed not to be a Subsidiary of the Borrower or any of its other Subsidiaries for purposes of this Agreement. "Subsidiary Guarantor" shall mean each Wholly-Owned Domestic Subsidiary (and, to the extent required by Section 8.12, each Wholly-Owned Foreign Subsidiary) of the Borrower that is or becomes a party to a Guaranty. "Swingline Expiry Date" shall mean the date which is five Business Days prior to the Revolving Loan Maturity Date. "Swingline Loan" shall have the meaning provided in Section 1.01(c). "Swingline Note" shall have the meaning provided in Section 1.05(a). "Syndication Agent" shall have the meaning provided in the first paragraph of this Agreement and shall include any successor to the Syndication Agent designated pursuant to Section 12.10. "Syndication Date" shall mean that date upon which the Administrative Agent determines (and notifies the Borrower and the Banks) that the primary syndication of the Loans and Commitments (and resultant addition of Persons as Banks pursuant to Section 13.04(b)) has been completed. "Tax Act" shall have the meaning provided in Section 4.04(f). "Tax Allocation Agreements" shall have the meaning provided in Section 5.12. "Tax Benefit" shall have the meaning provided in Section 4.04(c). "Taxes" shall have the meaning provided in Section 4.04(a). "Term Loan" shall have the meaning provided in Section 1.01(a). "Term Loan Commitment" shall mean, with respect to each Bank, the amount set forth opposite such Bank's name in Schedule I directly below the column entitled "Term Loan Commitment," as the same may be terminated pursuant to Sections 3.03 and/or 10. "Term Loan Maturity Date" shall mean May 28, 2006. "Term Note" shall have the meaning provided in Section 1.05(a). "Test Period" shall mean each period of four consecutive fiscal quarters then last ended, in each case taken as one accounting period. Notwithstanding anything to the contrary contained above or in Section 13.07 or otherwise required by GAAP, in the case of any Test Period ending prior to the first anniversary of the Initial Borrowing Date, such period shall be a one-year period ending on the last day of the fiscal quarter last ended, with any calculations of (x) Consolidated Interest Expense required in determining compliance with Section 9.09 to be made on a pro forma basis in accordance with, and to the extent provided in, the --- ----- immediately succeeding sentence and (y) Consolidated EBITDA required in determining compliance with Sections 9.09 and 9.10 and determining the Adjusted Total Leverage Ratio, the Total Leverage Ratio and the Adjusted Senior Leverage Ratio for all purposes of this Agreement to be made on a pro forma basis in --- ----- accordance with, and to the extent provided in, the second succeeding sentence. To the extent the respective Test Period (i) includes the fourth fiscal quarter of the fiscal year ended December 31, 1998, Consolidated Interest Expense for such fiscal quarter shall be deemed to be $7,000,000, (ii) includes the first fiscal quarter of the fiscal year ended December 31, 1999, Consolidated Interest Expense for such fiscal quarter shall be deemed to be $7,000,000 and (iii) includes the second fiscal quarter for the year ended December 31, 1999, Consolidated Interest Expense shall be determined by (x) taking actual Consolidated Interest Expense determined in accordance with the definition thereof for any period beginning on, and ending after, the Initial Borrowing Date and (y) for each day of such fiscal quarter occurring prior to the Initial Borrowing Date, using a per-day Consolidated Interest Expense of $77,777.78; provided that any additional adjustments required by the definition of Pro Forma - -------- --- ----- Basis for occurrences after the Initial Borrowing Date shall also be made. To the extent the respective Test Period (i) includes the fourth fiscal quarter of the fiscal year ended December 31, 1998, Consolidated EBITDA for such fiscal quarter shall be deemed to be $23,699,000, (ii) includes the first fiscal quarter of the fiscal year ended December 31, 1999, Consolidated EBITDA for such fiscal quarter shall be deemed to be $17,400,000 and (iii) includes the second fiscal quarter of the fiscal year ended December 31, 1999, Consolidated EBITDA shall be determined by (x) taking actual Consolidated EBITDA determined in accordance with the definition thereof for any period beginning on, and ending after, the Initial Borrowing Date and (y) for each day of such fiscal quarter occurring prior to the Initial Borrowing Date, using a per-day Consolidated EBITDA of $200,555; provided that any additional adjustments required by the -------- definition of Pro Forma Basis for occurrences after the Initial Borrowing Date --- ----- shall also be made. "Total Commitment" shall mean, at any time, the sum of the Total Term Loan Commitment and the Total Revolving Loan Commitment. "Total Leverage Ratio" shall mean on any date the ratio of (i) Consolidated Debt on such date to (ii) Consolidated EBITDA for the Test Period most recently ended on or prior to such date. All calculations of the Total Leverage Ratio shall be made on a Pro Forma Basis, it being understood and --- ----- agreed that, as provided in the definition of Pro Forma Basis, the adjustments --- ----- contained in clause (v) thereof shall not be taken into account in determining the Total Leverage Ratio. "Total Revolving Loan Commitment" shall mean the sum of the Revolving Loan Commitments of each of the Banks. "Total Term Loan Commitment" shall mean the sum of the Term Loan Commitments of each of the Banks. "Total Unutilized Revolving Loan Commitment" shall mean, at any time, (i) the Total Revolving Loan Commitment at such time less (ii) the sum of (I) ---- the aggregate principal amount of all Revolving Loans and Swingline Loans outstanding at such time plus (II) the Letter of Credit Outstandings at such ---- time. "Tractor Trailer" shall mean any truck, tractor, tank trailer or other trailer and any similar vehicle or trailer used in a Permitted Business. "Trade Letter of Credit" shall have the meaning set forth in Section 2.01(a). "Tranche" shall mean the respective facility and commitments utilized in making Loans hereunder, with there being three separate Tranches, i.e., Term ---- Loans, Revolving Loans and Swingline Loans. "Transaction" shall mean, collectively, (i) the consummation of the Recapitalization, (ii) the Equity Financing, (iii) the consummation of the Refinancing, (iv) the entering into of the Credit Documents and the incurrence of all Loans hereunder on the Initial Borrowing Date, (v) the consummation of the Sale-Leaseback Transaction, (vi) the consummation of the Pacer Logistics Acquisition and (vii) the payment of fees and expenses in connection with the foregoing. "Type" shall mean any type of Loan determined with respect to the interest option applicable thereto, i.e., a Base Rate Loan or a Eurodollar Loan. ---- "UCC" shall mean the Uniform Commercial Code as in effect from time to time in the relevant jurisdiction. "Unfunded Current Liability" of any Plan shall mean the amount, if any, by which the value of the accumulated plan benefits under the Plan determined on a plan termination basis in accordance with actuarial assumptions at such time consistent with those prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds the fair market value of all plan assets allocable to such liabilities under Title IV of ERISA (excluding any accrued but unpaid contributions). "Unpaid Drawing" shall have the meaning provided in Section 2.04(a). "Unrestricted Subsidiary" shall mean any Subsidiary of the Borrower that is acquired or created after the Initial Borrowing Date and designated by the Borrower as an Unrestricted Subsidiary hereunder by written notice to the Administrative Agent, provided that the Borrower shall only be permitted to so -------- designate a new Unrestricted Subsidiary after the Initial Borrowing Date and so long as (i) no Default or Event of Default exists or would result therefrom, (ii) in the case of any Unrestricted Subsidiary directly owned by the Borrower or any of its Wholly-Owned Domestic Subsidiaries, 100% of the capital stock of such newly-designated Unrestricted Subsidiary is owned by the Borrower or such Wholly-Owned Domestic Subsidiary and (iii) all of the provisions of Section 9.15 shall have been complied with in respect of such newly-designated Unrestricted Subsidiary and such Unrestricted Subsidiary shall be capitalized (to the extent capitalized by the Borrower or any of its Subsidiaries) through Investments as permitted by, and in compliance with, Section 9.05(l), with any assets owned by such Unrestricted Subsidiary at the time of the initial designation thereof to be treated as Investments pursuant to Section 9.05(l), provided that at the time of -------- the initial Investment by the Borrower or any Wholly-Owned Domestic Subsidiary in such Subsidiary, the Borrower shall designate such entity as an Unrestricted Subsidiary in a written notice to the Administrative Agent. "Unutilized Revolving Loan Commitment" with respect to any RL Bank at any time shall mean such RL Bank's Revolving Loan Commitment at such time less ---- the sum of (i) the aggregate outstanding principal amount of all Revolving Loans made by such RL Bank and (ii) such RL Bank's RL Percentage of the total Letter of Credit Outstandings at such time. "U.S. Dollars" and the sign "$" shall each mean freely transferable lawful money of the United States of America. "Voting Stock" shall mean, as to any Person, any class or classes of capital stock of such Person pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the Board of Directors of such Person. "Wholly-Owned Domestic Subsidiary" shall mean, as to any Person, any Wholly-Owned Subsidiary of such Person which is a Domestic Subsidiary. "Wholly-Owned Foreign Subsidiary" shall mean, as to any Person, any Wholly-Owned Subsidiary of such Person which is a Foreign Subsidiary. "Wholly-Owned Subsidiary" shall mean, as to any Person, (i) any corporation 100% of whose capital stock (other than director's qualifying shares and/or other nominal amounts of shares required to be held other than by such Person under applicable law) is at the time owned by such Person and/or one or more Wholly-Owned Subsidiaries of such Person and (ii) any partnership, association, joint venture or other entity in which such Person and/or one or more Wholly-Owned Subsidiaries of such Person has a 100% equity interest at such time; provided that (I) (x) except as provided in the last sentence of the definition of Subsidiary and (y) other than in the definition of Wholly-Owned Unrestricted Subsidiary, no Unrestricted Subsidiary shall be considered a Wholly-Owned Subsidiary and (II) Pacer Logistics shall be deemed to be a Wholly- Owned Subsidiary of the Borrower for all purposes of this Agreement, so long as the only capital stock of Pacer Logistics not owned by the Borrower and its Wholly-Owned Subsidiaries is the Pacer Logistics Preferred Stock issued as contemplated by clauses (y) and (z) of the parenthetical appearing in Section 9.13(a)(i). "Wholly-Owned Unrestricted Subsidiary" shall mean any Wholly-Owned Subsidiary which is an Unrestricted Subsidiary. "Written" (whether lower or upper case) or "in writing" shall mean any form of written communication or a communication by means of telex, facsimile device, telegraph or cable. "Year 2000 Compliant" shall mean that all Information Systems and Equipment accurately process date data (including, but not limited to, calculating, comparing and sequencing), before, during and after the year 2000, as well as same and multi-century dates, or between the years 1999 and 2000, taking into account all leap years, including the fact that the year 2000 is a leap year, and further, that when used in combination with, or interfacing with, other Information Systems and Equipment, shall accurately accept, release and exchange date data, and shall in all material respects continue to function in the same manner as it performs today and shall not otherwise impair the accuracy or functionality of Information Systems and Equipment. SECTION 12. The Agents. ---------- 12.01 Appointment. Each Bank hereby irrevocably designates and ----------- appoints BTCo as Administrative Agent of such Bank (for purposes of this Section 12, the term "Administrative Agent" shall mean BTCo in its capacity as Administrative Agent hereunder and Collateral Agent pursuant to the Security Documents), Morgan as Syndication Agent and CSFB as Documentation Agent to act as specified herein and in the other Credit Documents, and each such Bank hereby irrevocably authorizes the Administrative Agent, the Syndication Agent and the Documentation Agent to take such action on its behalf under the provisions of this Agreement and the other Credit Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent, the Syndication Agent and the Documentation Agent by the terms of this Agreement and the other Credit Documents, together with such other powers as are reasonably incidental thereto. Each of the Administrative Agent, the Syndication Agent and the Documentation Agent agrees to act as such upon the express conditions contained in this Section 12. Notwithstanding any provision to the contrary elsewhere in this Agreement or in any other Credit Document, the Administrative Agent, the Syndication Agent and the Documentation Agent shall not have any duties or responsibilities, except those expressly set forth herein or in the other Credit Documents, or any fiduciary relationship with any Bank, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Administrative Agent, the Syndication Agent or the Documentation Agent. The provisions of this Section 12 are solely for the benefit of the Administrative Agent, the Syndication Agent, the Documentation Agent and the Banks, and neither the Borrower nor any of its Subsidiaries shall have any rights as a third party beneficiary of any of the provisions hereof. In performing its functions and duties under this Agreement, each of the Administrative Agent, the Syndication Agent and the Documentation Agent shall act solely as agent of the Banks and does not assume and shall not be deemed to have assumed any obligation or relationship of agency or trust with or for any Borrower or any of its Subsidiaries. 12.02 Delegation of Duties. Each of the Administrative Agent, the -------------------- Syndication Agent and the Documentation Agent may execute any of its duties under this Agreement or any other Credit Document by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. None of the Administrative Agent, the Syndication Agent or the Documentation Agent shall be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. 12.03 Exculpatory Provisions. None of the Administrative Agent, the ---------------------- Syndication Agent, the Documentation Agent or any of their respective officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such person in its capacity as Administrative Agent, Syndication Agent or Documentation Agent, as the case may be, under or in connection with this Agreement or the other Credit Documents (except for its own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Banks for any recitals, statements, representations or warranties made by the Borrower, any of its Subsidiaries or any of their respective officers contained in this Agreement or the other Credit Documents, any other Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent, the Syndication Agent or the Documentation Agent under or in connection with, this Agreement or any other Document or for any failure of the Borrower or any of its Subsidiaries or any of their respective officers to perform its obligations hereunder or thereunder. None of the Administrative Agent, the Syndication Agent or the Documentation Agent shall be under any obligation to any Bank to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or the other Documents, or to inspect the properties, books or records of the Borrower or any of its Subsidiaries. None of the Administrative Agent, the Syndication Agent or the Documentation Agent shall be responsible to any Bank for the effectiveness, genuineness, validity, enforceability, collectability or sufficiency of this Agreement or any other Document or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statement or in any financial or other statements, instruments, reports, certificates or any other documents in connection herewith or therewith furnished or made by the Administrative Agent, the Syndication Agent or the Documentation Agent, as the case may be, to the Banks or by or on behalf of the Borrower or any of its Subsidiaries to the Administrative Agent, the Syndication Agent or the Documentation Agent, as the case may be, or any Bank or be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained herein or therein or as to the use of the proceeds of the Loans or of the existence or possible existence of any Default or Event of Default. 12.04 Reliance by Agents. The Administrative Agent, the Syndication ------------------ Agent and the Documentation Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, facsimile, telex or teletype message, statement, order or other document or conversation reasonably believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower or any of their respective Subsidiaries), independent accountants and other experts selected by the Administrative Agent, the Syndication Agent or the Documentation Agent, as the case may be. Each of the Administrative Agent, the Syndication Agent and the Documentation Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Credit Document unless it shall first receive such advice or concurrence of the Required Banks as it deems appropriate or it shall first be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent, the Syndication Agent and the Documentation Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Credit Documents in accordance with a request of the Required Banks, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Banks. 12.05 Notice of Default. None of the Administrative Agent, the ----------------- Syndication Agent or the Documentation Agent shall be deemed to have knowledge or notice of the occurrence of any Default or Event of Default unless the Administrative Agent, the Syndication Agent or the Documentation Agent, as the case may be, has actually received notice from a Bank or a Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default." In the event that the Administrative Agent, the Syndication Agent or the Documentation Agent receives such a notice, the Administrative Agent, the Syndication Agent or the Documentation Agent, as the case may be, shall give prompt notice thereof to the Banks. The Administrative Agent, the Syndication Agent or the Documentation Agent, as the case may be, shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Banks; provided, that, -------- unless and until the Administrative Agent, the Syndication Agent or the Documentation Agent, as the case may be, shall have received such directions, the Administrative Agent, the Syndication Agent, or the Documentation Agent, as the case may be, may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Banks. 12.06 Nonreliance on Agents and Other Banks. Each Bank expressly ------------------------------------- acknowledges that none of the Administrative Agent, the Syndication Agent, the Documentation Agent or any of their respective officers, directors, employees, agents, attorneys-in-fact or affiliates has made any representations or warranties to it and that no act by the Administrative Agent, the Syndication Agent or Documentation Agent hereinafter taken, including any review of the affairs of the Borrower or any of its Subsidiaries, shall be deemed to constitute any representation or warranty by the Administrative Agent, the Syndication Agent or the Documentation Agent to any Bank. Each Bank represents to the Administrative Agent, the Syndication Agent and the Documentation Agent that it has, independently and without reliance upon the Administrative Agent, the Syndication Agent, the Documentation Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, assets, operations, property, financial and other condition, prospects and creditworthiness of the Borrower and its Subsidiaries and made its own decision to make its Loans hereunder and enter into this Agreement. Each Bank also represents that it will, independently and without reliance upon the Administrative Agent, the Syndication Agent, the Documentation Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement, and to make such investigation as it deems necessary to inform itself as to the business, assets, operations, property, financial and other condition, prospects and creditworthiness of the Borrower and its Subsidiaries. None of the Administrative Agent, the Syndication Agent or the Documentation Agent shall have any duty or responsibility to provide any Bank with any credit or other information concerning the business, operations, assets, property, financial and other condition, prospects or creditworthiness of any Borrower or any of its Subsidiaries which may come into the possession of the Administrative Agent, the Syndication Agent, the Documentation Agent or any of their respective officers, directors, employees, agents, attorneys-in-fact or affiliates. 12.07 Indemnification. The Banks agree to indemnify each of the --------------- Administrative Agent, the Syndication Agent and the Documentation Agent in their respective capacities as such ratably according to their respective "percentages" as used in determining the Required Banks at such time or, if the Commitments have terminated and all Loans have been repaid in full, as determined immediately prior to such termination and repayment (with such "percentages" to be determined as if there are no Defaulting Banks), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, reasonable expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Obligations) be imposed on, incurred by or asserted against the Administrative Agent, the Syndication Agent or the Documentation Agent in their respective capacities as such in any way relating to or arising out of this Agreement or any other Credit Document, or any documents contemplated by or referred to herein or the transactions contemplated hereby or any action taken or omitted to be taken by the Administrative Agent, the Syndication Agent or the Documentation Agent under or in connection with any of the foregoing, but only to the extent that any of the foregoing is not paid by the Borrower or any of its Subsidiaries; provided, that no Bank shall be -------- liable to the Administrative Agent, the Syndication Agent or the Documentation Agent for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting primarily from the gross negligence or willful misconduct of the Administrative Agent, the Syndication Agent or the Documentation Agent. If any indemnity furnished to the Administrative Agent, the Syndication Agent or the Documentation Agent for any purpose shall, in the opinion of the Administrative Agent, the Syndication Agent or the Documentation Agent be insufficient or become impaired, the Administrative Agent, the Syndication Agent or the Documentation Agent, as the case may be, may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. The agreements in this Section 12.07 shall survive the payment of all Obligations. 12.08 Agents in their Individual Capacities. Each of the ------------------------------------- Administrative Agent, the Syndication Agent and the Documentation Agent and their respective affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower and its Subsidiaries as though the Administrative Agent, the Syndication Agent or the Documentation Agent, as the case may be, were not the Administrative Agent, the Syndication Agent or the Documentation Agent, as the case may be, hereunder. With respect to the Loans made by it and all Obligations owing to it, each of the Administrative Agent, the Syndication Agent and the Documentation Agent shall have the same rights and powers under this Agreement as any Bank and may exercise the same as though it were not the Administrative Agent, the Syndication Agent or the Documentation Agent, as the case may be, and the terms "Bank" and "Banks" shall include the Administrative Agent, the Syndication Agent and the Documentation Agent in their individual capacities. 12.09 Holders. The Administrative Agent may deem and treat the payee ------- of any Note as the owner thereof for all purposes hereof unless and until a written notice of the assignment, transfer or endorsement thereof, as the case may be, shall have been filed with the Administrative Agent. Any request, authority or consent of any Person or entity who, at the time of making such request or giving such authority or consent, is the holder of any Note shall be conclusive and binding on any subsequent holder, transferee, assignee or indorsee, as the case may be, of such Note or of any Note or Notes issued in exchange therefor. 12.10 Resignation of the Agents. (a) The Administrative Agent may ------------------------- resign from the performance of all its functions and duties hereunder and/or under the other Credit Documents at any time by giving 30 Business Days' prior written notice to the Borrower and the Banks. Such resignation shall take effect upon the appointment of a successor Administrative Agent pursuant to clauses (b) and (c) below or as otherwise provided below. (b) Upon any such notice of resignation, the Required Banks shall appoint a successor Administrative Agent hereunder or thereunder who shall be a commercial bank or trust company reasonably acceptable to the Borrower. (c) If a successor Administrative Agent shall not have been so appointed within such 30 Business Day period, the Administrative Agent, with the consent of the Borrower (which consent shall not be unreasonably withheld or delayed), shall then appoint a successor Administrative Agent who shall serve as Administrative Agent hereunder or thereunder until such time, if any, as the Required Banks appoint a successor Administrative Agent as provided above. (d) If no successor Administrative Agent has been appointed pursuant to clause (b) or (c) above by the 30th Business Day after the date such notice of resignation was given by the Administrative Agent, the Administrative Agent's resignation shall become effective and the Required Banks shall thereafter perform all the duties of the Administrative Agent hereunder and/or under any other Credit Document until such time, if any, as the Banks appoint a successor Administrative Agent as provided above. (e) The Syndication Agent may resign from the performance of all its functions and duties hereunder and/or under the other Credit Documents at any time by giving five Business Days' prior written notice to the Banks. Such resignation shall take effect at the end of such five Business Day period. Upon the effectiveness of the resignation of the Syndication Agent, the Administrative Agent shall assume all of the functions and duties of the Syndication Agent hereunder and/or under the other Credit Documents. (f) The Documentation Agent may resign from the performance of all its functions and duties hereunder and/or under the other Credit Documents at any time by giving five Business Days' prior written notice to the Banks. Such resignation shall take effect at the end of such five Business Day period. Upon the effectiveness of the resignation of the Documentation Agent, the Administrative Agent shall assume all of the functions and duties of the Documentation Agent hereunder and/or under the other Credit Documents. SECTION 13. Miscellaneous. ------------- 13.01 Payment of Expenses, etc. The Borrower agrees to: (i) pay all ------------------------- reasonable out-of-pocket costs and expenses of the Agents (including, without limitation, the reasonable fees and disbursements of White & Case LLP and local counsel) in connection with the negotiation, preparation, execution and delivery of the Credit Documents and the documents and instruments referred to therein and any amendment, waiver or consent relating thereto and in connection with the Agents' syndication efforts with respect to this Agreement; (ii) pay all reasonable out-of-pocket costs and expenses of each Agent, each Letter of Credit Issuer and each of the Banks in connection with the enforcement of the Credit Documents and the documents and instruments referred to therein and, after an Event of Default shall have occurred and be continuing, the protection of the rights of each Agent, each Letter of Credit Issuer and each of the Banks thereunder (including, without limitation, the reasonable fees and disbursements of counsel (including in-house counsel) for each Agent, for each Letter of Credit Issuer and for each of the Banks); (iii) pay and hold each of the Banks harmless from and against any and all present and future stamp and other similar taxes with respect to the foregoing matters and save each of the Banks harmless from and against any and all liabilities with respect to or resulting from any delay or omission (other than to the extent attributable to such Bank) to pay such taxes; and (iv) indemnify each Agent, the Collateral Agent, each Letter of Credit Issuer and each Bank, their respective officers, directors, employees, representatives, trustees and agents from and hold each of them harmless against any and all losses, liabilities, claims, damages or expenses incurred by any of them as a result of, or arising out of, or in any way related to, or by reason of, (a) any investigation, litigation or other proceeding (whether or not any Agent, the Collateral Agent, any Letter of Credit Issuer or any Bank is a party thereto and whether or not any such investigation, litigation or other proceeding is between or among any Agent, the Collateral Agent, any Letter of Credit Issuer, any Bank, any Credit Party or any third Person or otherwise) related to the entering into and/or performance of this Agreement or any other Document or the use of the proceeds of any Loans hereunder or any drawing on any Letter of Credit or the Transaction or the consummation of any other transactions contemplated in any Document (but excluding any such losses, liabilities, claims, damages or expenses to the extent incurred by reason of the gross negligence or willful misconduct of the Person to be indemnified), or (b) the actual or alleged presence of Hazardous Materials in the air, surface water or groundwater or on the surface or subsurface of any Real Property or any Environmental Claim, in each case, including, without limitation, the reasonable fees and disbursements of counsel and independent consultants incurred in connection with any such investigation, litigation or other proceeding. To the extent that the undertaking to indemnify, pay or hold harmless any Agent or any Bank set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, the Borrower shall make the maximum contribution to the payment and satisfaction of each of the indemnified liabilities which is permissible under applicable law. 13.02 Right of Setoff. In addition to any rights now or hereafter --------------- granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence of an Event of Default, each Agent, each Letter of Credit Issuer and each Bank is hereby authorized at any time or from time to time, without presentment, demand, protest or other notice of any kind to the Borrower or any of its Subsidiaries or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and apply any and all deposits (general or special) and any other Indebtedness at any time held or owing by such Agent, such Letter of Credit Issuer or such Bank (including, without limitation, by branches and agencies of such Agent, such Letter of Credit Issuer and such Bank wherever located) to or for the credit or the account of the Borrower or any of its Subsidiaries against and on account of the Obligations of the Borrower or any of its Subsidiaries to such Agent, such Letter of Credit Issuer or such Bank under this Agreement or under any of the other Credit Documents, including, without limitation, all interests in Obligations of the Borrower or any of its Subsidiaries purchased by such Bank pursuant to Section 13.06(b), and all other claims of any nature or description arising out of or connected with this Agreement or any other Credit Document, irrespective of whether or not such Agent, such Letter of Credit Issuer or such Bank shall have made any demand hereunder and although said Obligations shall be contingent or unmatured. 13.03 Notices. Except as otherwise expressly provided herein, all ------- notices and other communications provided for hereunder shall be in writing (including telegraphic, telex, facsimile or cable communication) and mailed, telegraphed, telexed, telecopied, cabled or delivered, if to any Credit Party, at the address specified opposite its signature below or in the other relevant Credit Documents, as the case may be; if to any Bank, at its address specified for such Bank on Schedule II; or, at such other address as shall be designated by any party in a written notice to the other parties hereto. All such notices and communications shall be mailed, telegraphed, telexed, telecopied or cabled or sent by overnight courier, and shall be effective when received. (b) Without in any way limiting the obligation of the Borrower to confirm in writing any telephonic notice permitted to be given hereunder, the Administrative Agent or BTCo (in the case of a Borrowing of Swingline Loans) or any Letter of Credit Issuer (in the case of the issuance of a Letter of Credit), as the case may be, may prior to receipt of written confirmation act without liability upon the basis of such telephonic notice, believed by the Administrative Agent or BTCo or any Letter of Credit Issuer in good faith to be from an Authorized Officer of the Borrower. In each such case, the Borrower hereby waives the right to dispute the Administrative Agent's, BTCo's or such Letter of Credit Issuer's record of the terms of such telephonic notice. 13.04 Benefit of Agreement. (a) This Agreement shall be binding -------------------- upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto; provided, however, the Borrower may not -------- ------- assign or transfer any of its rights, obligations or interest hereunder or under any other Credit Document without the prior written consent of each of the Banks and, provided further, that, although any Bank may grant participations in its ---------------- rights hereunder, such Bank shall remain a "Bank" for all purposes hereunder (and may not transfer or assign all or any portion of its Commitments or Loans hereunder except as provided in Section 13.04(b)) and the participant shall not constitute a "Bank" hereunder and, provided further, that no Bank shall transfer or grant any participation ---------------- under which the participant shall have rights to approve any amendment to or waiver of this Agreement or any other Credit Document except to the extent such amendment or waiver would (i) extend the final scheduled maturity of any Loan, Note or Letter of Credit (unless such Letter of Credit is not extended beyond the Revolving Loan Maturity Date) in which such participant is participating, or reduce the rate or extend the time of payment of interest or Fees thereon (except in connection with a waiver of applicability of any post-default increase in interest rates) or reduce the principal amount thereof, or increase the amount of the participant's participation over the amount thereof then in effect (it being understood that a waiver of any Default or Event of Default or of a mandatory reduction in the Total Commitment or of a mandatory repayment of Loans shall not constitute a change in the terms of such participation, that an increase in any Commitment or Loan shall be permitted without the consent of any participant if the participant's participation is not increased as a result thereof and that any amendment or modification to the financial definitions in this Agreement shall not constitute a reduction in any rate of interest or fees for purposes of this clause (i)), (ii) consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement or (iii) release all or substantially all of the Collateral under all of the Security Documents (except as expressly provided in the Security Documents) supporting the Loans hereunder in which such participant is participating. In the case of any such participation, the participant shall not have any rights under this Agreement or any of the other Credit Documents (the participant's rights against such Bank in respect of such participation to be those set forth in the agreement executed by such Bank in favor of the participant relating thereto) and all amounts payable by the Borrower hereunder shall be determined as if such Bank had not sold such participation. (b) Notwithstanding the foregoing, any Bank (or any Bank together with one or more other Banks) may (x) assign all or a portion of its Revolving Loan Commitment (and related outstanding Obligations hereunder) and/or its outstanding Term Loans to (i) its parent company and/or any affiliate of such Bank which is at least 50% owned by such Bank or its parent company or to one or more Banks or (ii) in the case of any Bank that is a fund that invests in bank loans or that manages (directly or through an Affiliate) any fund that invests in bank loans, any fund that invests in bank loans and is managed by the same investment advisor as such Bank, by an Affiliate of such investment advisor or by such Bank, as the case may be, or (y) assign all, or if less than all, a portion equal to at least $5,000,000 in the aggregate for the assigning Bank or assigning Banks, of such Revolving Loan Commitments (and related outstanding Obligations hereunder) and outstanding principal amount of Term Loans to one or more Eligible Transferees (treating (x) any fund that invests in bank loans and (y) any other fund that invests in bank loans and is managed by the same investment advisor as such fund or by an Affiliate of such investment advisor, as a single Eligible Transferee), each of which assignees shall become a party to this Agreement as a Bank by execution of an Assignment and Assumption Agreement, provided that, (i) at such time Schedule I shall be deemed modified -------- to reflect the Revolving Loan Commitments and/or outstanding Term Loans, as the case may be, of such new Bank and of the existing Banks, (ii) upon surrender of the old Notes (or the furnishing of a standard indemnity letter from the respective assigning Bank in respect of any lost Notes reasonably acceptable to the Borrower), new Notes will be issued, at the Borrower's expense, to such new Bank and to the assigning Bank, such new Notes to be in conformity with the requirements of Section 1.05 (with appropriate modifications) to the extent needed to reflect the revised Revolving Loan Commitments and/or outstanding Term Loans, as the case may be, (iii) the consent of the Administrative Agent and, so long as no Default or Event of Default is then in existence, the Borrower shall be required in connection with any assignment to an Eligible Transferee pursuant to clause (y) of this Section 13.04(b) (which consent, in each case, shall not be unreasonably withheld or delayed), (iv) the consent of each Letter of Credit Issuer shall be required in connection with any assignment of Revolving Loan Commitments pursuant to clause (y) of this Section 13.04(b) (which consent shall not be unreasonably withheld or delayed) and (v) the Administrative Agent shall receive at the time of each assignment, from the assigning or assignee Bank, the payment of a non-refundable assignment fee of $5,000 and, provided further, that ---------------- such transfer or assignment will not be effective until recorded by the Administrative Agent on the Register pursuant to Section 13.17. To the extent of any assignment pursuant to this Section 13.04(b), the assigning Bank shall be relieved of its obligations hereunder with respect to its assigned Revolving Loan Commitments and/or outstanding Term Loans. At the time of each assignment pursuant to this Section 13.04(b) to a Person which is not already a Bank hereunder and which is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax purposes, the respective assignee Bank shall provide to the Borrower and the Administrative Agent the appropriate Internal Revenue Service Forms (and, if applicable a Section 4.04(b)(ii) Certificate) described in Section 4.04(b). To the extent that an assignment of all or any portion of a Bank's Revolving Loan Commitment and outstanding Obligations pursuant to Section 1.13 or this Section 13.04(b) would, due to circumstances existing at the time of such assignment, result in increased costs under Section 1.10, 1.11, 2.05 or 4.04 from those being charged by the respective assigning Bank prior to such assignment, then the Borrower shall not be obligated to pay such increased costs (although the Borrower shall be obligated to pay any other increased costs of the type described above resulting from changes after the date of the respective assignment). Notwithstanding anything to the contrary contained above, at any time after the termination of the Total Revolving Loan Commitment, if any Revolving Loans or Letters of Credit remain outstanding, assignments may be made as provided above, except that the respective assignment shall be of a portion of the outstanding Revolving Loans of the respective RL Bank and its participation in Letters of Credit and its obligation to make Mandatory Borrowings, although any such assignment effected after the termination of the Total Revolving Loan Commitment shall not release the assigning RL Bank from its obligations as a Participant with respect to outstanding Letters of Credit or to fund its share of any Mandatory Borrowing (although the respective assignee may agree, as between itself and the respective assigning RL Bank, that it shall be responsible for such amounts). (c) Nothing in this Agreement shall prevent or prohibit any Bank or BTCo from pledging its Loans and Notes hereunder to a Federal Reserve Bank in support of borrowings made by such Bank from such Federal Reserve Bank and, with the consent of the Administrative Agent, any Bank which is a fund may pledge all or any portion of its Notes or Loans to its trustee in support of its obligations to its trustee. No pledge pursuant to this clause (c) shall release the transferor Bank from any of its obligations hereunder. 13.05 No Waiver; Remedies Cumulative. No failure or delay on the ------------------------------ part of any Agent, the Collateral Agent or any Bank in exercising any right, power or privilege hereunder or under any other Credit Document and no course of dealing between any Credit Party and any Agent, the Collateral Agent or any Bank shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Credit Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights and remedies herein expressly provided are cumulative and not exclusive of any rights or remedies which any Agent, the Collateral Agent or any Bank would otherwise have. No notice to or demand on any Credit Party in any case shall entitle any Credit Party to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Agents, the Collateral Agent or the Banks to any other or further action in any circumstances without notice or demand. 13.06 Payments Pro Rata. (a) The Administrative Agent agrees that ----------------- promptly after its receipt of each payment from or on behalf of any Credit Party in respect of any Obligations of such Credit Party, it shall, except as otherwise provided in this Agreement, distribute such payment to the Banks (other than any Bank that has consented in writing to waive its pro rata share --- ---- of such payment) pro rata based upon their respective shares, if any, of the --- ---- Obligations with respect to which such payment was received. (b) Each of the Banks agrees that, if it should receive any amount hereunder (whether by voluntary payment, by realization upon security, by the exercise of the right of setoff or banker's lien, by counterclaim or cross action, by the enforcement of any right under the Credit Documents, or otherwise) which is applicable to the payment of the principal of, or interest on, the Loans, Unpaid Drawings or Fees, of a sum which with respect to the related sum or sums received by other Banks is in a greater proportion than the total of such Obligation then owed and due to such Bank bears to the total of such Obligation then owed and due to all of the Banks immediately prior to such receipt, then such Bank receiving such excess payment shall purchase for cash without recourse or warranty from the other Banks an interest in the Obligations of the respective Credit Party to such Banks in such amount as shall result in a proportional participation by all of the Banks in such amount; provided, that if -------- all or any portion of such excess amount is thereafter recovered from such Bank, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. 13.07 Calculations; Computations. (a) The financial statements to -------------------------- be furnished to the Banks pursuant hereto shall be made and prepared in accordance with GAAP consistently applied throughout the periods involved (except as set forth in the notes thereto or as otherwise disclosed in writing by the Borrower to the Banks); provided, that except as otherwise specifically -------- provided herein, all computations determining the Adjusted Total Leverage Ratio, the Total Leverage Ratio and the Adjusted Senior Leverage Ratio and compliance with Sections 4.02, 8.14 and 9, including definitions used therein shall, in each case, utilize accounting principles and policies in effect at the time of the preparation of, and in conformity with those used to prepare, the December 31, 1998 financial statements of the Borrower delivered to the Banks pursuant to Section 7.10(b); provided further, that (i) to the extent expressly required ---------------- pursuant to the provisions of this Agreement, certain calculations shall be made on a Pro Forma --- ----- Basis, (ii) to the extent compliance with any of Section 9.09 or 9.10 or the determination of any of the Adjusted Total Leverage Ratio, the Total Leverage Ratio and the Adjusted Senior Leverage Ratio would include periods occurring prior to the Initial Borrowing Date, such calculation shall be adjusted on a Pro --- Forma Basis to give effect to the Transaction as if same had occurred on the - ----- first day of the respective period, (iii) in the case of any determinations of Consolidated Interest Expense or Consolidated EBITDA for any portion of any Test Period which ends prior to the Initial Borrowing Date, all computations determining compliance with Sections 9.09 or 9.10 and all determinations of the Adjusted Total Leverage Ratio, the Adjusted Senior Leverage Ratio and the Total Leverage Ratio (including as used in the definition of Applicable Margin) shall be calculated in accordance with the definition of Test Period contained herein and (iv) for purposes of calculating the Applicable Margins, financial ratios, financial terms, all covenants and related definitions, all such calculations based on the operations of the Borrower and its Subsidiaries on a consolidated basis shall be made without giving effect to the operations of any Unrestricted Subsidiaries. (b) All computations of interest and Fees hereunder shall be made on the actual number of days elapsed over a year of 360 days. 13.08 Governing Law; Submission to Jurisdiction; Venue. (a) THIS ------------------------------------------------ AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. Any legal action or proceeding with respect to this Agreement or any other Credit Document may be brought in the courts of the State of New York or of the United States for the Southern District of New York, and, by execution and delivery of this Agreement, the Borrower hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. The Borrower hereby irrevocably designates, appoints and empowers CT Corporation System, with offices on the date hereof at 1633 Broadway, New York, NY 10019 as its designee, appointee and agent to receive, accept and acknowledge for and on its behalf, and in respect of the property of the Borrower and its Subsidiaries, service of any and all legal process, summons, notices and documents which may be served in any such action or proceeding. If for any reason such designee, appointee and agent shall cease to be available to act as such, the Borrower agrees to designate a new designee, appointee and agent in New York City on the terms and for the purposes of this provision satisfactory to the Administrative Agent under this Agreement. The Borrower hereby further irrevocably waives any claim that any such courts lack jurisdiction over the Borrower, and agrees not to plead or claim, in any legal action or proceeding with respect to this Agreement or any other Credit Document brought in any of the aforesaid courts, that any such court lacks jurisdiction over the Borrower. The Borrower further irrevocably consents to the service of process in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to the Borrower, at its address for notices pursuant to Section 13.03, such service to become effective 30 days after such mailing. The Borrower hereby irrevocably waives any objection to such service of process and further irrevocably waives and agrees not to plead or claim in any action or proceeding commenced hereunder or under any other Credit Document that service of process was in any way invalid or ineffective. Nothing herein shall affect the right of any Agent, the Collateral Agent, any Bank or the holder of any Note to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against any Credit Party in any other jurisdiction. (b) The Borrower hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement or any other Credit Document brought in the courts referred to in clause (a) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. 13.09 Counterparts. This Agreement may be executed in any number of ------------ counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A complete set of counterparts executed by all the parties hereto shall be lodged with the Borrower and the Administrative Agent. 13.10 Effectiveness. This Agreement shall become effective on the ------------- date (the "Effective Date") on which the Borrower, the Administrative Agent, the Syndication Agent and the Documentation Agent and each Bank shall have signed a counterpart hereof (whether the same or different counterparts) and shall have delivered the same (including by way of facsimile transmission) to the Administrative Agent at the Notice Office or at the office of Agents' counsel. The Administrative Agent will give the Borrower and each Bank prompt written notice of the occurrence of the Effective Date. 13.11 Headings Descriptive. The headings of the several sections and -------------------- subsections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. 13.12 Amendment or Waiver; etc. (a) Neither this Agreement nor any ------------------------- other Credit Document nor any terms hereof or thereof may be changed, waived, discharged or terminated unless such change, waiver, discharge or termination is in writing signed by the respective Credit Parties party thereto and the Required Banks, provided that no such change, waiver, discharge or termination -------- shall, without the consent of each Bank (other than a Defaulting Bank) (with Obligations being directly affected thereby in the case of the following clause (i)), (i) extend the final scheduled maturity of any Loan or Note or extend the stated maturity of any Letter of Credit beyond the Revolving Loan Maturity Date, or reduce the rate or extend the time of payment of interest or Fees thereon, or reduce the principal amount thereof (it being understood that any amendment or modification to the financial definitions in this Agreement shall not constitute a reduction in any rate of interest or fees for purposes of this clause (i)), (ii) release all or substantially all of the Collateral (except as expressly provided in the Security Documents) under all the Security Documents, (iii) amend, modify or waive any provision of this Section 13.12, (iv) reduce the percentage specified in the definition of Required Banks (it being understood that, with the consent of the Required Banks, additional extensions of credit pursuant to this Agreement may be included in the determination of the Required Banks on substantially the same basis as the extensions of Term Loans and Revolving Loan Commitments are included on the Effective Date) or (v) consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement or any other Credit Document; provided further, that no such change, ---------------- waiver, discharge or termination shall (v) increase the Commitments of any Bank over the amount thereof then in effect without the consent of such Bank (it being understood that waivers or modifications of conditions precedent, covenants, Defaults or Events of Default or of a mandatory reduction in the Total Commitment shall not constitute an increase of the Commitment of any Bank, and that an increase in the available portion of any Commitment of any Bank shall not constitute an increase in the Commitment of such Bank), (w) without the consent of each Letter of Credit Issuer, amend, modify or waive any provision of Section 2 or alter its rights or obligations with respect to Letters of Credit, (x) without the consent of BTCo, alter its rights or obligations with respect to Swingline Loans, (y) without the consent of the Agents, amend, modify or waive any provision of Section 12 as same applies to the Agents or any other provision as same relates to the rights or obligations of the Agents and (z) without the consent of the Collateral Agent, amend, modify or waive any provision relating to the rights or obligations of the Collateral Agent. (b) If, in connection with any proposed change, waiver, discharge or termination of or to any of the provisions of this Agreement as contemplated by clauses (i) through (v), inclusive, of the first proviso to Section 13.12(a), the consent of the Required Banks is obtained but the consent of one or more of such other Banks whose consent is required is not obtained, then the Borrower shall have the right, so long as all non-consenting Banks whose individual consent is required are treated as described in either clause (A) or (B) below, to either (A) replace each such non-consenting Bank or Banks (or, at the option of the Borrower if the respective Bank's consent is required with respect to less than all Tranches of Loans (or related Commitments), to replace only the Revolving Loan Commitments and/or Loans of the respective non-consenting Bank which gave rise to the need to obtain such Bank's individual consent) with one or more Replacement Banks pursuant to Section 1.13 so long as at the time of such replacement, each such Replacement Bank consents to the proposed change, waiver, discharge or termination or (B) terminate such non-consenting Bank's Revolving Loan Commitment (if such Bank's consent is required as a result of its Revolving Loan Commitment) and/or repay each Tranche of outstanding Loans of such Bank which gave rise to the need to obtain such Bank's consent and/or cash collateralize its applicable Adjusted RL Percentage of the Letter of Credit of Outstandings, in accordance with Sections 3.02(b) and/or 4.01(b), provided that, -------- unless the Commitments which are terminated and Loans which are repaid pursuant to preceding clause (B) are immediately replaced in full at such time through the addition of new Banks or the increase of the Commitments and/or outstanding Loans of existing Banks (who in each case must specifically consent thereto), then in the case of any action pursuant to preceding clause (B), the Required Banks (determined after giving effect to the proposed action) shall specifically consent thereto, provided further, that the Borrower shall not have the right to ---------------- replace a Bank, terminate its Commitment or repay its Loans solely as a result of the exercise of such Bank's rights (and the withholding of any required consent by such Bank) pursuant to the second proviso to Section 13.12(a). 13.13 Survival. All indemnities set forth herein including, without -------- limitation, in Sections 1.10, 1.11, 2.05, 4.04, 12.07 and 13.01, shall, subject to the provisions of Section 13.18 (to the extent applicable), survive the execution and delivery of this Agreement and the making and repayment of the Loans. 13.14 Domicile of Loans and Commitments. Each Bank may transfer and --------------------------------- carry its Loans and/or Commitments at, to or for the account of any branch office, subsidiary or affiliate of such Bank; provided, that the Borrower shall -------- not be responsible for costs arising under Section 1.10, 1.11, 2.05 or 4.04 resulting from any such transfer (other than a transfer pursuant to Section 1.12) to the extent such costs would not otherwise be applicable to such Bank in the absence of such transfer. 13.15 Confidentiality. (a) Each of the Banks agrees that it will --------------- use its reasonable efforts not to disclose without the prior consent of the Borrower (other than to its directors, trustees, employees, officers, auditors, counsel or other professional advisors, to affiliates or to another Bank if the Bank or such Bank's holding or parent company in its sole discretion determines that any such party should have access to such information, provided that such -------- persons shall be subject to the provisions of this Section 13.15 to the same extent as such Bank) any information with respect to the Borrower or any of its Subsidiaries which is furnished by the Borrower or any of its Subsidiaries pursuant to this Agreement; provided, that any Bank may disclose any such -------- information (a) which is publicly known at the time of the disclosure or which has become generally available to the public, (b) as may be required or appropriate (x) in any report, statement or testimony submitted to any municipal, state or Federal regulatory body having or claiming to have jurisdiction over such Bank or to the Federal Reserve Board or the Federal Deposit Insurance Corporation or similar organizations (whether in the United States or elsewhere) or their successors or (y) in connection with any request or requirement of any such regulatory body (including any securities exchange or self-regulatory organization), (c) as may be required or appropriate in response to any summons or subpoena or in connection with any litigation or other legal process, (d) to comply with any law, order, regulation or ruling applicable to such Bank, and (e) to any prospective transferee in connection with any contemplated transfer of any of the Notes or any interest therein by such Bank; provided, that such prospective transferee agrees to be bound by this Section - -------- 13.15 to the same extent as such Bank. (b) The Borrower hereby acknowledges and agrees that each Bank may share with any of its affiliates any information related to the Borrower or any of its Subsidiaries (including, without limitation, any nonpublic customer information regarding the creditworthiness of the Borrower and its Subsidiaries), provided that such Persons shall be subject to the provisions of -------- this Section 13.15 to the same extent as such Bank. 13.16 Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT -------------------- HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. 13.17 Register. The Borrower hereby designates the Administrative -------- Agent to serve as the Borrower's agent, solely for purposes of this Section 13.17, to maintain a register (the "Register") on which it will record the Commitments from time to time of each of the Banks, the Loans made by each of the Banks and each repayment in respect of the principal amount of the Loans of each Bank. Failure to make any such recordation, or any error in such recordation shall not affect the Borrower's obligations in respect of such Loans. With respect to any Bank, the transfer of any Commitment of such Bank and the rights to the principal of, and interest on, any Loan shall not be effective until such transfer is recorded on the Register maintained by the Administrative Agent with respect to ownership of such Commitment and Loans and prior to such recordation all amounts owing to the transferor with respect to such Commitment and Loans shall remain owing to the transferor. The registration of assignment or transfer of all or part of any Commitment and Loans shall be recorded by the Administrative Agent on the Register only upon the acceptance by the Administrative Agent of a properly executed and delivered Assignment and Assumption Agreement pursuant to Section 13.04(b). Coincident with the delivery of such an Assignment and Assumption Agreement to the Administrative Agent for acceptance and registration of assignment or transfer of all or part of a Commitment and/or Loan, or as soon thereafter as practicable, the assigning or transferor Bank shall surrender the Note evidencing such Commitment and/or Loan, and thereupon one or more new Notes in the same aggregate principal amount shall be issued to the assigning or transferor Bank and/or the new Bank. The Borrower agrees to indemnify the Administrative Agent from and against any and all losses, claims, damages and liabilities of whatsoever nature which may be imposed on, asserted against or incurred by the Administrative Agent in performing its duties under this Section 13.17. 13.18 Limitation on Additional Amounts, etc. Notwithstanding -------------------------------------- anything to the contrary contained in Section 1.10, 1.11, 2.05 or 4.04 of this Agreement, unless a Bank gives notice to the Borrower that it is obligated to pay an amount under such Section within six months after the later of (x) the date the Bank incurs the respective increased costs, Taxes, loss, expense or liability, reduction in amounts received or receivable or reduction in return on capital or (y) the date such Bank has actual knowledge of its incurrence of the respective increased costs, Taxes, loss, expense or liability, reductions in amounts received or receivable or reduction in return on capital, then such Bank shall only be entitled to be compensated for such amount by the Borrower pursuant to said Section 1.10, 1.11, 2.05 or 4.04, as the case may be, to the extent of the costs, Taxes, loss, expense or liability, reduction in amounts received or receivable or reduction in return on capital that are incurred or suffered on or after the date which occurs six months prior to such Bank giving notice to the Borrower that it is obligated to pay the respective amounts pursuant to said Section 1.10, 1.11, 2.05 or 4.04, as the case may be. This Section 13.18 shall have no applicability to any Section of this Agreement other than said Sections 1.10, 1.11, 2.05 and 4.04. 13.19 Post-Closing Actions. Notwithstanding anything to the contrary -------------------- contained in this Agreement or the other Credit Documents, the parties hereto acknowledge and agree that: (a) Security Document Filings. Form UCC-1 and PPSA Form 1-C financing ------------------------- statements (or other appropriate local equivalent) delivered by the Borrower to the Collateral Agent on the Initial Borrowing Date shall be filed in the appropriate governmental office within 5 days following the Initial Borrowing Date. (b) UCC-3 Termination Statements. Within 15 days following the ---------------------------- Initial Borrowing Date (or such later date as shall have been determined by the Administrative Agent in its sole discretion), the Administrative Agent shall have received Form UCC-3 termination statements in respect of the Liens listed on Part B of Schedule IX hereto and same shall be filed in the appropriate governmental office within 15 days following the Initial Borrowing Date (or such later date as shall have been determined by the Administrative Agent in its sole discretion). (c) Opinions of Local Counsel. Within 60 days following the Initial ------------------------- Borrowing Date, the Collateral Agent shall have received additional opinions, addressed to each Agent, the Collateral Agent and each of the Banks from local counsel to Credit Parties and/or the Agents reasonably satisfactory to the Collateral Agent (including an opinion from special STB counsel), which opinions (x) shall cover the perfection and enforceability as against third parties of the security interests granted pursuant to the Security Documents and such other matters relating to the transactions contemplated herein as the Collateral Agent may reasonably request and (y) shall be in form and substance reasonably satisfactory to the Collateral Agent. (d) STB Filing, etc. (i) Within 30 days following the Initial ---------------- Borrowing Date, the Borrower shall have caused to be delivered and filed with the STB transmittal letters in the form required by 49 C.F.R. 1177 (appropriately completed) from each Credit Party which owns Rolling Stock on the Initial Borrowing Date, together with executed copies of the Security Agreement, in respect of all of the Rolling Stock owned by such Credit Party on the Initial Borrowing Date. (ii) Within 45 days following the Initial Borrowing Date, the Borrower shall have caused to be delivered and filed with the Office of the Registrar General of Canada fully executed copies of the Security Agreement in accordance with the requirements of the Canada Transportation Act and, promptly after such filing, published notice thereof in the Canada Gazette. (e) Certificates of Title. Certificates of title in respect of all ---------------------- Tractor Trailers owned by the Borrower and its Subsidiaries on the Initial Borrowing Date (other than Tractor Trailers securing Existing Indebtedness not refinanced on the Initial Borrowing Date) noting the Collateral Agent's security interest in the respective Tractor Trailer covered thereby shall be registered in the appropriate state or provincial governmental office within 90 days following the Initial Borrowing Date. All provisions of this Credit Agreement and the other Credit Documents (including, without limitation, all conditions precedent, representations, warranties, covenants, events of default and other agreements herein and therein) shall be deemed modified to the extent necessary to effect the foregoing (and to permit the taking of the actions described above within the time periods, required above, rather than as otherwise provided in the Credit Documents); provided, that (x) to the extent any representation and warranty would not be - -------- true because the foregoing actions were not taken on the Initial Borrowing Date, the respective representation and warranty shall be required to be true and correct in all material respects at the time the respective action is taken (or was required to be taken) in accordance with the foregoing provisions of this Section 13.19 and (y) all representations and warranties relating to the Collateral Documents shall be required to be true immediately after the actions required to be taken by Section 13.19 have been taken (or were required to be taken). The acceptance of the benefits of the Loans shall constitute a representation, warranty and covenant by the Borrower to each of the Banks that the actions required pursuant to this Section 13.19 will be, or have been, taken within the relevant time periods referred to in this Section 13.19 and that, at such time, all representations and warranties contained in this Credit Agreement and the other Credit Documents shall then be true and correct without any modification pursuant to this Section 13.19. The parties hereto acknowledge and agree that the failure to take any of the actions required above, within the relevant time periods required above, shall give rise to an immediate Event of Default pursuant to this Agreement. IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Agreement as of the date first above written. PACER INTERNATIONAL, INC. (f/k/a Land Transport Services, Inc.) By /s/ Lawrence C. Yarberry -------------------------- Title: Executive Vice President & Chief Financial Officer BANKERS TRUST COMPANY, Individually and as Administrative Agent By: /s/ Anthony LoGrippo --------------------- Title: Principal MORGAN STANLEY SENIOR FUNDING, INC., Individually and as Syndication Agent By: /s/ Henry F. D'Alessandro -------------------------- Title: Vice President CREDIT SUISSE FIRST BOSTON Individually and as Documentation Agent By: /s/ Karl M. Studer ------------------- Title: Director By: /s/ Robert Hetu ----------------- Title: Vice President BANKBOSTON, N.A. By: /s/ Carol Lovell ----------------- Title: Managing Director BANK UNITED By: /s/ Phil Green --------------- Title: Director Commercial Syndications ABN AMRO BANK N.V. By: /s/ David J. Thomas --------------------- Title: Group Vice President By: /s/ Gerald F. Mackin ---------------------- Title: Vice President THE FIRST NATIONAL BANK OF CHICAGO By: /s/ Kenneth J. Kramer ----------------------- Title: Vice President CREDIT LYONNAIS AMERICAS NEW YORK BRANCH By: /s/ Attila Koc --------------- Title: Senior Vice President FIRST UNION NATIONAL BANK By: /s/ Roy O. Young ------------------ Title: Vice President HELLER FINANCIAL By: /s/ Robert M. Reeg -------------------- Title: Assistant Vice President THE INDUSTRIAL BANK OF JAPAN, LIMITED By: /s/ Takuya Honjo ------------------ Title: Senior Vice President THE MITSUBISHI TRUST AND BANKING CORPORATION By: /s/ Toshihiro Hayashi ----------------------- Title: Senior Vice President THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By: /s/ B. Ross Smead ------------------- Title: Vice President TRANSAMERICA BUSINESS CREDIT CORPORATION By: /s/ Perry Vavoules -------------------- Title: Senior Vice President UNION BANK OF CALIFORNIA, N.A. By: /s/ Alison A. Mason --------------------- Title: Vice President SCHEDULE I ---------- LIST OF BANKS AND COMMITMENTS -----------------------------
Term Loan Revolving Loan Bank Commitment Commitment - ---- ---------- -------------- Bankers Trust Company 9,765,957.45 $ 7,234,042.55 Morgan Stanley Senior Funding, Inc. 9,765,957.45 $ 7,234,042.55 Credit Suisse First Boston 9,765,957.45 $ 7,234,042.55 ABN Amro Bank N.V. 9,765,957.45 $ 7,234,042.55 BankBoston, N.A. 8,329,787.23 $ 6,170,212.77 Bank One/The First National Bank of Chicago 9,765,957.45 $ 7,234,042.55 Bank United 8,329,787.23 $ 6,170,212.77 Credit Lyonnais Americas New York Branch 9,765,957.45 $ 7,234,042.55 First Union National Bank 8,329,787.23 $ 6,170,212.77 Heller Financial 8,329,787.23 $ 6,170,212.77 The Industrial Bank of Japan, Limited 8,329,787.23 $ 6,170,212.77 The Mitsubishi Trust & Banking Corporation 8,329,787.23 $ 6,170,212.77 The Prudential Insurance Company of America 8,329,787.23 $ 6,170,212.77 Transamerica Business Credit Corporation 8,329,787.23 $ 6,170,212.77 Union Bank of California, N.A. 9,765,957.45 $ 7,234,042.55 Total 135,000,000.00 $100,000,000.00
SCHEDULE II ----------- BANK ADDRESSES --------------
Bank Address - ---- ------- Bankers Trust Company One Bankers Trust Plaza New York, New York 10006 Attention: Greg Shefrin Telephone No.: (212) 250-2500 Facsimile No.: (212) 250-7218 ABN AMRO Bank N.V. Loan Administration 208 S. LaSalle Street, Suite 1500 Chicago, IL 60604-1003 Attn: Milena Sopcic Telephone No.: (312) 992-5096 Facsimile No.: (312) 992-5156 Bank United 3200 Southwest Freeway Suite 1920 Houston, TX Attn: Phillip Green Telephone No.: (713) 543-6949 Facsimile No.: (713) 543-6651 BankBoston, N.A. Diversified Finance, MS 01-08-05 100 Federal Street Boston, MA 02210 Attn: Kristin J. Kraska Telephone No.: (617) 434-2079 Facsimile No.: (617) 434-4929 Credit Lyonnais Americas New York Branch 1301 Avenue of the Americas, 12/th/ Floor New York, NY 10019 Attn: Oliver Tabouret Telephone No.: (212) 261-3254 Facsimile No.: (212) 261-7338
Schedule II page 2 Credit Suisse First Boston 11 Madison Avenue New York, NY 10010 Attn: Robert Hetu Telephone No.: (212) 325-4542 Facsimile No.: (212) 325-8309 The First National Bank of Chicago One First National Plaza Mail Suite IL1-0324 Chicago, IL 60670 Attn: Colleen Muff Telephone No.: (312) 732-9957 Facsimile No.: (312) 732-5297 First Union Capital Markets One South Penn Square Widener Bldg-11/th/ Floor PA 4827 Philadelphia, PA 19107 Attn: Roy O. Young Telephone No.: (215) 973-5866 Facsimile No.: (215) 786-7704 Heller Financial 50 West Monroe Street Chicago, IL 60661 Attn: Craig Galehugh Telephone No.: (312) 441-7630 Facsimile No.: (312) 441-7367 IBJ, Ltd. 1251 Avenue of the Americas New York, NY 10020-1104 Attn: Chris Droussiotis Telephone No.: (212) 282-3323 Facsimile No.: (212) 282-4490 The Mitsubishi Trust & Banking Corporation 520 Madison Avenue, 26/th/ Floor New York, NY 10022 Attn: Mildred Chiu Telephone No.: (212) 891-8256 Facsimile No.: (212) 755-2349 Morgan Stanley Senior Funding, Inc. 1585 Broadway New York, NY 10036 Attn: Hank D'Alessandro Telephone No.: (212) 761-1051 Facsimile No.: (212) 761-0322 Schedule II page 2 Prudential 100 Mulberry Street c/o Prudential Capital Group Four Gateway Center Newark, NJ 07102-4069 Attn: Janet Crowe Telephone No.: (973) 802-9285 Facsimile No.: (973) 802-7045 Transamerica Business Credit Corporation 555 Theodore Fremd Avenue Suite C-301 Rye, NY 10580 Attn: Stephen Goetschius Telephone No.: (914) 925-7234 Facsimile No.: (914) 921-0110 Union Bank of California Union Bank of California 350 California Street, 6/th/ Floor San Francisco, CA 94104 Attention: Alison A. Mason Telephone No.: (415) 705-7452 Facsimile No.: (415) 705-7566 SCHEDULE III ------------ REAL PROPERTIES --------------- SCHEDULE IV ----------- SCHEDULED EXISTING INDEBTEDNESS ------------------------------- SCHEDULE V ---------- PLANS ----- SCHEDULE VI ----------- EXISTING INVESTMENTS -------------------- SCHEDULE VII ------------ SUBSIDIARIES ------------ SCHEDULE VII ------------ INSURANCE --------- SCHEDULE IX ----------- EXISTING LIENS -------------- Filing File Location Debtor Secured Party Number FileDate of Collateral - -------- ------ ------------- ------ -------- ------------- SCHEDULE X ---------- CAPITALIZATION -------------- SCHEDULE XI ----------- CONSOLIDATED EBITDA ADJUSTMENTS ------------------------------- Relevant Fiscal Quarter Ended - ------------- June 30, 1999 $38,111.11 September 30, 1999 $28,888.89 December 30, 1999 $27,777.70 Each amount set forth above opposite a fiscal quarter to be included in the relevant Test Period represents a per diem amount for such fiscal quarter. Adjustments to Consolidated EBITDA pursuant to this Schedule shall only be made in the case of any fiscal quarter set forth above for each day during such fiscal quarter occurring after the Initial Borrowing Date. IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Agreement as of the date first above written. PACER INTERNATIONAL, INC. (f/k/a Land Transport Services, Inc.) By /s/ Lawrence C. Yarberry ----------------------------- Title: Executive Vice President & Chief Financial Officer BANKERS TRUST COMPANY, Individually and as Administrative Agent By: /s/ Anthony LoGrippo ----------------------------- Title: Principal MORGAN STANLEY SENIOR FUNDING, INC., Individually and as Syndication Agent By: /s/ Henry F. D'Alessandro ----------------------------- Title: Vice President CREDIT SUISSE FIRST BOSTON Individually and as Documentation Agent By: /s/ Karl M. Studer ----------------------------- Title: Director By: /s/ Robert Hetu ----------------------------- Title: Vice President BANKBOSTON, N.A. By: /s/ Carol Lovell ----------------------------- Title: Managing Director BANK UNITED By: /s/ Phil Green ----------------------------- Title: Director Commercial Syndications ABN AMRO BANK N.V. By: /s/ David J. Thomas ----------------------------- Title: Group Vice President By: /s/ Gerald F. Mackin ----------------------------- Title: Vice President THE FIRST NATIONAL BANK OF CHICAGO By: /s/ Kenneth J. Kramer ----------------------------- Title: Vice President CREDIT LYONNAIS AMERICAS NEW YORK BRANCH By: /s/ Attila Koc ----------------------------- Title: Senior Vice President -2- FIRST UNION NATIONAL BANK By: /s/ Roy O. Young --------------------------- Title: Vice President HELLER FINANCIAL By: /s/ Robert M. Reeg --------------------------- Title: Assistant Vice President THE INDUSTRIAL BANK OF JAPAN, LIMITED By: /s/ Takuya Honjo --------------------------- Title: Senior Vice President THE MITSUBISHI TRUST AND BANKING CORPORATION By: /s/ Toshihiro Hayashi --------------------------- Title: Senior Vice President THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By: /s/ B. Ross Smead --------------------------- Title: Vice President -3- TRANSAMERICA BUSINESS CREDIT CORPORATION By: /s/ Perry Vavoules -------------------------- Title: Senior Vice President UNION BANK OF CALIFORNIA, N.A. By: /s/ Alison A. Mason -------------------------- Title: Vice President -4- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. Pacer International Inc., (f/k/a Land Transport Services, Inc.), as an Assignor By: /s/ Lawrence Yarberry ------------------------ Title: Executive Vice President/CFO Pacer Logistics, Inc., (f/k/a Pacer International, Inc.), as an Assignor By: /s/ Lawrence Yarberry ------------------------ Title: Executive Vice President/CFO Cross Con Transport, Inc., as an Assignor By: /s/ Lawrence Yarberry ------------------------ Title: Executive Vice President/CFO Cross Con Terminals, Inc., as an Assignor By: /s/ Lawrence Yarberry ------------------------ Title: Executive Vice President/CFO Pacer International Rail Services LLC, as an Assignor By: Pacer Logistics, Inc., as manager By: /s/ Lawrence Yarberry ------------------------ Title: Executive Vice President/CFO Pacer International Consulting LLC, as an Assignor By: Pacer Logistics, Inc., as manager By: /s/ Lawrence Yarberry ------------------------ Title: Executive Vice President/CFO Pacer Rail Services LLC, as an Assignor By: Pacer Logistics, Inc., as manager By: /s/ Lawrence Yarberry ------------------------ Title: Executive Vice President/CFO Pacific Motor Transport Company, as an Assignor By: /s/ Lawrence Yarberry ------------------------ Title: Executive Vice President/CFO -2- Pacer Integrated Logistics, Inc., as an Assignor By: /s/ Lawrence Yarberry ----------------------- Title: Executive Vice President/CFO PLM Acquisition Corporation, as an Assignor By: /s/ Lawrence Yarberry ------------------------ Title: Executive Vice President/CFO Manufacturers Consolidation Service, Inc., as an Assignor By: /s/ Lawrence Yarberry ------------------------ Title: Executive Vice President/CFO Keystone Terminals Acquisition Corp., as an Assignor By: /s/ Lawrence Yarberry ------------------------ Title: Executive Vice President/CFO -3- Interstate Consolidation Service, Inc., as an Assignor By: /s/ Lawrence Yarberry ------------------------ Title: Executive Vice President/CFO Interstate Consolidation, Inc., as an Assignor By: /s/ Lawrence Yarberry ------------------------ Title: Executive Vice President/CFO Intermodal Container Service, Inc., as an Assignor By: /s/ Lawrence Yarberry ------------------------ Title: Executive Vice President/CFO Levcon, Inc., as an Assignor By: /s/ Lawrence Yarberry ------------------------ Title: Executive Vice President/CFO Manufacturers Consolidation Service of Canada, Inc., as an Assignor By: /s/ Lawrence Yarberry ------------------------ Title: Executive Vice President/CFO -4- Pacer Express, Inc., as an Assignor By: /s/ Lawrence Yarberry ------------------------ Title: Executive Vice President/CFO Bankers Trust Company, as Collateral Agent, as Assignee By: /s/ Anthony LoGrippo ----------------------- Title: Principal -5- IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be executed and delivered as of the date first above written. Pacer Logistics, Inc., (f/k/a Pacer International, Inc.), as a Guarantor By: /s/ Lawrence Yarberry ---------------------- Title: Executive Vice President/CFO Cross Con Transport, Inc., as a Guarantor By: /s/ Lawrence Yarberry --------------------- Title: Executive Vice President/CFO Cross Con Terminals, Inc., as a Guarantor By: /s/ Lawrence Yarberry --------------------- Title: Executive Vice President/CFO Pacer International Rail Services LLC, as a Guarantor By: /s/ Lawrence Yarberry --------------------- Title: Executive Vice President/CFO Pacer International Consulting LLC, as a Guarantor By: Pacer Logistics, Inc., as manager By: /s/ Lawrence Yarberry --------------------- Title: Executive Vice President/CFO Pacer Rail Services LLC, as a Guarantor By: Pacer Logistics, Inc., as manager By: /s/ Lawrence Yarberry --------------------- Title: Executive Vice President/CFO Pacific Motor Transport Company, as a Guarantor By: /s/ Lawrence Yarberry --------------------- Title: Executive Vice President/CFO -2- Pacer Integrated Logistics, Inc., as a Guarantor By: /s/ Lawrence Yarberry --------------------- Title: Executive Vice President/CFO PLM Acquisition Corporation, as a Guarantor By: /s/ Lawrence Yarberry --------------------- Title: Executive Vice President/CFO Manufacturers Consolidation Service, Inc., as a Guarantor By: /s/ Lawrence Yarberry --------------------- Title: Executive Vice President/CFO Keystone Terminals Acquisition Corp., as a Guarantor By: /s/ Lawrence Yarberry --------------------- Title: Executive Vice President/CFO -3- Interstate Consolidation Service, Inc., as a Guarantor By: /s/ Lawrence Yarberry --------------------- Title: Executive Vice President/CFO Interstate Consolidation, Inc., as a Guarantor By: /s/ Lawrence Yarberry --------------------- Title: Executive Vice President/CFO Intermodal Container Service, Inc., as a Guarantor By: /s/ Lawrence Yarberry --------------------- Title: Executive Vice President/CFO Levcon, Inc., as a Guarantor By: /s/ Lawrence Yarberry --------------------- Title: Executive Vice President/CFO -4- Manufacturers Consolidation Service of Canada, Inc., as a Guarantor By: /s/ Lawrence Yarberry --------------------- Title: Executive Vice President/CFO Pacer Express, Inc., as a Guarantor By: /s/ Lawrence Yarberry --------------------- Title: Executive Vice President/CFO -5- Accepted and Agreed to: Bankers Trust Company, as Administrative Agent for the Banks By: /s/ Anthony LoGrippo ---------------------- Title: Principal -6- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. Pacer International Inc., (f/k/a Land Transport Services, Inc.), as an Assignor By: /s/ Lawrence Yarberry ------------------------ Title: Executive Vice President/CFO Pacer Logistics, Inc., (f/k/a Pacer International, Inc.), as an Assignor By: /s/ Lawrence Yarberry ------------------------ Title: Executive Vice President/CFO Cross Con Transport, Inc., as an Assignor By: /s/ Lawrence Yarberry ------------------------ Title: Executive Vice President/CFO Cross Con Terminals, Inc., as an Assignor By: /s/ Lawrence Yarberry ------------------------ Title: Executive Vice President/CFO Pacer International Rail Services LLC, as an Assignor By: Pacer Logistics, Inc., as manager By: /s/ Lawrence Yarberry ------------------------ Title: Executive Vice President/CFO Pacer International Consulting LLC, as an Assignor By: Pacer Logistics, Inc., as manager By: /s/ Lawrence Yarberry ------------------------ Title: Executive Vice President/CFO Pacer Rail Services LLC, as an Assignor By: Pacer Logistics, Inc., as manager By: /s/ Lawrence Yarberry ------------------------ Title: Executive Vice President/CFO Pacific Motor Transport Company, as an Assignor By: /s/ Lawrence Yarberry ------------------------ Title: Executive Vice President/CFO -2- Pacer Integrated Logistics, Inc., as an Assignor By: /s/ Lawrence Yarberry ----------------------- Title: Executive Vice President/CFO PLM Acquisition Corporation, as an Assignor By: /s/ Lawrence Yarberry ------------------------ Title: Executive Vice President/CFO Manufacturers Consolidation Service, Inc., as an Assignor By: /s/ Lawrence Yarberry ------------------------ Title: Executive Vice President/CFO Keystone Terminals Acquisition Corp., as an Assignor By: /s/ Lawrence Yarberry ------------------------ Title: Executive Vice President/CFO -3- Interstate Consolidation Service, Inc., as an Assignor By: /s/ Lawrence Yarberry ------------------------ Title: Executive Vice President/CFO Interstate Consolidation, Inc., as an Assignor By: /s/ Lawrence Yarberry ------------------------ Title: Executive Vice President/CFO Intermodal Container Service, Inc., as an Assignor By: /s/ Lawrence Yarberry ------------------------ Title: Executive Vice President/CFO Levcon, Inc., as an Assignor By: /s/ Lawrence Yarberry ------------------------ Title: Executive Vice President/CFO Manufacturers Consolidation Service of Canada, Inc., as an Assignor By: /s/ Lawrence Yarberry ------------------------ Title: Executive Vice President/CFO -4- Pacer Express, Inc., as an Assignor By: /s/ Lawrence Yarberry ------------------------ Title: Executive Vice President/CFO Bankers Trust Company, as Collateral Agent, as Assignee By: /s/ Anthony LoGrippo ----------------------- Title: Principal -5- EX-4.2 5 INDENTURE DATED MAY 28, 1999 Exhibit 4.2 ================================================================================ PACER INTERNATIONAL, INC., as Issuer, the GUARANTORS named herein, as Guarantors, and WILMINGTON TRUST COMPANY, as Trustee __________________ INDENTURE Dated as of May 28, 1999 __________________ $150,000,000 11 3/4% Senior Subordinated Notes due 2007 ================================================================================ CROSS-REFERENCE TABLE TIA Indenture Section Section - ------- --------- 310(a)(1).................................................... 7.10 (a)(2).................................................... 7.10 (a)(3).................................................... N.A. (a)(4).................................................... N.A. (a)(5).................................................... 7.08; 7.10 (b)....................................................... 7.08; 7.10; 13.02 (c)....................................................... N.A. 311(a)....................................................... 7.11 (b)....................................................... 7.11 (c)....................................................... N.A. 312(a)....................................................... 2.05 (b)....................................................... 13.03 (c)....................................................... 13.03 313(a)....................................................... 7.06 (b)(1).................................................... 7.06 (b)(2).................................................... 7.06 (c)....................................................... 7.06; 13.02 (d)....................................................... 7.06 314(a)....................................................... 4.08; 4.10; 13.02 (b)....................................................... N.A. (c)(1).................................................... 7.02; 13.04; 13.05 (c)(2).................................................... 7.02; 13.04; 13.05 (c)(3).................................................... N.A. (d)....................................................... N.A. (e)....................................................... 13.05 (f)....................................................... N.A. 315(a)....................................................... 7.01(b) (b)....................................................... 7.05 (c)....................................................... 7.01 (d)....................................................... 6.05; 7.01(c) 316(a)(last sentence)........................................ 2.09 (a)(1)(A)................................................. 6.05 (a)(1)(B)................................................. 6.04 (a)(2).................................................... 9.05 (b)....................................................... 6.07 (c)....................................................... 9.05 317(a)(1).................................................... 6.08 (a)(2).................................................... 6.09 (b)....................................................... 2.04 318(a)....................................................... 13.01 (c)....................................................... 13.01 _____________________ N.A. means Not Applicable Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Indenture TABLE OF CONTENTS
Page ---- ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions........................................................................1 SECTION 1.02. Incorporation by Reference of TIA.................................................23 SECTION 1.03. Rules of Construction.............................................................23 ARTICLE TWO THE SECURITIES SECTION 2.01. Form and Dating...................................................................23 SECTION 2.02. Execution and Authentication......................................................23 SECTION 2.03. Registrar, Paying Agent and Calculation Agent.....................................23 SECTION 2.04. Paying Agent To Hold Assets in Trust..............................................23 SECTION 2.05. Holder Lists......................................................................23 SECTION 2.06. Transfer and Exchange.............................................................23 SECTION 2.07. Replacement Securities............................................................23 SECTION 2.08. Outstanding Securities............................................................23 SECTION 2.09. Treasury Securities...............................................................23 SECTION 2.10. Temporary Securities..............................................................23 SECTION 2.11. Cancellation......................................................................23 SECTION 2.12. Defaulted Interest................................................................23 SECTION 2.13. CUSIP Number......................................................................23 SECTION 2.14. Restrictive Legends...............................................................23 SECTION 2.15. Book-Entry Provisions for Global Security.........................................23 SECTION 2.16. Special Transfer Provisions.......................................................23 ARTICLE THREE REDEMPTION SECTION 3.01. Notices to Trustee................................................................23 SECTION 3.02. Selection of Securities To Be Redeemed............................................23 SECTION 3.03. Notice of Redemption..............................................................23 SECTION 3.04. Effect of Notice of Redemption....................................................23 SECTION 3.05. Deposit of Redemption Price.......................................................23 SECTION 3.06. Securities Redeemed in Part.......................................................23 ARTICLE FOUR COVENANTS SECTION 4.01. Payment of Securities.............................................................23
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Page ---- SECTION 4.02. Maintenance of Office or Agency...................................................23 SECTION 4.03. Limitation on Restricted Payments.................................................23 SECTION 4.04. Limitation on Incurrence of Additional Indebtedness...............................23 SECTION 4.05. Corporate Existence...............................................................23 SECTION 4.06. Payment of Taxes and Other Claims.................................................23 SECTION 4.07. Maintenance of Properties and Insurance...........................................23 SECTION 4.08. Compliance Certificate; Notice of Default.........................................23 SECTION 4.09. Compliance with Laws..............................................................23 SECTION 4.10. Reports to Holders................................................................23 SECTION 4.11. Waiver of Stay, Extension or Usury Laws...........................................23 SECTION 4.12. Limitations on Transactions with Affiliates.......................................23 SECTION 4.13. Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries......23 SECTION 4.14. Limitation on Liens...............................................................23 SECTION 4.15. Change of Control.................................................................23 SECTION 4.16. Limitation on Asset Sales.........................................................23 SECTION 4.17. Prohibition on Incurrence of Senior Subordinated Debt.............................23 SECTION 4.18. Additional Subsidiary Guarantees..................................................23 ARTICLE FIVE SUCCESSOR CORPORATION SECTION 5.01. Merger, Consolidation and Sale of Assets..........................................23 SECTION 5.02. Successor Corporation Substituted.................................................23 ARTICLE SIX DEFAULT AND REMEDIES SECTION 6.01. Events of Default.................................................................23 SECTION 6.02. Acceleration......................................................................23 SECTION 6.03. Other Remedies....................................................................23 SECTION 6.04. Waiver of Past Defaults...........................................................23 SECTION 6.05. Control by Majority...............................................................23 SECTION 6.06. Limitation on Suits...............................................................23 SECTION 6.07. Rights of Holders To Receive Payment..............................................23 SECTION 6.08. Collection Suit by Trustee........................................................23 SECTION 6.09. Trustee May File Proofs of Claim..................................................23 SECTION 6.10. Priorities........................................................................23 SECTION 6.11. Undertaking for Costs.............................................................23
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Page ---- ARTICLE SEVEN TRUSTEE SECTION 7.01. Duties of Trustee.................................................................23 SECTION 7.02. Rights of Trustee.................................................................23 SECTION 7.03. Individual Rights of Trustee......................................................23 SECTION 7.04. Trustee's Disclaimer..............................................................23 SECTION 7.05. Notice of Default.................................................................23 SECTION 7.06. Reports by Trustee to Holders.....................................................23 SECTION 7.07. Compensation and Indemnity........................................................23 SECTION 7.08. Replacement of Trustee............................................................23 SECTION 7.09. Successor Trustee by Merger, Etc..................................................23 SECTION 7.10. Eligibility; Disqualification.....................................................23 SECTION 7.11. Preferential Collection of Claims Against Company.................................23 ARTICLE EIGHT DISCHARGE OF INDENTURE; DEFEASANCE SECTION 8.01. Termination of the Company's Obligations..........................................23 SECTION 8.02. Legal Defeasance and Covenant Defeasance..........................................23 SECTION 8.03. Conditions to Legal Defeasance or Covenant Defeasance.............................23 SECTION 8.04. Application of Trust Money........................................................23 SECTION 8.05. Repayment to the Company..........................................................23 SECTION 8.06. Reinstatement.....................................................................23 ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 9.01. Without Consent of Holders........................................................23 SECTION 9.02. With Consent of Holders...........................................................23 SECTION 9.03. Effect on Senior Debt.............................................................23 SECTION 9.04. Compliance with TIA...............................................................23 SECTION 9.05. Revocation and Effect of Consents.................................................23 SECTION 9.06. Notation on or Exchange of Securities.............................................23 SECTION 9.07. Trustee To Sign Amendments, Etc...................................................23 ARTICLE TEN SUBORDINATION OF SECURITIES SECTION 10.01. Securities Subordinated to Senior Debt............................................23 SECTION 10.02. Suspension of Payment When Senior Debt Is in Default..............................23
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Page ---- SECTION 10.03. Securities Subordinated to Prior Payment of All Senior Debt on Dissolution, Liquidation or Reorganization of Company.......................................23 SECTION 10.04. Payments May Be Paid Prior to Dissolution.........................................23 SECTION 10.05. Holders To Be Subrogated to Rights of Holders of Senior Debt......................23 SECTION 10.06. Obligations of the Company Unconditional..........................................23 SECTION 10.07. Notice to Trustee.................................................................23 SECTION 10.08. Reliance on Judicial Order or Certificate of Liquidating Agent....................23 SECTION 10.09. Trustee's Relation to Senior Debt.................................................23 SECTION 10.10. Subordination Rights Not Impaired by Acts or Omissions of the Company or Holders of Senior Debt.................................................................23 SECTION 10.11. Securityholders Authorize Trustee To Effectuate Subordination of Securities.......23 SECTION 10.12. This Article Ten Not To Prevent Events of Default.................................23 SECTION 10.13. Trustee's Compensation Not Prejudiced.............................................23 ARTICLE ELEVEN GUARANTEE OF SECURITIES SECTION 11.01. Unconditional Guarantee...........................................................23 SECTION 11.02. Limitations on Guarantees.........................................................23 SECTION 11.03. Execution and Delivery of Guarantee...............................................23 SECTION 11.04. Release of a Guarantor............................................................23 SECTION 11.05. Waiver of Subrogation.............................................................23 SECTION 11.06. Immediate Payment.................................................................23 SECTION 11.07. No Set-Off........................................................................23 SECTION 11.08. Obligations Absolute..............................................................23 SECTION 11.09. Obligations Continuing............................................................23 SECTION 11.10. Obligations Not Reduced...........................................................23 SECTION 11.11. Obligations Reinstated............................................................23 SECTION 11.12. Obligations Not Affected..........................................................23 SECTION 11.13. Waiver............................................................................23 SECTION 11.14. No Obligation To Take Action Against the Company..................................23 SECTION 11.15. Dealing with the Company and Others...............................................23 SECTION 11.16. Default and Enforcement...........................................................23 SECTION 11.17. Amendment, Etc....................................................................23 SECTION 11.18. Acknowledgment....................................................................23 SECTION 11.19. Costs and Expenses................................................................23 SECTION 11.20. No Merger or Waiver; Cumulative Remedies..........................................23
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Page ---- SECTION 11.21. Survival of Obligations...........................................................23 SECTION 11.22. Guarantee in Addition to Other Obligations........................................23 SECTION 11.23. Severability......................................................................23 SECTION 11.24. Successors and Assigns............................................................23 ARTICLE TWELVE SUBORDINATION OF GUARANTEE SECTION 12.01. Guarantee Obligations Subordinated to Guarantor Senior Debt.......................23 SECTION 12.02. Suspension of Guarantee Obligations When Guarantor Senior Debt Is in Default......23 SECTION 12.03. Guarantee Obligations Subordinated to Prior Payment of All Guarantor Senior Debt on Dissolution, Liquidation or Reorganization of Such Guarantor................23 SECTION 12.04. Payments May Be Paid Prior to Dissolution.........................................23 SECTION 12.05. Holders of Guarantee Obligations To Be Subrogated to Rights of Holders of Guarantor Senior Debt..........................................................23 SECTION 12.06. Obligations of the Guarantors Unconditional.......................................23 SECTION 12.07. Notice to Trustee.................................................................23 SECTION 12.08. Reliance on Judicial Order or Certificate of Liquidating Agent....................23 SECTION 12.09. Trustee's Relation to Guarantor Senior Debt.......................................23 SECTION 12.10. Subordination Rights Not Impaired by Acts or Omissions of the Guarantors or Holders of Guarantor Senior Debt...............................................23 SECTION 12.11. Holders Authorize Trustee To Effectuate Subordination of Guarantee Obligations....23 SECTION 12.12. This Article Twelve Not To Prevent Events of Default..............................23 SECTION 12.13. Trustee's Compensation Not Prejudiced.............................................23 ARTICLE THIRTEEN MISCELLANEOUS SECTION 13.01. TIA Controls......................................................................23 SECTION 13.02. Notices...........................................................................23 SECTION 13.03. Communications by Holders with Other Holders......................................23 SECTION 13.04. Certificate and Opinion as to Conditions Precedent................................23
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Page ---- SECTION 13.05. Statements Required in Certificate or Opinion.....................................23 SECTION 13.06. Rules by Trustee, Paying Agent, Registrar.........................................23 SECTION 13.07. Legal Holidays....................................................................23 SECTION 13.08. Governing Law.....................................................................23 SECTION 13.09. No Adverse Interpretation of Other Agreements.....................................23 SECTION 13.10. No Recourse Against Others........................................................23 SECTION 13.11. Successors........................................................................23 SECTION 13.12. Duplicate Originals...............................................................23 SECTION 13.13. Severability......................................................................23 Signatures ............................................................................S-1
Exhibit A - Form of Series A Note Exhibit B - Form of Series B Note Exhibit C - Form of Guarantee Exhibit D - Form of Certificate for Transfers to Non-QIB Accredited Investors Exhibit E - Form of Certificate for Transfers Pursuant to Regulation S Note: This Table of Contents shall not, for any purpose, be deemed to be part of the Indenture -vi- INDENTURE dated as of May 28, 1999 among PACER INTERNATIONAL, INC., a Tennessee corporation (the "Company"), as issuer, each of the Guarantors named ------- herein, as Guarantors, and WILMINGTON TRUST COMPANY, as trustee (the "Trustee"). ------- The Company has duly authorized the creation of an issue of 11 3/4% Senior Subordinated Notes due 2007 and, when and if issued as provided in the Registration Rights Agreement, Series B Senior Subordinated Notes due 2007, and, to provide therefor, the Company has duly authorized the execution and delivery of this Indenture. All things necessary to make the Securities, when duly issued and executed by the Company and authenticated and delivered hereunder, the valid and binding obligations of the Company and to make this Indenture a valid and binding agreement of the Company have been done. Each party hereto agrees as follows for the benefit of each other party and for the equal and ratable benefit of the Holders of the Securities: ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions. ----------- "Acceleration Notice" has the meaning set forth in Section 6.02. ------------------- "Accredited Investor" has the meaning set forth in Section 2.16(a). ------------------- "Acquired Indebtedness" means Indebtedness of a Person or any of its --------------------- Subsidiaries (1) existing at the time such Person becomes a Restricted Subsidiary of the Company or at the time it merges or consolidates with the Company or any of its Restricted Subsidiaries or (2) assumed in connection with the acquisition of assets from such Person, in each case not incurred by such Person in connection with, or in anticipation or contemplation of, such Person becoming a Restricted Subsidiary of the Company or such acquisition, merger or consolidation. "Affiliate" means, with respect to any specified Person, any other --------- Person who directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person. The term "control" ------- -2- means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative of the foregoing. ----------- ---------- "Affiliate Transaction" has the meaning set forth in Section 4.12. --------------------- "Agent" means any Registrar, Paying Agent or co-Registrar. ----- "Agent Members" has the meaning set forth in Section 2.15. ------------- "Apollo" means Apollo Management, L.P. and its Affiliates. ------ "Applicable Premium" means, with respect to a Security, the greater of ------------------ (i) 1.0% of the then outstanding principal amount of such Security and (ii)(a) the present value of all remaining required interest and principal payments due on such Security and all premium payments relating thereto assuming a redemption date of June 1, 2003, computed using a discount rate equal to the Treasury Rate plus 50 basis points, minus (b) the then outstanding principal amount of such Security minus (c) accrued interest paid on the date of redemption. "Asset Acquisition" means: ----------------- (1) an Investment by the Company or any Restricted Subsidiary of the Company in any other Person pursuant to which such Person shall become a Restricted Subsidiary of the Company or any Restricted Subsidiary of the Company, or shall be merged with or into or consolidated with the Company or any Restricted Subsidiary of the Company; or (2) the acquisition by the Company or any Restricted Subsidiary of the Company of the assets of any Person (other than a Restricted Subsidiary of the Company) which constitute all or substantially all of the assets of such Person or comprise any division or line of business of such Person or any other properties or assets of such Person other than in the ordinary course of business. "Asset Sale" means any direct or indirect sale, issuance, conveyance, ---------- transfer, lease (other than operating leases entered into in the ordinary course of business), assignment or -3- other transfer for value by the Company or any of its Restricted Subsidiaries (including any Sale and Leaseback Transaction) to any Person other than the Company or a Wholly Owned Restricted Subsidiary of the Company of (a) any Capital Stock of any Restricted Subsidiary of the Company; or (b) any other property or assets of the Company or any Restricted Subsidiary of the Company other than in the ordinary course of business; provided, however, that Asset -------- ------- Sales shall not include: (1) a transaction or series of related transactions for which the Company or its Restricted Subsidiaries receive aggregate consideration of less than $1.5 million; (2) the sale or exchange of equipment in connection with the purchase or other acquisition of other equipment, in each case used in the business of the Company and its Restricted Subsidiaries; (3) the sale, lease, conveyance, disposition or other transfer of all or substantially all of the assets of the Company as permitted under Section 5.01; (4) disposals of equipment in connection with the reinvestment in or the replacement of its equipment and disposals of worn-out or obsolete equipment, in each case in the ordinary course of business of the Company or its Restricted Subsidiaries; (5) the sale of accounts receivable pursuant to a Qualified Receivables Transaction; (6) any Restricted Payment permitted by Section 4.03 or that constitutes a Permitted Investment; and (7) one or more Sale and Leaseback Transactions for which the Company or any Restricted Subsidiary of the Company receives aggregate consideration from all such Sale and Leaseback Transactions of less than $15.0 million. "Bankruptcy Law" means Title 11, U.S. Code, or any similar federal, -------------- state or foreign law for the relief of debtors. "Board of Directors" means, as to any Person, the board of directors ------------------ of such Person or any duly authorized committee thereof. -4- "Board Resolution" means, with respect to any Person, a copy of a ---------------- resolution certified by the Secretary or an Assistant Secretary of such Person to have been duly adopted by the Board of Directors of such Person and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means any day other than a Saturday, Sunday or any ------------ other day on which banking institutions in The City of New York or The State of Delaware are required or authorized by law or other governmental action to be closed. "Capitalized Lease Obligation" means, as to any Person, the ---------------------------- obligations of such Person under a lease that are required to be classified and accounted for as capital lease obligations under GAAP and, for purposes of this definition, the amount of such obligations at any date shall be the capitalized amount of such obligations at such date, determined in accordance with GAAP. "Capital Stock" means: ------------- (1) with respect to any Person that is a corporation, any and all shares, interests, participations or other equivalents (however designated and whether or not voting) of corporate stock, including each class of Common Stock and Preferred Stock of such Person or options to purchase the same; and (2) with respect to any Person that is not a corporation, any and all partnership or other equity interests of such Person. "Cash Equivalents" means: ---------------- (1) marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition thereof; (2) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either -5- Standard & Poor's ("S&P") or Moody's Investors Service, Inc. ("Moody's"); --- ------- (3) commercial paper maturing no more than one year from the date of creation thereof and, at the time of acquisition, having a rating of at least A-1 from S&P or at least P-1 from Moody's; (4) certificates of deposit or bankers' acceptances maturing within one year from the date of acquisition thereof issued by any bank organized under the laws of the United States of America or any state thereof or the District of Columbia or any U.S. branch of a foreign bank having at the date of acquisition thereof combined capital and surplus of not less than $250.0 million; (5) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (1) above entered into with any bank meeting the qualifications specified in clause (4) above; and (6) investments in money market funds which invest substantially all their assets in securities of the types described in clauses (1) through (5) above. "Change of Control" means the occurrence of one or more of the ----------------- following events: (1) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company to any Person or group of related Persons for purposes of Section 13(d) of the Exchange Act (a "Group"), together with ----- any Affiliates thereof (whether or not otherwise in compliance with the provisions of this Indenture), other than the Permitted Holders; (2) the approval by the holders of Capital Stock of the Company of any plan or proposal for the liquidation or dissolution of the Company (whether or not otherwise in compliance with the provisions of this Indenture); (3) any Person or Group (other than the Permitted Holders) shall become the owner, directly or indirectly, beneficially or of record, of shares representing more than 50% of the aggregate ordinary voting power repre- -6- sented by the issued and outstanding Capital Stock of the Company; or (4) the replacement of a majority of the Board of Directors of the Company over a two-year period from the directors who constituted the Board of Directors of the Company at the beginning of such period, and such replacement shall not have been approved by the Permitted Holders or a vote of at least a majority of the Board of Directors of the Company then still in office who either were members of such Board of Directors at the beginning of such period or whose election as a member of such Board of Directors was previously so approved. "Change of Control Date" has the meaning set forth in Section 4.15. ---------------------- "Change of Control Offer" has the meaning set forth in Section 4.15. ----------------------- "Change of Control Payment Date" has the meaning set forth in Section ------------------------------ 4.15. "Commission" means the Securities and Exchange Commission. ---------- "Common Stock" of any Person means any and all shares, interests or ------------ other participations in, and other equivalents (however designated and whether voting or non-voting) of such Person's common stock, whether outstanding on the Issue Date or issued after the Issue Date, and includes, without limitation, all series and classes of such common stock. "Company" means the party named as such in this Indenture until a ------- successor replaces it pursuant to this Indenture and thereafter shall mean such successor corporation. "Consolidated EBITDA" means, with respect to any Person, for any ------------------- period, the sum (without duplication) of: (1) Consolidated Net Income; and (2) to the extent Consolidated Net Income has been reduced thereby, (a) all income taxes of such Person and its Restricted Subsidiaries paid or accrued in accordance with GAAP for such period (other than income taxes -7- attributable to extraordinary, unusual or nonrecurring gains or losses), (b) Consolidated Interest Expense, and (c) Consolidated Non-cash Charges less any non-cash items ---- increasing Consolidated Net Income for such period, all as determined on a consolidated basis for such Person and its Restricted Subsidiaries in accordance with GAAP as applicable. "Consolidated Fixed Charge Coverage Ratio" means, with respect to any ---------------------------------------- Person, the ratio of Consolidated EBITDA of such Person during the four full fiscal quarters (the "Four Quarter Period") ending on or prior to the date of ------------------- the transaction giving rise to the need to calculate the Consolidated Fixed Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of ---------------- such Person for the Four Quarter Period. In addition to and without limitation of the foregoing, for purposes of this definition, "Consolidated EBITDA" and "Consolidated Fixed Charges" shall be calculated after giving effect on a pro --- forma basis (consistent with the provisions below) for the period of such - ----- calculation to: (1) the incurrence or repayment of any Indebtedness of such Person or any of its Restricted Subsidiaries (and the application of the proceeds thereof) giving rise to the need to make such calculation and any incurrence or repayment of other Indebtedness (and the application of the proceeds thereof), other than the incurrence or repayment of Indebtedness in the ordinary course of business for working capital purposes pursuant to working capital facilities, occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such incurrence or repayment, as the case may be (and the application of the proceeds thereof), occurred on the first day of the Four Quarter Period; (2) any asset sales or other dispositions or Asset Acquisitions (including, without limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of such Person or one of its Restricted Subsidiaries (including any Person who becomes a Restricted Subsidiary as a result of the Asset Acquisition) incurring, assuming or otherwise being liable for Acquired In- -8- debtedness and also including any Consolidated EBITDA (including any pro --- forma expense and cost reductions, adjustments and other operating ----- improvements or synergies both achieved by such Person during such period and to be achieved by such Person and with respect to the acquired assets, all as determined in good faith by a responsible financial or accounting officer of the Company and as reported on or otherwise confirmed, consistent with applicable standards of the American Institute of Certified Public Accountants, to the Company by an independent accounting firm) attributable to the assets which are the subject of the Asset Acquisition or asset sale or other disposition during the Four Quarter Period) occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such asset sale or other disposition or Asset Acquisition (including the incurrence, assumption or liability for any such Acquired Indebtedness) occurred on the first day of the Four Quarter Period. If such Person or any of its Restricted Subsidiaries directly or indirectly guarantees Indebtedness of a third Person, the preceding sentence shall give effect to the incurrence of such guaranteed Indebtedness as if such Person or any Restricted Subsidiary of such Person had directly incurred or otherwise assumed such guaranteed Indebtedness; and (3) all adjustments used in connection with the calculation of adjusted EBITDA as set forth in the Offering Memorandum dated May 24, 1999 relating to the issuance of the Securities on the Issue Date to the extent such adjustments are not fully reflected in such Four Quarter Period and continue to be applicable. Furthermore, in calculating "Consolidated Fixed Charges" for purposes of determining the denominator (but not the numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1) interest on outstanding Indebtedness determined on a fluctuating basis as of the Transaction Date and which will continue to be so determined thereafter shall be deemed to have accrued at a fixed rate per annum equal to the rate of interest on such Indebtedness in effect on the Transaction Date; and (2) notwithstanding clause (1) above, interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by agreements relating to -9- Interest Swap Obligations, shall be deemed to accrue at the rate per annum resulting after giving effect to the operation of such agreements. "Consolidated Fixed Charges" means, with respect to any Person for any -------------------------- period, the sum, without duplication, of: (1) Consolidated Interest Expense (excluding amortization or write- off of deferred financing costs), plus (2) the product of (x) the amount of all dividend payments on any series of Preferred Stock of such Person (other than dividends paid in Qualified Capital Stock) paid, accrued or scheduled to be paid or accrued during such period times (y) a fraction, the numerator of which is one and the denominator of which is one minus the then current effective consolidated federal, state and local tax rate of such Person, expressed as a decimal. "Consolidated Interest Expense" means, with respect to any Person for ----------------------------- any period, the sum of, without duplication: (1) the aggregate of the interest expense of such Person and its Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP, including without limitation, (a) any amortization of debt discount and amortization or write-off of deferred financing costs (including the amortization of costs relating to interest rate caps or other similar agreements), (b) the net costs under Interest Swap Obligations, (c) all capitalized interest and (d) the interest portion of any deferred payment obligation; and (2) the interest component of Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such Person and its Restricted Subsidiaries during such period as determined on a consolidated basis in accordance with GAAP, minus interest income for such period. "Consolidated Net Income" means, with respect to any Person for any ----------------------- period, the aggregate net income (or loss) of such Person and its Restricted Subsidiaries for such period on a consolidated basis, determined in accordance with GAAP; provided that there shall be excluded therefrom: -------- (1) after-tax gains or losses from Asset Sales (without regard to the $1.5 million limitation set forth -10- in the definition thereof) or abandonments or reserves relating thereto; (2) after-tax items classified as extraordinary or nonrecurring gains or losses; (3) the net income of any Person acquired in a "pooling of interests" transaction accrued prior to the date it becomes a Restricted Subsidiary of the referent Person or is merged or consolidated with the referent Person or any Restricted Subsidiary of the referent Person; (4) the net income (but not loss) of any Restricted Subsidiary of the referent Person to the extent that the declaration of dividends or similar distributions by that Restricted Subsidiary of that income is prohibited by contract, operation of law or otherwise; (5) the net income of any Person, other than a Restricted Subsidiary of the referent Person, except to the extent of cash dividends or distributions paid to the referent Person or to a Wholly Owned Restricted Subsidiary of the referent Person by such Person; (6) income or loss attributable to discontinued operations (including, without limitation, operations disposed of during such period whether or not such operations were classified as discontinued); and (7) in the case of a successor to the referent Person by consolidation or merger or as a transferee of the referent Person's assets, any earnings of the successor corporation prior to such consolidation, merger or transfer of assets. "Consolidated Non-cash Charges" means, with respect to any Person for ----------------------------- any period, the aggregate depreciation, amortization and other non-cash expenses of such Person and its Restricted Subsidiaries reducing Consolidated Net Income of such Person and its Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP. "Covenant Defeasance" has the meaning set forth in Section 8.02. ------------------- "Credit Agreement" means the Credit Agreement dated as of the Issue ---------------- Date, among the Company, the lenders party thereto in their capacities as lenders thereunder and Bankers -11- Trust Company, as administrative agent, together with the related documents thereto (including, without limitation, any guarantee agreements and security documents), in each case as such agreements may be amended (including any amendment and restatement thereof), supplemented or otherwise modified from time to time, including any agreement extending the maturity of, refinancing, replacing or otherwise restructuring (including increasing the amount of available borrowings thereunder or adding Restricted Subsidiaries of the Company as additional borrowers or guarantors thereunder) all or any portion of the Indebtedness under such agreement or any successor or replacement agreement and whether by the same or any other agent, lender or group of lenders. "Currency Agreement" means any foreign exchange contract, currency ------------------ swap agreement or other similar agreement or arrangement designed to protect the Company or any Restricted Subsidiary of the Company against fluctuations in currency values. "Custodian" means any receiver, trustee, assignee, liquidator, --------- sequestrator or similar official under any Bankruptcy Law. "Default" means an event or condition the occurrence of which is, or ------- with the lapse of time or the giving of notice or both would be, an Event of Default. "Default Notice" has the meaning set forth in Section 10.02. -------------- "Depository" shall mean The Depository Trust Company, New York, New ---------- York, or a successor thereto registered under the Exchange Act or other applicable statute or regulation. "Designated Senior Debt" means: ---------------------- (1) Indebtedness under or in respect of the Credit Agreement; and (2) any other Indebtedness constituting Senior Debt which, at the time of determination, has an aggregate principal amount of at least $25.0 million and is specifically designated in the instrument evidencing such Senior Debt as "Designated Senior Debt" by the Company. "Disqualified Capital Stock" means that portion of any Capital Stock -------------------------- which, by its terms (or by the terms of any -12- security into which it is convertible or for which it is exchangeable at the option of the holder thereof), or upon the happening of any event (other than an event which would constitute a Change of Control or Asset Sale), matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the sole option of the holder thereof (except, in each case, upon the occurrence of a Change of Control or Asset Sale), on or prior to the final maturity date of the Securities; provided that the Pacer Preferred Stock -------- and any Capital Stock having substantially the same terms issued in exchange therefor shall not be deemed to be Disqualified Capital Stock. "Domestic Restricted Subsidiary" means a Restricted Subsidiary ------------------------------ incorporated or otherwise organized or existing under the laws of the United States, any state thereof or any territory or possession of the United States. "Equity Investment" means the equity investment (in the form of the ----------------- issuance, rollover and exchange of Pacer International, Inc.'s and Pacer Logistics, Inc.'s equity securities) in the Company of approximately $133.0 million. "Equity Offering" means a public or private offering of Qualified --------------- Capital Stock (other than public offerings with respect to the Company's Common Stock on Form S-8) of the Company for aggregate net cash proceeds to the Company of at least $20.0 million. "Event of Default" has the meaning set forth in Section 6.01. ---------------- "Exchange Act" means the Securities Exchange Act of 1934, as amended, ------------ or any successor statute or statutes thereto. "Exchange Notes" means the 11 3/4% Series B Senior Subordinated Notes -------------- due 2007 (the terms of which are identical to the Initial Notes except that, unless any Exchange Notes shall be issued as Private Exchange Notes (as defined in the Registration Rights Agreement), the Exchange Notes shall be registered under the Securities Act, and shall not contain the restrictive legend on the face of the form of the Initial Notes), to be issued in exchange for the Initial Notes pursuant to the registered Exchange Offer and a Private Exchange (as defined in the Registration Rights Agreement). "Exchange Offer" means the registration by the Company under the -------------- Securities Act pursuant to a registration state- -13- ment of the offer by the Company to each Holder of the Initial Notes to exchange all the Initial Notes held by such Holder for the Exchange Notes in an aggregate principal amount equal to the aggregate principal amount of the Initial Notes held by such Holder, all in accordance with the terms and conditions of the Registration Rights Agreement. "fair market value" means, with respect to any asset or property, the ----------------- price which could be negotiated in an arm's-length, free market transaction, for cash, between a willing seller and a willing and able buyer, neither of whom is under undue pressure or compulsion to complete the transaction. Fair market value shall be determined by the Board of Directors of the Company acting reasonably and in good faith and shall be evidenced by a Board Resolution of the Board of Directors of the Company delivered to the Trustee. "GAAP" means generally accepted accounting principles set forth in the ---- opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States, which are in effect as of the Issue Date. "Global Security" shall mean a Security which is executed by the --------------- Company and authenticated and delivered by the Trustee to the Depository or pursuant to the Depository's instruction, all in accordance with this Indenture and pursuant to a written order, which shall be registered in the name of the Depository or its nominee. "Guarantees" means the guarantees of the Securities of the Company by ---------- the Guarantors pursuant to this Indenture. "Guarantor" means: --------- (1) each of the Company's Domestic Restricted Subsidiaries on the Issue Date; and (2) each of the Company's Domestic Restricted Subsidiaries that in the future executes a supplemental indenture in which such Restricted Subsidiary agrees to be bound by the terms of this Indenture as a Guarantor; provided that any Person constituting a Guarantor as described above shall cease - -------- to constitute a Guarantor when its respective -14- Guarantee is released in accordance with the terms of this Indenture. "Guarantor Senior Debt" means, with respect to any Guarantor, the --------------------- principal of, premium, if any, and interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on any Indebtedness of a Guarantor, whether outstanding on the Issue Date or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Guarantee of such Guarantor. Without limiting the generality of the foregoing, "Guarantor Senior Debt" shall also include the principal of, premium, if any, interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on, and all other amounts owing by any Guarantor in respect of, (x) all monetary obligations of every nature of a Guarantor under, or with respect to, the Credit Agreement, including, without limitation, obligations to pay principal and interest, reimbursement obligations under letters of credit, fees, expenses and indemnities (including guarantees thereof); (y) all Interest Swap Obligations (including guarantees thereof); and (z) all obligations under Currency Agreements (including guarantees thereof), in each case whether outstanding on the Issue Date or thereafter incurred. Notwithstanding the foregoing, "Guarantor Senior Debt" shall not include: (1) any Indebtedness of such Guarantor to a Restricted Subsidiary of such Guarantor; (2) Indebtedness to, or guaranteed on behalf of, any director, officer or employee of such Guarantor or any Restricted Subsidiary of such Guarantor (including, without limitation, amounts owed for compensation); -15- (3) Indebtedness to trade creditors and other amounts incurred in connection with obtaining goods, materials or services; (4) Indebtedness represented by Disqualified Capital Stock; (5) any liability for federal, state, local or other taxes owed or owing by such Guarantor; (6) that portion of any Indebtedness incurred in violation of the provisions set forth under Section 4.04 (but, as to any such obligation, no such violation shall be deemed to exist for purposes of this clause (6) if the holder(s) of such obligation or their representative shall have received an Officers' Certificate of the Company to the effect that the incurrence of such Indebtedness does not (or, in the case of revolving credit Indebtedness, that the incurrence of the entire committed amount thereof at the date on which the initial borrowing thereunder is made would not) violate such provisions of this Indenture); (7) any Indebtedness which, when incurred and without respect to any election under Section 1111(b) of Title 11, United States Code, is without recourse to the Company or any Guarantor; and (8) any Indebtedness which is, by its express terms, subordinated in right of payment to any other Indebtedness of such Guarantor. "incur" has the meaning set forth in Section 4.04. ----- "Indebtedness" means with respect to any Person, without duplication: ------------ (1) all Obligations of such Person for borrowed money, including, without limitation, Senior Debt; (2) all Obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (3) all Capitalized Lease Obligations of such Person; (4) all Obligations of such Person issued or assumed as the deferred purchase price of property, all condi- -16- tional sale obligations and all Obligations under any title retention agreement (but excluding trade accounts payable and other accrued liabilities arising in the ordinary course of business); (5) all Obligations for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction; (6) guarantees and other contingent Obligations in respect of Indebtedness referred to in clauses (1) through (5) above and clause (8) below; (7) all Obligations of any other Person of the type referred to in clauses (1) through (6) which are secured by any Lien on any property or asset of such Person, the amount of such Obligation being deemed to be the lesser of the fair market value of such property or asset or the amount of the Obligation so secured; (8) all Obligations under currency agreements and interest swap agreements of such Person; and (9) all Disqualified Capital Stock issued by such Person with the amount of Indebtedness represented by such Disqualified Capital Stock being equal to the greater of its voluntary or involuntary liquidation preference and its maximum fixed repurchase price, but excluding accrued dividends, if any. For purposes hereof, the "maximum fixed repurchase price" of any Disqualified Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Capital Stock as if such Disqualified Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to this Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Capital Stock, such fair market value shall be determined reasonably and in good faith by the Board of Directors of the issuer of such Disqualified Capital Stock. For purposes of Section 4.04, in determining the principal amount of any Indebtedness to be incurred by the Company or a Guarantor or which is outstanding at any date, the principal amount of any Indebtedness which provides that an amount less than the principal amount thereof shall be due upon any declaration of acceleration thereof shall be the accreted value thereof at the date of determination. -17- "Indenture" means this Indenture, as amended or supplemented from time --------- to time in accordance with the terms hereof. "Independent Financial Advisor" means a firm: ----------------------------- (1) which does not, and whose directors, officers and employees or Affiliates do not, have a direct or indirect financial interest in the Company; and (2) which, in the judgment of the Board of Directors of the Company, is otherwise independent and qualified to perform the task for which it is to be engaged. "Initial Notes" means the 11 3/4% Series A Senior Subordinated Notes ------------- due 2007 of the Company issued on the Issue Date and authenticated and delivered under this Indenture pursuant to Section 2.02 of this Indenture and any other notes (other than Exchange Notes) issued after the Issue Date in accordance with clause (iii) of the fourth paragraph of Section 2.02. "Interest Payment Date" means the stated maturity of an installment of --------------------- interest on the Securities. "Interest Swap Obligations" means the obligations of any Person ------------------------- pursuant to any arrangement with any other Person, whereby, directly or indirectly, such Person is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made by such other Person calculated by applying a fixed or a floating rate of interest on the same notional amount and shall include, without limitation, interest rate swaps, caps, floors, collars and similar agreements. "Investment" means, with respect to any Person, any direct or indirect ---------- loan or other extension of credit (including, without limitation, a guarantee) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition by such Person of any Capital Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by, any Person. "Investment" shall exclude extensions of trade credit by the Company and its Restricted Subsidiaries on commercially reasonable terms in accordance with normal trade practices of the -18- Company or such Restricted Subsidiary, as the case may be. For purposes of Section 4.03: (1) "Investment" shall include and be valued at the fair market value of the net assets of any Restricted Subsidiary of the Company at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary of the Company and shall exclude the fair market value of the net assets of any Unrestricted Subsidiary of the Company at the time that such Unrestricted Subsidiary is designated a Restricted Subsidiary of the Company; and (2) the amount of any Investment shall be the original cost of such Investment plus the cost of all additional Investments by the Company or any of its Restricted Subsidiaries, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment, reduced by the payment of dividends or distributions in connection with such Investment or any other amounts received in respect of such Investment; provided that no such payment of dividends or -------- distributions or receipt of any such other amounts shall reduce the amount of any Investment if such payment of dividends or distributions or receipt of any such amounts would be included in Consolidated Net Income. If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any Common Stock of any direct or indirect Restricted Subsidiary of the Company such that, after giving effect to any such sale or disposition, the Company no longer owns, directly or indirectly, 100.0% of the outstanding Common Stock of such Restricted Subsidiary, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Common Stock of such Restricted Subsidiary not sold or disposed of. "Issue Date" means May 28, 1999, the date of original issuance of the ---------- Initial Notes. "Legal Defeasance" has the meaning set forth in Section 8.02. ---------------- "Lien" means any lien, mortgage, deed of trust, pledge, security ---- interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof and any agreement to give any security interest). -19- "Management Agreement" means the Management Agreement dated as of the -------------------- Issue Date between the Company and Apollo. "Maturity Date" means June 1, 2007. ------------- "Net Cash Proceeds" means, with respect to any Asset Sale, the ----------------- proceeds in the form of cash or Cash Equivalents including payments in respect of deferred payment obligations when received in the form of cash or Cash Equivalents (other than the portion of any such deferred payment constituting interest) received by the Company or any of its Restricted Subsidiaries from such Asset Sale net of: (1) reasonable out-of-pocket expenses and fees relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees and sales commissions); (2) taxes paid or payable after taking into account any reduction in consolidated tax liability due to available tax credits or deductions and any tax sharing arrangements; (3) repayment of Indebtedness that is required to be repaid in connection with such Asset Sale; and (4) appropriate amounts to be provided by the Company or any Restricted Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against any liabilities associated with such Asset Sale and retained by the Company or any Restricted Subsidiary, as the case may be, after such Asset Sale, including, without limitation, pension and other post- employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale. "Net Proceeds Offer" has the meaning set forth in Section 4.16. ------------------ "Net Proceeds Offer Amount" has the meaning set forth in Section 4.16. ------------------------- "Net Proceeds Offer Payment Date" has the meaning set forth in Section ------------------------------- 4.16. "Net Proceeds Offer Trigger Date" has the meaning set forth in Section ------------------------------- 4.16. -20- "Non-payment Default" has the meaning set forth in Section 10.02. ------------------- "Obligations" means all obligations for principal, premium, interest, ----------- penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Offering" means the offering of the Initial Notes. -------- "Officer" means, with respect to any Person, the Chairman of the ------- Board, the Chief Executive Officer, the President, any Vice President, the Chief Financial Officer, the Controller, or the Secretary of such Person. "Officers' Certificate" means a certificate signed by two Officers of --------------------- the Company or of a Guarantor, as applicable. "Opinion of Counsel" means a written opinion from legal counsel, which ------------------ opinion and counsel are reasonably acceptable to the Trustee. "Option Plan" means the Company's 1999 Stock Option Plan with respect ----------- to an aggregate of no more than 1.8 million shares of the Company's Common Stock and Pacer Preferred Stock. "Pacer Preferred Stock" means the Perpetual Participating Exchangeable --------------------- Preferred Stock of Pacer Logistics, Inc. as in effect on the Issue Date. "Paying Agent" has the meaning set forth in Section 2.03. ------------ "Payment Blockage Period" has the meaning set forth in Section 10.02. ----------------------- "Payment Default" has the meaning set forth in Section 10.02. --------------- "Permitted Holders" means (i) Apollo and (ii) members of senior ----------------- management of the Company and its Subsidiaries. "Permitted Indebtedness" means, without duplication, each of the ---------------------- following: (1) Indebtedness under the Securities and the Guarantees in an aggregate principal amount not to exceed $150.0 million; -21- (2) Indebtedness incurred pursuant to the Credit Agreement in an aggregate principal amount at any time outstanding not to exceed $235.0 million less the amount of all repayments of term debt and permanent commitment reductions under the Credit Agreement with Net Cash Proceeds of Asset Sales applied thereto as required by Section 4.16; provided, that the -------- aggregate principal amount of Indebtedness permitted to be incurred from time to time under this clause (2) shall be reduced dollar for dollar by the amount of any Indebtedness then outstanding under clause (12) below; (3) other Indebtedness of the Company and its Restricted Subsidiaries outstanding on the Issue Date reduced by the amount of any scheduled amortization payments or mandatory prepayments when actually paid or permanent reductions therein; (4) Interest Swap Obligations of the Company or any Restricted Subsidiaries of the Company covering Indebtedness of the Company or any of its Restricted Subsidiaries and Interest Swap Obligations of any Restricted Subsidiary of the Company covering Indebtedness of the Company or such Restricted Subsidiary; provided, however, that such Interest Swap -------- ------- Obligations are entered into to protect the Company and its Restricted Subsidiaries from fluctuations in interest rates on Indebtedness incurred in accordance with this Indenture to the extent the notional principal amount of such Interest Swap Obligation does not exceed the principal amount of the Indebtedness to which such Interest Swap Obligation relates; (5) Indebtedness under Currency Agreements; provided that in the case -------- of Currency Agreements which relate to Indebtedness, such Currency Agreements do not increase the Indebtedness of the Company and its Restricted Subsidiaries outstanding other than as a result of fluctuations in foreign currency exchange rates or by reason of fees, indemnities and compensation payable thereunder; (6) Indebtedness of a Restricted Subsidiary of the Company to the Company or to a Wholly Owned Restricted Subsidiary of the Company for so long as such Indebtedness is held by the Company, a Wholly Owned Restricted Subsidiary of the Company or the lenders or collateral agent under the Credit Agreement, in each case subject to no Lien held by a Person other than the Company, a Wholly Owned Restricted Subsidiary of the Company or the lenders or -22- collateral agent under the Credit Agreement; provided that if as of any -------- date any Person other than the Company, a Wholly Owned Restricted Subsidiary of the Company or the lenders or collateral agent under the Credit Agreement owns or holds any such Indebtedness or holds a Lien in respect of such Indebtedness, such date shall be deemed the incurrence of Indebtedness not constituting Permitted Indebtedness by the issuer of such Indebtedness; (7) Indebtedness of the Company to a Wholly Owned Restricted Subsidiary of the Company for so long as such Indebtedness is held by a Wholly Owned Restricted Subsidiary of the Company or the lenders or the collateral agent under the Credit Agreement and is subject to no Lien other than a Lien in favor of the lenders or collateral agent under the Credit Agreement; provided that (a) any Indebtedness of the Company to any Wholly -------- Owned Restricted Subsidiary of the Company is unsecured and subordinated, pursuant to a written agreement, to the Company's obligations under this Indenture and the Securities and (b) if as of any date any Person other than a Wholly Owned Restricted Subsidiary of the Company or the lenders or collateral agent under the Credit Agreement owns or holds any such Indebtedness or any Person holds a Lien (other than a Lien in favor of the lenders or collateral agent under the Credit Agreement) in respect of such Indebtedness, such date shall be deemed the incurrence of Indebtedness not constituting Permitted Indebtedness by the Company; (8) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; provided, however, that such -------- ------- Indebtedness is extinguished within two Business Days of incurrence; (9) Indebtedness of the Company or any of its Restricted Subsidiaries in respect of performance bonds, bankers' acceptances, workers' compensation claims, surety or appeal bonds, payment obligations in connection with self-insurance or similar obligations, and bank overdrafts (and letters of credit in respect thereof); (10) Indebtedness represented by Capitalized Lease Obligations, Purchase Money Indebtedness or Acquired Indebtedness of the Company and its Restricted Subsidiaries incurred in the ordinary course of business not to exceed -23- $25.0 million at any one time outstanding; provided that all or a portion -------- of the $25.0 million permitted to be incurred under this clause (10) may, at the option of the Company, be incurred under the Credit Agreement or pursuant to clause (14) below (in addition to the $25.0 million set forth therein) instead of pursuant to Capitalized Lease Obligations, Purchase Money Indebtedness or Acquired Indebtedness; (11) Indebtedness arising from agreements of the Company or a Restricted Subsidiary of the Company providing for indemnification, adjustment of purchase price or similar obligations, in each case, incurred or assumed in connection with the disposition of any business, assets or a Subsidiary, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or a Subsidiary for the purpose of financing such acquisition; provided, however, that: -------- ------- (a) such Indebtedness is not reflected on the balance sheet of the Company or any Restricted Subsidiary of the Company (contingent obligations referred to in a footnote to financial statements and not otherwise reflected on the balance sheet will not be deemed to be reflected on such balance sheet for purposes of this clause (a)); and (b) the maximum assumable liability in respect of all such Indebtedness shall at no time exceed the gross proceeds including non- cash proceeds (the fair market value of such non-cash proceeds being measured at the time they are received and without giving effect to any subsequent changes in value) actually received by the Company and its Restricted Subsidiaries in connection with such disposition; (12) the incurrence by a Receivables Subsidiary of Indebtedness in a Qualified Receivables Transaction that is without recourse to the Company or to any Restricted Subsidiary of the Company or their assets (other than such Receivables Subsidiary and its assets), and is not guaranteed by any such Person; provided that any outstanding Indebtedness incurred under this -------- clause (12) shall reduce (for so long as, and to the extent that, the Indebtedness referred to in this clause (12) remains outstanding) the aggregate amount permitted to be incurred under clause (2) above to the extent set forth therein; -24- (13) Refinancing Indebtedness; and (14) additional Indebtedness of the Company and its Restricted Subsidiaries in an aggregate principal amount not to exceed $25.0 million at any one time outstanding (which amount may, but need not, be incurred in whole or in part under the Credit Agreement) plus up to an additional $25.0 million as contemplated by, and to the extent not incurred under, clause (10) above . For purposes of determining compliance with Section 4.04, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Indebtedness described in clauses (1) through (14) above or is entitled to be incurred pursuant to the Consolidated Fixed Charge Coverage Ratio provisions of such Section, the Company shall, in its sole discretion, classify (or later reclassify) such item of Indebtedness in any manner that complies with such Section. Accrual of interest, accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the payment of dividends on Disqualified Capital Stock in the form of additional shares of the same class of Disqualified Capital Stock will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Capital Stock for purposes of Section 4.04. "Permitted Investments" means: --------------------- (1) Investments by the Company or any Restricted Subsidiary of the Company in any Person that is or will become immediately after such Investment a Wholly Owned Restricted Subsidiary of the Company or that will merge or consolidate into the Company or a Wholly Owned Restricted Subsidiary of the Company; provided that such Wholly Owned Restricted -------- Subsidiary of the Company is not restricted from making dividends or similar distributions by contract, operation of law or otherwise; (2) Investments in the Company by any Restricted Subsidiary of the Company; provided that any Indebtedness evidencing such Investment is -------- unsecured and subordinated, pursuant to a written agreement, to the Company's obligations under the Securities and this Indenture; (3) Investments in cash and Cash Equivalents; -25- (4) loans and advances to employees and officers of the Company and its Restricted Subsidiaries in the ordinary course of business for bona fide business purposes not to exceed $4.0 million at any one time outstanding; (5) Currency Agreements and Interest Swap Obligations entered into in the ordinary course of the Company's or its Restricted Subsidiaries' businesses and otherwise in compliance with this Indenture; (6) additional Investments (including joint ventures) not to exceed $25.0 million at any one time outstanding; (7) Investments in securities of trade creditors or customers received (a) pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers or (b) in settlement of delinquent obligations of, and other disputes with, customers, suppliers and others, in each case arising in the ordinary course of business or otherwise in satisfaction of a judgment; (8) Investments (a) made by the Company or its Restricted Subsidiaries as a result of consideration received in connection with an Asset Sale made in compliance with Section 4.16; or (b) acquired in exchange for, or out of the proceeds of, a substantially concurrent offering of Capital Stock (other than Disqualified Capital Stock) of the Company (which proceeds of any such offering of Capital Stock of the Company shall not have been, and shall not be, included in clause (3)(b) of the first paragraph of Section 4.03); (9) Investments of a Person or any of its Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of the Company or at the time such Person merges or consolidates with the Company or any of its Restricted Subsidiaries, in either case in compliance with this Indenture; provided that such Investments were not made by such Person in connection -------- with, or in anticipation or contemplation of, such Person becoming a Restricted Subsidiary of the Company or such merger or consolidation; and (10) Investments in the Securities or Pacer Preferred Stock. -26- "Permitted Liens" means the following types of Liens: --------------- (1) Liens for taxes, assessments or governmental charges or claims either (a) not delinquent or (b) contested in good faith by appropriate proceedings and as to which the Company or its Restricted Subsidiaries shall have set aside on its books such reserves as may be required pursuant to GAAP; (2) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen, customs and revenue authorities and other Liens imposed by law incurred in the ordinary course of business for sums not yet delinquent or being contested in good faith, if such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made in respect thereof; (3) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, including any Lien securing letters of credit issued in the ordinary course of business consistent with past practice in connection therewith, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); (4) judgment Liens not giving rise to an Event of Default so long as such Lien is adequately bonded and any appropriate legal proceedings which may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which such proceedings may be initiated shall not have expired; (5) easements, rights-of-way, zoning restrictions and other similar charges or encumbrances in respect of real property not interfering in any material respect with the ordinary conduct of the business of the Company or any of its Restricted Subsidiaries; (6) any interest or title of a lessor under any Capitalized Lease Obligation; provided that such Liens do not extend to any property or asset -------- which is not leased property subject to such Capitalized Lease Obligation; -27- (7) Liens securing Indebtedness permitted pursuant to clause (10) of the definition of "Permitted Indebtedness"; provided, however, that in the -------- ------- case of Purchase Money Indebtedness (a) the Indebtedness shall not exceed the cost of such property or assets and shall not be secured by any property or assets of the Company or any Restricted Subsidiary of the Company other than the property and assets so acquired or constructed and (b) the Lien securing such Indebtedness shall be created within 180 days of such acquisition or construction or, in the case of a refinancing of any Purchase Money Indebtedness, within 180 days of such refinancing; (8) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person's obligations in respect of bankers' acceptances or similar credit transactions issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods; (9) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other property relating to such letters of credit and products and proceeds thereof; (10) Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual, or warranty requirements of the Company or any of its Restricted Subsidiaries, including rights of offset and set-off; (11) Liens securing Interest Swap Obligations which Interest Swap Obligations relate to Indebtedness that is otherwise permitted under this Indenture; (12) Liens in the ordinary course of business not exceeding $5.0 million at any one time outstanding that (a) are not incurred in connection with borrowing of money and (b) do not materially detract from the value of the property or materially impair its use; (13) Liens by reason of judgment or decree not otherwise resulting in an Event of Default; (14) Liens securing Indebtedness permitted to be incurred pursuant to clauses (12) and (14) of the definition of "Permitted Indebtedness"; -28- (15) Liens securing Indebtedness under Currency Agreements permitted under this Indenture; and (16) Liens securing Acquired Indebtedness incurred in accordance with Section 4.04 (including, without limitation, clause (10) of the definition of "Permitted Indebtedness"); provided that: -------- (a) such Liens secured such Acquired Indebtedness at the time of and prior to the incurrence of such Acquired Indebtedness by the Company or a Restricted Subsidiary of the Company and were not granted in connection with, or in anticipation of, the incurrence of such Acquired Indebtedness by the Company or a Restricted Subsidiary of the Company; and (b) such Liens do not extend to or cover any property or assets of the Company or any of its Restricted Subsidiaries other than the property or assets that secured the Acquired Indebtedness prior to the time such Indebtedness became Acquired Indebtedness of the Company or a Restricted Subsidiary of the Company and are no more favorable to the lienholders than those securing the Acquired Indebtedness prior to the incurrence of such Acquired Indebtedness by the Company or a Restricted Subsidiary of the Company. "Person" means an individual, partnership, corporation, limited ------ liability company, unincorporated organization, trust or joint venture, or a governmental agency or political subdivision thereof. "Physical Securities" has the meaning provided in Section 2.01. ------------------- Physical Securities are sometimes referred to herein as certificated Securities. "Preferred Stock" of any Person means any Capital Stock of such Person --------------- that has preferential rights to any other Capital Stock of such Person with respect to dividends or redemptions or upon liquidation. "Private Placement Legend" means the legend initially set forth on the ------------------------ Initial Notes in the form set forth in the first paragraph of Section 2.14. -29- "Purchase Money Indebtedness" means Indebtedness of the Company and --------------------------- its Restricted Subsidiaries incurred in the normal course of business for the purpose of financing all or any part of the purchase price, or the cost of installation, construction or improvement, of property or equipment and any Refinancing thereof. "QIB" means any "qualified institutional buyer" (as defined under the --- Securities Act). "Qualified Capital Stock" means any Capital Stock that is not ----------------------- Disqualified Capital Stock. "Qualified Receivables Transaction" means any transaction or series of --------------------------------- transactions that may be entered into by the Company or any of its Restricted Subsidiaries pursuant to which the Company or any of its Restricted Subsidiaries may sell, convey or otherwise transfer to (1) a Receivables Subsidiary (in the case of a transfer by the Company or any of its Restricted Subsidiaries) and (2) any other Person (in the case of a transfer by a Receivables Subsidiary), or may grant a security interest in, any accounts receivable (whether now existing or arising in the future) of the Company or any of its Restricted Subsidiaries, and any assets related thereto including, without limitation, all collateral securing such accounts receivable, all contracts and all guarantees or other obligations in respect of such accounts receivable, proceeds of such accounts receivable and other assets which are customarily transferred or in respect of which security interests are customarily granted in connection with asset securitization transactions involving accounts receivable. "Recapitalization" means the recapitalization of the Company on the ---------------- Issue Date. "Receivables Subsidiary" means a Wholly Owned Restricted Subsidiary of ---------------------- the Company that engages in no activities other than in connection with the financing of accounts receivable and that is designated by the Board of Directors of the Company (as provided below) as a Receivables Subsidiary: (1) no portion of the Indebtedness or any other Obligations (contingent or otherwise) of which (a) is guaranteed by the Company or any Restricted Subsidiary of the Company (excluding guarantees of Obligations (other than the principal of, and interest on, Indebtedness) pursuant to representations, warranties, covenants and indemnities entered into in the ordinary course of business in connec- -30- tion with a Qualified Receivables Transaction), (b) is recourse to or obligates the Company or any Restricted Subsidiary of the Company in any way other than pursuant to representations, warranties, covenants and indemnities entered into in the ordinary course of business in connection with a Qualified Receivables Transaction or (c) subjects any property or asset of the Company or any Restricted Subsidiary of the Company, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to representations, warranties, covenants and indemnities entered into in the ordinary course of business in connection with a Qualified Receivables Transaction; (2) with which neither the Company nor any Restricted Subsidiary of the Company has any material contract, agreement, arrangement or understanding other than on terms no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company, other than fees payable in the ordinary course of business in connection with servicing accounts receivable; and (3) with which neither the Company nor any Restricted Subsidiary of the Company has any obligation to maintain or preserve such Restricted Subsidiary's financial condition or cause such Restricted Subsidiary to achieve certain levels of operating results. Any such designation by the Board of Directors of the Company shall be evidenced to the Trustee by filing with the Trustee a Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions. "Record Date" means the applicable record date specified in the ----------- Securities. "Redemption Date," when used with respect to any Security to be --------------- redeemed, means the date fixed for such redemption pursuant to this Indenture and the Securities. "Redemption Price," when used with respect to any Security to be ---------------- redeemed, means the price fixed for such redemption, payable in immediately available funds, pursuant to this Indenture and the Securities. -31- "Reference Date" has the meaning set forth in Section 4.03. -------------- "Refinance" means, in respect of any security or Indebtedness, to --------- refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a security or Indebtedness in exchange or replacement for, such security or Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have correlative meanings. "Refinancing Indebtedness" means any Refinancing by the Company or any ------------------------ Restricted Subsidiary of the Company of (A) for purposes of clause (13) of the definition of Permitted Indebtedness, Indebtedness incurred or existing in accordance with Section 4.04 (other than pursuant to clause (2), (4), (5), (6), (7), (8), (9), (10), (11), (12) or (14) of the definition of Permitted Indebtedness) or (B) for any other purpose, Indebtedness incurred in accordance with Section 4.04, in each case that does not: (1) result in an increase in the aggregate principal amount of Indebtedness of such Person as of the date of such proposed Refinancing (plus the amount of any premium required to be paid under the terms of the instrument governing such Indebtedness and plus the amount of reasonable expenses incurred by the Company in connection with such Refinancing); or (2) create Indebtedness with (a) a Weighted Average Life to Maturity that is less than the Weighted Average Life to Maturity of the Indebtedness being Refinanced or (b) a final maturity earlier than the final maturity of the Indebtedness being Refinanced; provided that (x) if such Indebtedness -------- being Refinanced is Indebtedness solely of the Company, then such Refinancing Indebtedness shall be Indebtedness solely of the Company and (y) if such Indebtedness being Refinanced is subordinate or junior to the Securities, then such Refinancing Indebtedness shall be subordinate to the Securities at least to the same extent and in the same manner as the Indebtedness being Refinanced. "Registrar" has the meaning set forth in Section 2.03. --------- "Registration Rights Agreement" means the Registration Rights ----------------------------- Agreement dated as of the Issue Date by and among the Company, the Guarantors and the placement agents. -32- "Replacement Assets" has the meaning set forth in Section 4.16. ------------------ "Representative" means the indenture trustee or other trustee, agent -------------- or representative in respect of any Designated Senior Debt; provided that if, -------- and for so long as, any Designated Senior Debt lacks such a representative, then the Representative for such Designated Senior Debt shall at all times constitute the holders of a majority in outstanding principal amount of such Designated Senior Debt in respect of any Designated Senior Debt. "Responsible Officer" means, when used with respect to the Trustee, ------------------- any officer in the corporate trust office of the Trustee with direct responsibility for the administration of this Indenture or to whom any corporate trust matter is referred because of such officer's knowledge of and familiarity with the particular subject. "Restricted Payment" has the meaning set forth in Section 4.03. ------------------ "Restricted Security" has the meaning assigned to such term in Rule ------------------- 144(a)(3) under the Securities Act; provided that the Trustee shall be entitled -------- to request and conclusively rely on an Opinion of Counsel with respect to whether any Security constitutes a Restricted Security. "Restricted Subsidiary" of any Person means any Subsidiary of such --------------------- Person which at the time of determination is not an Unrestricted Subsidiary. "Sale and Leaseback Transaction" means any direct or indirect ------------------------------ arrangement with any Person or to which any such Person is a party, providing for the leasing to the Company or a Restricted Subsidiary of any property, whether owned by the Company or any Restricted Subsidiary at the Issue Date or later acquired, which has been or is to be sold or transferred by the Company or such Restricted Subsidiary to such Person or to any other Person from whom funds have been or are to be advanced by such Person on the security of such property. "Securities" means the Initial Notes, the Exchange Notes and any other ---------- notes issued after the Issue Date in accordance with clause (iii) of the fourth paragraph of Section 2.02 treated as a single class of securities, as amended or supplemented from time to time in accordance with the terms hereof, that are issued pursuant to this Indenture. -33- "Securities Act" means the Securities Act of 1933, as amended, or any -------------- successor statute or statutes thereto. "Securityholder" or "Holder" means the Person in whose name a Security -------------- ------ is registered on the Registrar's books. "Senior Debt" means the principal of, premium, if any, and interest ----------- (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on any Indebtedness of the Company, whether outstanding on the Issue Date or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Securities. Without limiting the generality of the foregoing, "Senior Debt" shall also include the principal of, premium, if any, interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on, and all other amounts owing by the Company in respect of, (x) all monetary obligations of every nature of the Company under, or with respect to, the Credit Agreement, including, without limitation, obligations to pay principal and interest, reimbursement obligations under letters of credit, fees, expenses and indemnities; (y) all Interest Swap Obligations (including guarantees thereof); and (z) all obligations under Currency Agreements (including guarantees thereof), in each case whether outstanding on the Issue Date or thereafter incurred. Notwithstanding the foregoing, "Senior Debt" shall not include: (1) any Indebtedness of the Company to a Subsidiary of the Company; (2) Indebtedness to, or guaranteed on behalf of, any director, officer or employee of the Company or any Subsidiary of the Company (including, without limitation, amounts owed for compensation); -34- (3) Indebtedness to trade creditors and other amounts incurred in connection with obtaining goods, materials or services; (4) Indebtedness represented by Disqualified Capital Stock; (5) any liability for federal, state, local or other taxes owed or owing by the Company; (6) that portion of any Indebtedness incurred in violation of Section 4.04 (but, as to any such obligation, no such violation shall be deemed to exist for purposes of this clause (6) if the holder(s) of such obligation or their representative shall have received an Officers' Certificate of the Company to the effect that the incurrence of such Indebtedness does not (or, in the case of revolving credit Indebtedness, that the incurrence of the entire committed amount thereof at the date on which the initial borrowing thereunder is made would not) violate such provisions of this Indenture); (7) Indebtedness which, when incurred and without respect to any election under Section 1111(b) of Title 11, United States Code, is without recourse to the Company; and (8) any Indebtedness which is, by its express terms, subordinated in right of payment to any other Indebtedness of the Company. "Shareholders' Agreement" means the Shareholders' Agreement dated as ----------------------- of the Issue Date among certain Affiliates of Apollo, APL Limited and APL Land Transport Services, Inc. "Significant Subsidiary" with respect to any Person, means any ---------------------- Restricted Subsidiary of such Person that satisfies the criteria for a "Significant Subsidiary" set forth in Rule 1.02(w) of Regulation S-X under the Securities Act. "Subsidiary", with respect to any Person, means: ---------- (1) any corporation of which the outstanding Capital Stock having at least a majority of the votes entitled to be cast in the election of directors under ordinary circumstances shall at the time be owned, directly or indirectly, by such Person; or -35- (2) any other Person of which at least a majority of the voting interest under ordinary circumstances is at the time, directly or indirectly, owned by such Person. "Surviving Entity" has the meaning set forth in Section 5.01. ---------------- "TIA" means the Trust Indenture act of 1939 (15 U.S.C. (S)(S) 77aaa- --- 77bbbb), as amended, as in effect on the date of the execution of this Indenture until such time as this Indenture is qualified under the TIA, and thereafter as in effect on the date on which this Indenture is qualified under the TIA, except as otherwise provided in Section 9.04. "Transactions" means the Offering, the Recapitalization, the Equity ------------ Investment and the related borrowings under the Credit Agreement. "Treasury Rate" means the rate per annum equal to the yield to ------------- maturity at the time of computation of United States Treasury securities with a constant maturity selected by the Calculation Agent (which shall initially be the Trustee) most nearly equal to the period from such date of redemption to June 1, 2003; provided, however, that if the period from such date of redemption -------- ------- to June 1, 2003 is not equal to the constant maturity of the United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the period from such date of redemption to June 1, 2003 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used. "Trustee" means the party named as such in this Indenture until a ------- successor replaces it in accordance with the provisions of this Indenture and thereafter means such successor. "Unrestricted Subsidiary" of any Person means (1) any Subsidiary of ----------------------- such Person that at the time of determination shall be or continue to be designated an Unrestricted Subsidiary by the Board of Directors of such Person in the manner provided below and (2) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary owns any -36- Capital Stock of, or owns or holds any Lien on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided that (x) the Company certifies to the Trustee in -------- an Officers' Certificate that such designation complies with Section 4.03 and (y) each Subsidiary to be so designated and each of its Subsidiaries has not at the time of designation, and does not thereafter, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to any Indebtedness pursuant to which the lender has recourse to any of the assets of the Company or any of its Restricted Subsidiaries. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary only if (x) immediately after giving effect to such designation, the Company is able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with Section 4.04 and (y) immediately before and immediately after giving effect to such designation, no Default or Event of Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "U.S. Government Obligations" means direct obligations of, and --------------------------- obligations guaranteed by, the United States of America for the payment of which the full faith and credit of the United States of America is pledged and which are not callable or redeemable at the issuer's option. "U.S. Legal Tender" means such coin or currency of the United States ----------------- of America as at the time of payment shall be legal tender for the payment of public and private debts. "Weighted Average Life to Maturity" means, when applied to any --------------------------------- Indebtedness at any date, the number of years obtained by dividing (1) the then outstanding aggregate principal amount of such Indebtedness into (2) the sum of the total of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) which will elapse between such date and the making of such payment. "Wholly Owned Restricted Subsidiary" of any Person means any ---------------------------------- Restricted Subsidiary of such Person of which all the -37- outstanding voting securities (other than in the case of a foreign Restricted Subsidiary, directors' qualifying shares or an immaterial amount of shares required to be owned by other Persons pursuant to applicable law) are owned by such Person or any Wholly Owned Restricted Subsidiary of such Person. SECTION 1.02. Incorporation by Reference of TIA. --------------------------------- Whenever this Indenture refers to a provision of the TIA, such provision is incorporated by reference in, and made a part of, this Indenture. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Securities. -------------------- "indenture security holder" means a Holder or a Securityholder. ------------------------- "indenture to be qualified" means this Indenture. ------------------------- "indenture trustee" or "institutional trustee" means the Trustee. ----------------- --------------------- "obligor" on the indenture securities means the Company, any Guarantor ------- or any other obligor on the Securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by Commission rule and not otherwise defined herein have the meanings assigned to them therein. SECTION 1.03. Rules of Construction. --------------------- Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) words in the singular include the plural, and words in the plural include the singular; (5) provisions apply to successive events and transactions; and -38- (6) "herein," "hereof" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. ARTICLE TWO THE SECURITIES SECTION 2.01. Form and Dating. --------------- The Initial Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A and the Exchange Notes and the --------- Trustee's certificate of authentication shall be substantially in the form of Exhibit B. The Securities may have notations, legends or endorsements required - --------- by law, stock exchange rule or usage. The Company and the Trustee shall approve the form of the Securities and any notation, legend or endorsement on them. Each Security shall be dated the date of its authentication. At the time of issuance, each Security shall have an executed Guarantee from each of the then existing Guarantors endorsed thereon substantially in the form of Exhibit C. --------- The terms and provisions contained in the Securities, annexed hereto as Exhibits A and B, and the Guarantees shall constitute, and are hereby ---------- - expressly made, a part of this Indenture and, to the extent applicable, the Company, the Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. Securities offered and sold in reliance on Rule 144A shall be issued initially in the form of one or more permanent Global Securities in registered form, substantially in the form set forth in Exhibit A, deposited with the --------- Trustee, as custodian for the Depository, duly executed by the Company and authenticated by the Trustee as hereinafter provided, and shall bear the legends set forth in Section 2.14. The aggregate principal amount of the Global Securities may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depository, as hereinafter provided. Securities issued in exchange for interests in the Global Securities pursuant to Section 2.15 may be issued in the form of permanent certificated Securities in registered form -39- (the "Physical Securities") and shall bear the first legend set forth in Section ------------------- 2.14. All Securities offered and sold in reliance on Regulation S shall remain in the form of a Global Security until the consummation of the Exchange Offer pursuant to the Registration Rights Agreement. SECTION 2.02. Execution and Authentication. ---------------------------- Two Officers, or an Officer and an Assistant Secretary, shall sign, or one Officer shall sign and one Officer or an Assistant Secretary (each of whom shall, in each case, have been duly authorized by all requisite corporate actions) shall attest to, the Securities for the Company by manual or facsimile signature. If an Officer whose signature is on a Security was an Officer at the time of such execution but no longer holds that office at the time the Trustee authenticates the Security, the Security shall nevertheless be valid. A Security shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture. The Trustee shall authenticate (i) Initial Notes for original issue on the Issue Date in the aggregate principal amount not to exceed $150,000,000, (ii) pursuant to the Exchange Offer, Exchange Notes from time to time for issue only in exchange for a like principal amount of Initial Notes and (iii) subject to compliance with Section 4.04, one or more series of Securities for original issue after the Issue Date (such Securities to be substantially in the form of Exhibit A or B, as the case may be) in an unlimited amount (and if in the form - --------- - of Exhibit A the same principal amount of Exchange Notes in exchange therefor --------- upon consummation of a registered exchange offer), in each case upon written orders of the Company in the form of an Officers' Certificate, which Officers' Certificate shall, in the case of any issuance pursuant to clause (iii) above, certify that such issuance is in compliance with Section 4.04. In addition, each such Officers' Certificate shall specify the amount of Securities to be authenticated, the date on which the Securities are to be authenticated, whether the Securities are to be Initial Notes, Exchange Notes or Securities issued under clause (iii) of the preceding sentence and the aggregate principal amount of Securities outstanding on the date of authentication, and shall further specify the amount of such -40- Securities to be issued as a Global Security or Physical Securities. Such Securities shall initially be in the form of one or more Global Securities, which (i) shall represent, and shall be denominated in an amount equal to the aggregate principal amount of, the Securities to be issued, (ii) shall be registered in the name of the Depository for such Global Security or Securities or its nominee and (iii) shall be delivered by the Trustee to the Depository or pursuant to the Depository's instruction. The Trustee may appoint an authenticating agent reasonably acceptable to the Company to authenticate the Securities. Unless otherwise provided in the appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Company and Affiliates of the Company. The Securities shall be issuable only in registered form without coupons in denominations of $1,000 and integral multiples thereof. SECTION 2.03. Registrar, Paying Agent and Calculation Agent. --------------------------------------------- The Company shall maintain an office or agency in the Borough of Manhattan, The City of New York, where (a) Securities may be presented or surrendered for registration of transfer or for exchange ("Registrar"), (b) --------- Securities may be presented or surrendered for payment ("Paying Agent") and (c) ------------ notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in -------- ------- any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, The City of New York, for such purposes. The Company may act as its own Registrar, Paying Agent or Calculation Agent except that for the purposes of Articles Three and Eight and Sections 4.15 and 4.16, neither the Company nor any Affiliate of the Company shall act as Paying Agent. The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company, upon notice to the Trustee, may have one or more co- Registrars and one or more additional paying agents reasonably acceptable to the Trustee. The term "Paying Agent" includes any additional paying agent. The -41- Company hereby initially appoints the Trustee as Registrar, Paying Agent and Calculation Agent until such time as the Trustee has resigned or a successor has been appointed. The Company shall enter into an appropriate agency agreement with any Agent not a party to this Indenture, which agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee, in advance, of the name and address of any such Agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such. SECTION 2.04. Paying Agent To Hold Assets in Trust. ------------------------------------ The Company shall require each Paying Agent other than the Trustee to agree in writing that, subject to Article Ten and Article Twelve, each Paying Agent shall hold in trust for the benefit of Holders or the Trustee all assets held by the Paying Agent for the payment of principal of, or interest on, the Securities (whether such assets have been distributed to it by the Company or any other obligor on the Securities), and shall notify the Trustee of any Default or Event of Default by the Company (or any other obligor on the Securities) in making any such payment. If the Company or a Subsidiary acts as Paying Agent, it shall segregate such assets and hold them as a separate trust fund. The Company at any time may require a Paying Agent to distribute all assets held by it to the Trustee and account for any assets disbursed and the Trustee may at any time during the continuance of any payment Default or payment Event of Default, upon written request to a Paying Agent, require such Paying Agent to distribute all assets held by it to the Trustee and to account for any assets distributed. Upon distribution to the Trustee of all assets that shall have been delivered by the Company to the Paying Agent, the Paying Agent shall have no further liability for such assets. SECTION 2.05. Holder Lists. ------------ The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee on or before each Interest Payment Date and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Holders, which list may be conclusively relied upon by the Trustee. -42- SECTION 2.06. Transfer and Exchange. --------------------- (a) Subject to the provisions of Sections 2.14 and 2.15, when Securities are presented to the Registrar or a co-Registrar with a request to register the transfer of such Securities or to exchange such Securities for an equal principal amount of Securities of other authorized denominations, the Registrar or co-Registrar shall register the transfer or make the exchange as requested if its requirements for such transaction are met; provided, however, -------- ------- that the Securities surrendered for registration of transfer or exchange shall be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Company and the Registrar or co-Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing. To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Securities at the Registrar's or co-Registrar's request. No service charge shall be made for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchanges or transfers pursuant to Sections 2.02, 2.10, 3.06, 4.15, 4.16 or 9.06). The Registrar or co-Registrar shall not be required to register the transfer of or exchange of any Security (i) during a period beginning at the opening of business 15 days before the mailing of a notice of redemption of Securities and ending at the close of business on the day of such mailing, (ii) selected for redemption in whole or in part pursuant to Article Three, except the unredeemed portion of any Security being redeemed in part, and (iii) during a Change of Control Offer or a Net Proceeds Offer if such Security is tendered pursuant to such Change of Control Offer or Net Proceeds Offer and not withdrawn. A Global Security may be transferred, in whole but not in part, in the manner provided in this Section 2.06(a), only to a nominee of the Depository for such Global Security, or to the Depository, or a successor Depository for such Global Security selected or approved by the Company, or to a nominee of such successor Depository. (b) If at any time the Depository for the Global Security or Securities notifies the Company that it is unwilling or unable to continue as Depository for such Global Security or Securities or the Company becomes aware that the Depository has ceased to be a clearing agency registered under the Exchange Act, the Company shall appoint a successor Depository with respect to such Global Security or Securities. If a successor Depository for such Global Security or Securities has not been -43- appointed within 120 days after the Company receives such notice or becomes aware of such ineligibility, the Company shall execute, and the Trustee, upon receipt of an Officers' Certificate for the authentication and delivery of Securities, shall authenticate and deliver, Securities in definitive form, in an aggregate principal amount at maturity equal to the principal amount at maturity of the Global Security representing such Securities, in exchange for such Global Security. The Company shall reimburse the Registrar, the Depository and the Trustee for expenses they incur in documenting such exchanges and issuances of Securities in definitive form. The Company may at any time and in its sole discretion determine that the Securities shall no longer be represented by such Global Security or Securities. In such event the Company will execute, and the Trustee, upon receipt of a written order for the authentication and delivery of individual Securities in exchange in whole or in part for such Global Security or Securities, will authenticate and deliver individual Securities in definitive form in an aggregate principal amount equal to the principal amount of such Global Security or Securities in exchange for such Global Security or Securities. In any exchange provided for in any of the preceding two paragraphs, the Company will execute and the Trustee will authenticate and deliver individual Securities in definitive registered form in authorized denominations. Upon the exchange of a Global Security for individual Securities, such Global Security shall be cancelled by the Trustee. Securities issued in exchange for a Global Security pursuant to this Section 2.06(b) shall be registered in such names and in such authorized denominations as the Depository for such Global Security, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. The Trustee shall deliver such Securities to the Persons in whose names such Securities are so registered. None of the Company, the Trustee, any Paying Agent or the Registrar will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in a Global Security or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. SECTION 2.07. Replacement Securities. ---------------------- If a mutilated Security is surrendered to the Trustee or if the Holder of a Security claims that the Security has -44- been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Security if the Trustee's requirements are met. If required by the Trustee or the Company, such Holder must provide an indemnity bond or other indemnity, sufficient in the judgment of both the Company and the Trustee, to protect the Company, the Trustee or any Agent from any loss which any of them may suffer if a Security is replaced. The Company may charge such Holder for its reasonable out-of-pocket expenses in replacing a Security pursuant to this Section 2.07, including reasonable fees and expenses of counsel. Every replacement Security is an additional obligation of the Company. SECTION 2.08. Outstanding Securities. ---------------------- Securities outstanding at any time are all the Securities that have been authenticated by the Trustee except those cancelled by it, those delivered to it for cancellation and those described in this Section as not outstanding. A Security does not cease to be outstanding because the Company, any of the Guarantors or any of their respective Affiliates holds the Security. If a Security is replaced pursuant to Section 2.07 (other than a mutilated Security surrendered for replacement), it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Security is held by a bona fide purchaser or a protected purchaser. A mutilated Security ---- ---- ceases to be outstanding upon surrender of such Security and replacement thereof pursuant to Section 2.07. If the principal amount of any Security is considered paid under Section 4.01, it ceases to be outstanding and interest ceases to accrue. If on a Redemption Date or the Maturity Date the Paying Agent (other than the Company or a Subsidiary) holds U.S. Legal Tender sufficient to pay all of the principal and interest due on the Securities payable on that date, then on and after that date such Securities cease to be outstanding and interest on them ceases to accrue. SECTION 2.09. Treasury Securities. ------------------- In determining whether the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Company, any of its Subsidiaries or any of their respective Affiliates shall be -45- disregarded, except that, for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities that a Responsible Officer of the Trustee knows or has reason to know are so owned shall be disregarded. SECTION 2.10. Temporary Securities. -------------------- Until definitive Securities are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Securities in exchange for temporary Securities. Until such exchange, temporary Securities shall be entitled to the same rights, benefits and privileges as definitive Securities. Notwithstanding the foregoing, so long as the Securities are represented by a Global Security, such Global Security may be in typewritten form. SECTION 2.11. Cancellation. ------------ The Company at any time may deliver Securities to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for registration of transfer, exchange or payment. The Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent (other than the Company or a Subsidiary), and no one else, shall cancel and shall dispose of all Securities surrendered for registration of transfer, exchange, payment or cancellation. Subject to Section 2.07, the Company may not issue new Securities to replace Securities that it has paid or delivered to the Trustee for cancellation. If the Company or any Guarantor shall acquire any of the Securities, such acquisition shall not operate as a redemption or satisfaction of the Indebtedness represented by such Securities unless and until the same are surrendered to the Trustee for cancellation pursuant to this Section 2.11. SECTION 2.12. Defaulted Interest. ------------------ If the Company defaults in a payment of interest on the Securities, it shall, unless the Trustee fixes another record date pursuant to Section 6.10, pay the defaulted interest, plus (to the extent lawful) any interest payable on the defaulted interest, in any lawful manner. The Company may pay -46- the defaulted interest to the Persons who are Holders on a subsequent special record date, which date shall be the fifteenth day next preceding the date fixed by the Company for the payment of defaulted interest or the next succeeding Business Day if such date is not a Business Day. At least 15 days before any such subsequent special record date, the Company shall mail to each Holder, with a copy to the Trustee, a notice that states the subsequent special record date, the payment date and the amount of defaulted interest, and interest payable on such defaulted interest, if any, to be paid. SECTION 2.13. CUSIP Number. ------------ The Company in issuing the Securities may use a "CUSIP" number, and if so, the Trustee shall use the CUSIP number in notices of redemption or exchange as a convenience to Holders; provided, however, that any such notice may state -------- ------- that no representation is made as to the correctness or accuracy of the CUSIP number printed in the notice or on the Securities, and that reliance may be placed only on the other identification numbers printed on the Securities. SECTION 2.14. Restrictive Legends. ------------------- Each Global Security and Physical Security that constitutes a Restricted Security or is sold in compliance with Regulation S shall bear the following legend (the "Private Placement Legend") on the face thereof until ------------------------ after the second anniversary of the later of the Issue Date and the last date on which the Company or any Affiliate of the Company was the owner of such Security (or any predecessor security) (or such shorter period of time as permitted by Rule 144(k) under the Securities Act or any successor provision thereunder) (or such longer period of time as may be required under the Securities Act or applicable state securities laws in the opinion of counsel for the Company, unless otherwise agreed by the Company and the Holder thereof): THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE -47- SECURITIES ACT, (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) or (7) UNDER THE SECURITIES ACT) THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE FOR THIS SECURITY), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. Each Global Security shall also bear the following legend on the face thereof: UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY, OR BY ANY SUCH NOMINEE OF THE DEPOSITORY, OR BY THE DEPOSITORY OR NOMINEE OF SUCH SUCCESSOR DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. -48- OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.16 OF THE INDENTURE GOVERNING THIS SECURITY. SECTION 2.15. Book-Entry Provisions for Global Security. ----------------------------------------- (a) Each Global Security initially shall (i) be registered in the name of the Depository or the nominee of such Depository, (ii) be delivered to the Trustee as custodian for such Depository and (iii) bear legends as set forth in Section 2.14. Members of, or participants in, the Depository ("Agent Members") shall ------------- have no rights under this Indenture with respect to any Global Security held on their behalf by the Depository, or the Trustee as its custodian, or under any Global Security, and the Depository may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of each Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and its Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any Security. (b) Transfers of Global Securities shall be limited to transfers in whole, but not in part, to the Depository, its successors or their respective nominees. Interests of beneficial owners in any Global Security may be transferred or, subject to Section 2.01, exchanged for Physical Securities in accordance with the rules and procedures of the Depository and the provisions of Section 2.16. In addition, Physical Securities shall be transferred to all beneficial owners in exchange for their beneficial interests in any Global Security if -49- (i) the Depository notifies the Company that it is unwilling or unable to continue as Depository for the Global Securities and a successor depositary is not appointed by the Company within 90 days of such notice or (ii) an Event of Default has occurred and is continuing and the Registrar has received a written request from the Depository or the Trustee to issue Physical Securities. (c) In connection with any transfer or exchange of a portion of the beneficial interest in any Global Security to beneficial owners pursuant to paragraph (b), the Registrar shall (if one or more Physical Securities are to be issued) reflect on its books and records the date and a decrease in the principal amount of such Global Security in an amount equal to the principal amount of the beneficial interest in such Global Security to be transferred, and the Company shall execute, and the Trustee shall authenticate and deliver, one or more Physical Securities of like tenor and amount. (d) In connection with the transfer of an entire Global Security to beneficial owners pursuant to paragraph (b), such Global Security shall be deemed to be surrendered to the Trustee for cancellation, and the Company shall execute, and the Trustee shall authenticate and deliver, to each beneficial owner identified by the Depository in exchange for its beneficial interest in such Global Security, an equal aggregate principal amount of Physical Securities of authorized denominations. (e) Any Physical Security constituting a Restricted Security delivered in exchange for an interest in a Global Security pursuant to paragraph (b) or (c) shall, except as otherwise provided by paragraphs (a)(i)(x) and (c) of Section 2.16, bear the legend regarding transfer restrictions applicable to the Physical Securities set forth in Section 2.14. (f) The Holder of a Global Security may grant proxies and otherwise authorize any person, including Agent Members and persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Securities. SECTION 2.16. Special Transfer Provisions. --------------------------- (a) Transfers to Non-QIB Institutional Accredited Investors and Non- --------------------------------------------------------------- U.S. Persons. The following provisions shall apply with respect to the - ------------ registration of any proposed transfer of a Security constituting a Restricted Security to any insti- -50- tutional accredited investor (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) (an "Accredited Investor") which is not a QIB or to ------------------- any Non-U.S. Person: (i) the Registrar shall register the transfer of any Security constituting a Restricted Security, whether or not such Security bears the Private Placement Legend, if (x) the transferee certifies that it is not an Affiliate of the Company and the requested transfer is after the second anniversary of the later of the (a) Issue Date and (b) the last date on which the Company or an Affiliate of the Company was the owner of such Security (or any predecessor Security) or such shorter period of time as permitted by Rule 144(k) under the Securities Act or any successor provision thereunder or (y) (1) in the case of a transfer to an Accredited Investor which is not a QIB (excluding Non-U.S. Persons), the proposed transferee has delivered to the Registrar a certificate substantially in the form of Exhibit D hereto or (2) in the case of a transfer to a Non-U.S. --------- Person, the proposed transferor has delivered to the Registrar a certificate substantially in the form of Exhibit E hereto and such other --------- information that the Trustee may reasonably request in order to confirm that such transaction is being made pursuant to an exemption from or in a transaction not subject to the registration requirements of the Securities Act; and (ii) if the proposed transferor is an Agent Member holding a beneficial interest in the Global Security, the Registrar shall register the transfer of any Security constituting a Restricted Security, whether or not such Security bears a Private Placement Legend upon receipt by the Registrar of (x) the certificate, if any, required by paragraph (i) above and (y) instructions given in accordance with the Depository's and the Registrar's procedures, whereupon (a) the Registrar shall reflect on its books and records the date and (if the transfer does not involve a transfer of outstanding Physical Securities) a decrease in the principal amount of the applicable Global Security in an amount equal to the principal amount of the beneficial interest in such Global Security to be transferred, and (b) the Company shall execute and the Trustee shall authenticate and deliver one or more Physical Securities of like tenor and amount. (b) Transfers to QIBs. The following provisions shall apply with ----------------- respect to the registration of any proposed -51- transfer of a Security constituting a Restricted Security to a QIB (excluding transfers to Non-U.S. Persons): (i) the Registrar shall register the transfer if such transfer is being made by a proposed transferor who has checked the box provided for on the form of Security stating, or has otherwise advised the Company and the Registrar in writing, that the sale has been made in compliance with the provisions of Rule 144A to a transferee who has signed the certification provided for on the form of Security stating, or has otherwise advised the Company and the Registrar in writing, that it is purchasing the Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a QIB within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as it has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A; and (ii) if the proposed transferee is an Agent Member, and the Securities to be transferred consist of Physical Securities which after transfer are to be evidenced by an interest in a Global Security, upon receipt by the Registrar of instructions given in accordance with the Depository's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the applicable Global Security in an amount equal to the principal amount of the Physical Securities to be transferred, and the Trustee shall cancel the Physical Securities so transferred. (c) Private Placement Legend. Upon the registration of transfer, ------------------------ exchange or replacement of Securities not bearing the Private Placement Legend, the Registrar shall deliver Securities that do not bear the Private Placement Legend. Upon the registration of transfer, exchange or replacement of Securities bearing the Private Placement Legend, the Registrar shall deliver only Securities that bear the Private Placement Legend unless (i) the circumstance contemplated by paragraph (a)(i)(x) of this Section 2.16 exists or (ii) there is delivered to the Registrar an Opinion of Counsel reasonably satisfactory to the Company and the Trustee to the effect that neither such legend nor the related restrictions on transfer are required in order -52- to maintain compliance with the provisions of the Securities Act. (d) General. By its acceptance of any Security bearing the Private ------- Placement Legend, each Holder of such Security acknowledges the restrictions on transfer of such Security set forth in this Indenture and in the Private Placement Legend and agrees that it will transfer such Security only as provided in this Indenture. The Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 2.15 or this Section 2.16 in accordance with its customary procedures. The Company shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Registrar. ARTICLE THREE REDEMPTION SECTION 3.01. Notices to Trustee. ------------------ If the Company elects to redeem Securities pursuant to Paragraph 6 or Paragraph 7 of the Securities, it shall notify the Trustee in writing of the Redemption Date, the Redemption Price and the principal amount of the applicable Securities to be redeemed. The Company shall give notice of redemption to the Paying Agent and Trustee at least 30 days but not more than 60 days before the Redemption Date (unless a shorter notice shall be agreed to by the Trustee in writing), together with an Officers' Certificate stating that such redemption will comply with the conditions contained herein. SECTION 3.02. Selection of Securities To Be Redeemed. -------------------------------------- In the event that less than all of the Securities are to be redeemed at any time, selection of such Securities for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which such Securities are listed or, if such Securities are not then listed on a national securities exchange, on a pro rata basis, by lot --- ---- or by such method as the Trustee shall deem fair and appropriate; provided, -------- however, that no Securities of a principal amount of $1,000 or less shall be - ------- redeemed in part; -53- and provided, further, that if a partial redemption is made with the net cash -------- ------- proceeds of an Equity Offering, selection of the Securities or portions thereof for redemption shall be made by the Trustee only on a pro rata basis or on as --- ---- nearly a pro rata basis as is practicable (subject to the procedures of the --- ---- Depository), unless such method is otherwise prohibited. SECTION 3.03. Notice of Redemption. -------------------- At least 30 days but not more than 60 days before a Redemption Date, the Company shall mail a notice of redemption by first class mail, postage prepaid, to each Holder whose Securities are to be redeemed at its registered address. At the Company's request at least 40 days before a Redemption Date (unless a shorter period shall be acceptable to the Trustee), the Trustee shall give the notice of redemption in the Company's name and at the Company's expense. Each notice of redemption shall identify the Securities to be redeemed and shall state: (1) the Redemption Date; (2) the Redemption Price and the amount of accrued interest, if any, to be paid; (3) the name and address of the Paying Agent; (4) that Securities called for redemption must be surrendered to the Paying Agent to collect the Redemption Price plus accrued interest, if any; (5) that, unless the Company defaults in making the redemption payment, interest on Securities called for redemption ceases to accrue on and after the Redemption Date, and the only remaining right of the Holders of such Securities is to receive payment of the Redemption Price upon surrender to the Paying Agent of the Securities redeemed; (6) if any Security is being redeemed in part, the portion of the principal amount of such Security to be redeemed and that, after the Redemption Date, and upon surrender of such Security, a new Security or Securities in aggregate principal amount equal to the unredeemed portion thereof will be issued; (7) if fewer than all the Securities are to be redeemed, the identification of the particular Securities -54- (or portion thereof) to be redeemed, as well as the aggregate principal amount of Securities to be redeemed and the aggregate principal amount of Securities to be outstanding after such partial redemption; and (8) the Paragraph of the Securities pursuant to which the Securities are to be redeemed. The notice, if mailed in a manner herein provided, shall be conclusively presumed to have been given, whether or not the Holder receives such notice. In any case, failure to give such notice by mail or any defect in the notice to the Holder of any Security designated for redemption in whole or in part shall not affect the validity of the proceedings for the redemption of any other Security. SECTION 3.04. Effect of Notice of Redemption. ------------------------------ Once notice of redemption is mailed in accordance with Section 3.03, Securities called for redemption become due and payable on the Redemption Date and at the Redemption Price plus accrued interest, if any. Upon surrender to the Trustee or Paying Agent, such Securities called for redemption shall be paid at the Redemption Price (which shall include accrued interest thereon to the Redemption Date), but installments of interest, the maturity of which is on or prior to the Redemption Date, shall be payable to Holders of record at the close of business on the relevant Record Dates. SECTION 3.05. Deposit of Redemption Price. --------------------------- On or before 11:00 a.m New York time on the Redemption Date, the Company shall deposit with the Paying Agent U.S. Legal Tender sufficient to pay the Redemption Price plus accrued interest, if any, of all Securities to be redeemed on that date. If the Company complies with the preceding paragraph, then, unless the Company defaults in the payment of such Redemption Price plus accrued interest, if any, interest on the Securities to be redeemed will cease to accrue on and after the applicable Redemption Date, whether or not such Securities are presented for payment. SECTION 3.06. Securities Redeemed in Part. --------------------------- Upon surrender of a Security that is to be redeemed in part only, the Trustee shall upon written instruction from -55- the Company authenticate for the Holder a new Security or Securities in a principal amount equal to the unredeemed portion of the Security surrendered. ARTICLE FOUR COVENANTS SECTION 4.01. Payment of Securities. --------------------- The Company shall pay the principal of and interest on the Securities in the manner provided in the Securities. An installment of principal of or interest on the Securities shall be considered paid on the date it is due if the Trustee or Paying Agent holds on that date U.S. Legal Tender designated for and sufficient to pay the installment. Interest on the Securities will be computed on the basis of a 360-day year comprised of twelve 30-day months. SECTION 4.02. Maintenance of Office or Agency. ------------------------------- The Company shall maintain in the Borough of Manhattan, The City of New York, the office or agency required under Section 2.03. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in Section 13.02. The Company may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby initially designates the Trustee at its address c/o Wilmington Trust FSB, 520 Madison Avenue, 33rd Floor, New York, New York, 10022, as such office of the Company in accordance with Section 2.03. -56- SECTION 4.03. Limitation on Restricted Payments. --------------------------------- The Company shall not, and shall not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, (1) declare or pay any dividend or make any distribution (other than dividends or distributions payable in Qualified Capital Stock of the Company) on or in respect of shares of the Company's Capital Stock to holders of such Capital Stock; (2) purchase, redeem or otherwise acquire or retire for value any Capital Stock of the Company or any warrants, rights or options to purchase or acquire shares of any class of such Capital Stock; (3) make any principal payment on, purchase, defease, redeem, prepay, decrease or otherwise acquire or retire for value, prior to any scheduled final maturity, scheduled repayment or scheduled sinking fund payment, any Indebtedness of the Company (other than the Securities) that is subordinate or junior in right of payment to the Securities; or (4) make any Investment (other than Permitted Investments) (each of the foregoing actions set forth in clauses (1), (2), (3) and (4) being referred to as a "Restricted Payment"), if ------------------ at the time of such Restricted Payment or immediately after giving effect thereto: (1) a Default or an Event of Default shall have occurred and be continuing; or (2) the Company is not able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with Section 4.04; or (3) the aggregate amount of Restricted Payments (including such proposed Restricted Payment) made subsequent to the Issue Date (the amount expended for such purposes, if other than in cash, being the fair market value of such property as determined reasonably and in good faith by the Board of Directors of the Company) shall exceed the sum of: (a) 50% of the cumulative Consolidated Net Income (or if cumulative Consolidated Net Income shall be a loss, minus 100% of such loss) of the Company earned subsequent to the Issue Date and on or prior to the date the Restricted Payment occurs (the "Reference Date") -------------- (treating such period as a single accounting period); plus (b) 100% of the aggregate net cash proceeds and the fair market value, as determined in good faith by the Board of Directors, of property other than cash -57- received by the Company from any Person (other than a Subsidiary of the Company) from the issuance and sale subsequent to the Issue Date and on or prior to the Reference Date of Qualified Capital Stock of the Company other than any Qualified Capital Stock issued in exchange for the Pacer Preferred Stock; plus (c) without duplication of any amounts included in clause (3)(b) above, 100% of the aggregate net cash proceeds of any equity contribution received by the Company from a holder of the Company's Capital Stock; plus (d) without duplication, the sum of: (I) the aggregate amount returned in cash on or with respect to Investments (other than Permitted Investments) made subsequent to the Issue Date whether through interest payments, principal payments, dividends or other distributions or payments; (II) the net cash proceeds received by the Company or any Restricted Subsidiary of the Company from the disposition of all or any portion of such Investments (other than to a Subsidiary of the Company); and (III) upon redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, the fair market value of such Subsidiary (valued in each case as provided in the definition of "Investment"); ---------- provided, however, that the sum of clauses (I), (II) and (III) above -------- -------- shall not exceed the aggregate amount of all such Investments made by the Company or any Restricted Subsidiary in the relevant Person or Unrestricted Subsidiary subsequent to the Issue Date. Notwithstanding the foregoing, the provisions set forth in the immediately preceding paragraph do not prohibit: (1) the payment of any dividend within 60 days after the date of declaration of such dividend if the dividend would have been permitted on the date of declaration; -58- (2) if no Default or Event of Default shall have occurred and be continuing, the acquisition of any shares of Capital Stock of the Company, either (a) solely in exchange for shares of Qualified Capital Stock of the Company or (b) through the application of net proceeds of a substantially concurrent sale for cash (other than to a Subsidiary of the Company) of shares of Qualified Capital Stock of the Company; (3) if no Default or Event of Default shall have occurred and be continuing, the acquisition of any Indebtedness of the Company that is subordinate or junior in right of payment to the Securities either (a) solely in exchange for shares of Qualified Capital Stock of the Company, or (b) through the application of net proceeds of a substantially concurrent sale for cash (other than to a Subsidiary of the Company) of (I) shares of Qualified Capital Stock of the Company or (II) Refinancing Indebtedness; (4) if no Default or Event of Default shall have occurred and be continuing, repurchases by the Company or any Restricted Subsidiary of the Company of Capital Stock of the Company or any Restricted Subsidiary of the Company from (i) employees of the Company or any of its Subsidiaries or their authorized representatives (a) upon the death, disability or termination of employment of such employees or consultants or to the extent required pursuant to employee benefit plans, employment agreements or consulting agreements, (b) pursuant to any other agreements with such employees of or consultants to the Company or any of its Subsidiaries, in an aggregate amount not to exceed $5.0 million in any calendar year (with unused amounts in any calendar year being carried over to succeeding years subject to a maximum of $10.0 million in any calendar year) or (c) to the extent required pursuant to the Shareholder Agreement or the Option Plan or (ii) Richard P. Hyland; (5) the declaration and payment of dividends to holders of any class or series of Preferred Stock (other than Disqualified Capital Stock) issued after the Issue Date, provided that for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date of issuance of such Preferred Stock, after giving effect to such issuance on a pro forma basis, the Company would have --- ----- had a Consolidated Fixed Charge Coverage Ratio of at least 1.75 to 1.0; -59- (6) the payment of dividends on the Company's Common Stock, following the first public offering of the Company's Common Stock after the Issue Date, of up to 6% per annum of the net proceeds received by the Company in such public offering, other than public offerings with respect to the Company's Common Stock registered on Form S-8 (or any successor form); (7) the repurchase, retirement or other acquisition or retirement for value of equity interests of the Company in existence on the Issue Date and from the Persons holding such equity interests on the Issue Date and which are not held by Apollo or any of its Affiliates or members of management of the Company and its Subsidiaries on the Issue Date (including any equity interests issued in respect of such equity interests as a result of a stock split, recapitalization, merger, combination, consolidation or similar transaction), provided, however, that the Company shall be -------- ------- permitted to make Restricted Payments under this clause only if after giving effect thereto, the Company would be permitted to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to Section 4.04; (8) other Restricted Payments in an aggregate amount not to exceed $10.0 million; (9) if no Default or Event of Default shall have occurred and be continuing, payments or distributions to dissenting stockholders pursuant to applicable law, pursuant to or in connection with a consolidation, merger or transfer of assets that complies with the provisions of this Indenture applicable to mergers, consolidations and transfers of all or substantially all of the property and assets of the Company; and (10) if no Default or Event of Default shall have occurred and be continuing, payments of cash in lieu of the issuance of fractional shares upon the exercise of warrants or upon the conversion or exchange of, or issuance of Capital Stock in lieu of cash dividends on, any Capital Stock of the Company or any Restricted Subsidiary, which in the aggregate do not exceed $3.0 million. In determining the aggregate amount of Restricted Payments made subsequent to the Issue Date in accordance with clause (3) of the immediately preceding paragraph, amounts expended pursuant -60- to clauses (1), (2)(b), (4), (5), (6), (7), (8), (9) and (10) shall be included in such calculation. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment complies with this Indenture and setting forth in reasonable detail the basis upon which the required calculations were computed, which calculations may be based upon the Company's latest available internal quarterly financial statements. SECTION 4.04. Limitation on Incurrence of Additional Indebtedness. ---------------------------------------------------- The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume, guarantee, acquire, become liable, contingently or otherwise, with respect to, or otherwise become responsible for payment of (collectively, "incur") any Indebtedness ----- (other than Permitted Indebtedness); provided, however, that if no Default or -------- ------- Event of Default shall have occurred and be continuing at the time of or as a consequence of the incurrence of any such Indebtedness, the Company or any of the Guarantors may incur Indebtedness (including, without limitation, Acquired Indebtedness) and Restricted Subsidiaries of the Company that are not Guarantors may incur Acquired Indebtedness, in each case if on the date of the incurrence of such Indebtedness, after giving effect to the incurrence thereof, the Consolidated Fixed Charge Coverage Ratio of the Company is greater than 2.25 to 1.0 if such incurrence is on or prior to June 1, 2000 or 2.5 to 1.0 if such incurrence is thereafter. SECTION 4.05. Corporate Existence. ------------------- Except as otherwise permitted by Article Five, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and the corporate, partnership or other existence of each of its Restricted Subsidiaries in accordance with the respective organizational documents of each such Restricted Subsidiary and the rights (charter and statutory) and material franchises of the Company and each of its Restricted Subsidiaries; provided, however, that the Company shall not be -------- ------- required to preserve any such right, franchise or corporate existence with respect to each such Restricted Subsidiary if the Board of Directors of the Company shall determine that the loss thereof is not, and will not be, adverse in any material respect to the Holders. -61- SECTION 4.06. Payment of Taxes and Other Claims. --------------------------------- The Company shall pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (a) all material taxes, assessments and governmental charges levied or imposed upon it or any of its Subsidiaries or upon the income, profits or property of it or any of its Restricted Subsidiaries and (b) all lawful claims for labor, materials and supplies which, in each case, if unpaid, might by law become a material liability or Lien upon the property of it or any of its Restricted Subsidiaries; provided, however, that the Company -------- ------- shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, (i) the applicability or validity is being contested in good faith by appropriate proceedings and for which appropriate provision has been made or (ii) where the failure to effect such payment or discharge is not adverse in any material respect to the Holders. SECTION 4.07. Maintenance of Properties and Insurance. --------------------------------------- (a) The Company shall cause all material properties owned by or leased by it or any of its Restricted Subsidiaries used or useful to the conduct of its business or the business of any of its Restricted Subsidiaries, taken as a whole, to be maintained and kept in normal condition, repair and working order and supplied with all necessary equipment and shall cause to be made all repairs, renewals, replacements, and betterments thereof, all as in its judgment may be necessary, so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that -------- ------- nothing in this Section 4.07 shall prevent the Company or any of its Restricted Subsidiaries from discontinuing the use, operation or maintenance of any of such properties, or disposing of any of them, if such discontinuance or disposal is, in the judgment of the Board of Directors of the Company or any such Restricted Subsidiary desirable in the conduct of the business of the Company or any such Restricted Subsidiary, and if such discontinuance or disposal is not adverse in any material respect to the Holders; provided, further, that nothing in this -------- ------- Section 4.07 shall prevent the Company or any of its Restricted Subsidiaries from discontinuing or disposing of any properties to the extent otherwise permitted by this Indenture. (b) The Company shall maintain, and shall cause its Restricted Subsidiaries to maintain, insurance with responsible carriers against such risks and in such amounts, and with such deductibles, retentions, self-insured amounts and co-insurance -62- provisions, as are, in the Company's reasonable judgment, customarily carried by similar businesses of similar size, including property and casualty loss, workers' compensation and interruption of business insurance. SECTION 4.08. Compliance Certificate; Notice of Default. ----------------------------------------- (a) The Company and each Guarantor shall deliver to the Trustee, within 120 days after the close of each fiscal year of the Company (currently the last Friday in December) an Officers' Certificate stating that a review of the activities of the Company or the applicable Guarantor has been made under the supervision of the signing officers with a view to determining whether it has kept, observed, performed and fulfilled its obligations under this Indenture and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company or the applicable Guarantor during such preceding fiscal year has kept, observed, performed and fulfilled each and every such covenant and no Default or Event of Default occurred during such year and at the date of such certificate there is no Default or Event of Default that has occurred and is continuing or, if such signers do know of such Default or Event of Default, the certificate shall describe its status with particularity. The applicable Officers' Certificate shall also notify the Trustee should the Company or any Guarantor elect to change the manner in which it fixes its fiscal year end. (b) The annual financial statements delivered pursuant to Section 4.10 shall be accompanied by a written report of the Company's independent accountants (who shall be a firm of established national reputation) that in conducting their audit of such financial statements nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Article Four, Five or Six of this Indenture insofar as they relate to accounting matters or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. (c) The Company shall deliver to the Trustee, forthwith upon becoming aware of any Default or Event of Default in the performance of any covenant, agreement or condition contained in this Indenture, an Officers' Certificate specifying the Default or Event of Default and describing its status with particularity. -63- SECTION 4.09. Compliance with Laws. -------------------- The Company shall comply, and shall cause each of its Subsidiaries to comply, with all applicable statutes, rules, regulations, orders and restrictions of the United States, all states and municipalities thereof, and of any governmental department, commission, board, regulatory authority, bureau, agency and instrumentality of the foregoing, in respect of the conduct of their respective businesses and the ownership of their respective properties, except for such noncompliances as would not in the aggregate have a material adverse effect on the financial condition or results of operations of the Company and its Subsidiaries taken as a whole. SECTION 4.10. Reports to Holders. ------------------ Whether or not required by the rules and regulations of the Commission, so long as any Securities are outstanding, the Company shall file a copy of the following information and reports with the Commission for public availability (unless the Commission will not accept such a filing) and shall furnish to the Holders of Securities and to securities analysts and prospective investors, upon their request: (1) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" that describes the financial condition and results of operations of the Company and its consolidated Subsidiaries and, with respect to the annual information only, a report thereon by the Company's certified independent accounts; and (2) all current reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports, in each case within five days of the time periods specified in the Commission's rules and regulations. In addition, following the consummation of the Exchange Offer, whether or not required by the rules and regulations of the Commission, the Company shall file a copy of all such information and reports with the Commission for public availability within the time periods specified in the Commission's rules and regulations (unless the Commission will not -64- accept such a filing) and make such information available to securities analysts and prospective investors upon written request to the Company. In addition, for so long as any Securities remain outstanding, the Company shall furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. SECTION 4.11. Waiver of Stay, Extension or Usury Laws. --------------------------------------- Each of the Company and each Guarantor covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive the Company or such Guarantor from paying all or any portion of the principal of and/or interest on the Securities or the Guarantee of any such Guarantor as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Indenture, and (to the extent that it may lawfully do so) each hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. SECTION 4.12. Limitations on Transactions with Affiliates. ------------------------------------------- (1) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction or series of related transactions (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with, or for the benefit of, any of its Affiliates (each an "Affiliate --------- Transaction"), other than (x) Affiliate Transactions permitted under paragraph - ----------- (2) below and (y) Affiliate Transactions on terms that are no less favorable than those that might reasonably have been obtained in a comparable transaction at such time on an arm's-length basis from a Person that is not an Affiliate of the Company or such Restricted Subsidiary. All Affiliate Transactions (and each series of related Affiliate Transactions which are similar or part of a common plan) involving aggregate payments or other property with a fair market value in excess of $2.0 million shall be approved by the Board of Directors of the Company or such Re- -65- stricted Subsidiary, as the case may be, such approval to be evidenced by a Board Resolution stating that such Board of Directors has determined that such transaction complies with the foregoing provisions. If the Company or any Restricted Subsidiary of the Company enters into an Affiliate Transaction (or a series of related Affiliate Transactions related to a common plan) that involves an aggregate fair market value of more than $10.0 million, the Company or such Restricted Subsidiary, as the case may be, shall, prior to the consummation thereof, obtain a favorable opinion as to the fairness of such transaction or series of related transactions to the Company or the relevant Restricted Subsidiary, as the case may be, from a financial point of view, from an Independent Financial Advisor and file the same with the Trustee. (2) The restrictions set forth in clause (1) shall not apply to: (a) reasonable fees and compensation paid to and indemnity provided on behalf of, officers, directors, employees or consultants of the Company or any Restricted Subsidiary of the Company as determined in good faith by the Company's Board of Directors; (b) transactions exclusively between or among the Company and any of its Wholly Owned Restricted Subsidiaries or exclusively between or among such Wholly Owned Restricted Subsidiaries, provided such transactions are -------- not otherwise prohibited by this Indenture; (c) any agreement as in effect as of the Issue Date or any amendment thereto or any transaction contemplated thereby (including pursuant to any amendment thereto) in any replacement agreement thereto so long as any such amendment or replacement agreement is not more disadvantageous to the Holders in any material respect than the original agreement as in effect on the Issue Date; (d) Restricted Payments permitted by this Indenture; (e) transactions in which the Company or any of its Restricted Subsidiaries, as the case may be, delivers to the Trustee a letter from an Independent Financial Advisor stating that such transaction is fair to the Company or such Restricted Subsidiary from a financial point of view or meets the requirements of the first sentence of paragraph (1) above; -66- (f) the existence of, or the performance by the Company or any of its Restricted Subsidiaries of its obligations under the terms of, any stockholders agreement (including any registration rights agreement or purchase agreement related thereto) to which it is a party as of the Issue Date and any similar agreements which it may enter into thereafter; provided, however, that the existence of, or the performance by the Company -------- ------- or any of its Restricted Subsidiaries of obligations under, any future amendment to any such existing agreement or under any similar agreement entered into after the Issue Date shall only be permitted by this clause to the extent that the terms of any such amendment or new agreement are not otherwise disadvantageous to the Holders of the Securities in any material respect; (g) the issuance of securities or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, stock options and stock ownership plans approved by Board of Directors of the Company in good faith and loans to employees of the Company and its Subsidiaries which are approved by the Board of Directors of the Company in good faith; (h) the payment of all fees and expenses related to the Transactions; (i) transactions with customers, clients, suppliers, or purchasers or sellers of goods or services, in each case in the ordinary course of business and otherwise in compliance with the terms of this Indenture, which are fair to the Company or its Restricted Subsidiaries, in the reasonable determination of the Board of Directors of the Company or the senior management thereof, or are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated party; and (j) fees payable to Apollo pursuant to the Management Agreement and the Shareholders' Agreement. SECTION 4.13. Limitation on Dividend and Other Payment Restrictions Affecting --------------------------------------------------------------- Subsidiaries. ------------ The Company shall not, and shall not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or permit to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary of the Company to (a) pay dividends or make -67- any other distributions on or in respect of its Capital Stock; (b) make loans or advances or to pay any Indebtedness or other obligation owed to the Company or any other Restricted Subsidiary of the Company; or (c) transfer any of its property or assets to the Company or any other Restricted Subsidiary of the Company, except for such encumbrances or restrictions existing under or by reason of: (1) applicable law; (2) this Indenture; (3) the Credit Agreement; (4) customary non-assignment provisions of any contract or any lease governing a leasehold interest of any Restricted Subsidiary of the Company; (5) any instrument governing Acquired Indebtedness, which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person or the properties or assets of the Person so acquired; (6) agreements existing on the Issue Date to the extent and in the manner such agreements are in effect on the Issue Date; (7) purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature discussed in clause (c) above on the property so acquired; (8) contracts for the sale of assets, including, without limitation, customary restrictions with respect to a Restricted Subsidiary of the Company pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock or assets of such Restricted Subsidiary; (9) secured Indebtedness otherwise permitted to be incurred pursuant to Sections 4.04 and 4.14 that limit the right of the debtor to dispose of the assets securing such Indebtedness; (10) customary provisions in joint venture agreements and other similar agreements entered into in the ordinary course of business; -68- (11) customary net worth provisions contained in leases and other agreements entered into by the Company or any Restricted Subsidiary; (12) an agreement governing Indebtedness incurred to Refinance the Indebtedness issued, assumed or incurred pursuant to an agreement referred to in clauses (1) through (11) above; provided, however, that the -------- ------- provisions relating to such encumbrance or restriction contained in any such Indebtedness are no less favorable to the Company in any material respect as determined by the Board of Directors of the Company in their reasonable and good faith judgment than the provisions relating to such encumbrance or restriction contained in agreements referred to in such clauses; or (13) an agreement governing Indebtedness permitted to be incurred pursuant to Section 4.04; provided that the provisions relating to such -------- encumbrance or restriction contained in such Indebtedness are no less favorable to the Company in any material respect as determined by the Board of Directors of the Company in their reasonable and good faith judgment than the provisions contained in the Credit Agreement as in effect on the Issue Date. SECTION 4.14. Limitation on Liens. ------------------- The Company shall not, and shall not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or permit or suffer to exist any Liens of any kind against or upon any property or assets of the Company or any of its Restricted Subsidiaries whether owned on the Issue Date or acquired after the Issue Date, or any proceeds therefrom, or assign or otherwise convey any right to receive income or profits therefrom unless: (1) in the case of Liens securing Indebtedness that is expressly subordinate or junior in right of payment to the Securities, the Securities are secured by a Lien on such property, assets or proceeds that is senior in priority to such Liens; and (2) in all other cases, the Securities are equally and ratably secured, except for the following Liens which are expressly permitted: -69- (a) Liens existing as of the Issue Date to the extent and in the manner such Liens are in effect on the Issue Date; (b) Liens securing Senior Debt and Liens securing Guarantor Senior Debt; (c) Liens securing the Securities and the Guarantees; (d) Liens of the Company or a Wholly Owned Restricted Subsidiary of the Company on assets of any Restricted Subsidiary of the Company; (e) Liens securing Refinancing Indebtedness which is incurred to Refinance any Indebtedness (including, without limitation, Acquired Indebtedness) which has been secured by a Lien permitted under this Indenture and which has been incurred in accordance with the provisions of this Indenture; provided, however, that such Liens: -------- ------- (I) are no less favorable to the Holders and are not more favorable to the lienholders with respect to such Liens than the Liens in respect of the Indebtedness being Refinanced; and (II) do not extend to or cover any property or assets of the Company or any of its Restricted Subsidiaries not securing the Indebtedness so Refinanced; and (f) Permitted Liens. SECTION 4.15. Change of Control. ----------------- (a) Upon the occurrence of a Change of Control, the Company shall be obligated to make an offer to purchase (the "Change of Control Offer"), and ----------------------- shall purchase, on a Business Day (the "Change of Control Payment Date") as ------------------------------ described below, all of the then outstanding Securities at a purchase price equal to 101.0% of the principal amount thereof, plus accrued and unpaid interest, if any, thereon to the Change of Control Payment Date. The Change of Control Offer shall remain open for at least 20 Business Days and until the close of business on the Change of Control Payment Date. -70- (b) Prior to the mailing of the notice referred to below, but in any event within 30 days following any Change of Control, the Company covenants to: (1) repay in full and terminate all commitments under Indebtedness under the Credit Agreement and all other Senior Debt the terms of which require repayment upon a Change of Control or offer to repay in full and terminate all commitments under all Indebtedness under the Credit Agreement and all other such Senior Debt and to repay the Indebtedness owed to each lender which has accepted such offer; or (2) obtain the requisite consents under the Credit Agreement and all other Senior Debt to permit the repurchase of the Securities as provided below. The Company shall first comply with the covenant in the immediately preceding sentence before it shall be required to repurchase Securities pursuant to the provisions described below. The Company's failure to comply with the covenant described in the second preceding sentence (and any failure to send the notice referred to in clause (c) below because same is prohibited by the second preceding sentence) may (with notice and lapse of time) constitute an Event of Default described in clause (3) of Section 6.01 but shall not constitute an Event of Default described in clause (2) of Section 6.01. (c) Within 30 days following the date upon which a Change of Control occurs (the "Change of Control Date"), the Company shall send, by first class ---------------------- mail, a notice to each Holder, with a copy to the Trustee, which notice shall govern the terms of the Change of Control Offer. The notice to the Holders shall contain all instructions and materials necessary to enable such Holders to tender Securities pursuant to the Change of Control Offer. Such notice shall state: (1) that the Change of Control Offer is being made pursuant to this Section 4.15 and that all Securities tendered and not withdrawn will be accepted for payment; (2) the purchase price (including the amount of accrued interest) and the Change of Control Payment Date, which shall be a Business Day, that is not earlier than 30 days or later than 60 days from the date such notice is mailed; -71- (3) that any Security not tendered will continue to accrue interest; (4) that, unless the Company defaults in making payment therefor, any Security accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Payment Date; (5) that Holders electing to have a Security purchased pursuant to a Change of Control Offer will be required to surrender the Security, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Security completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day prior to the Change of Control Payment Date; (6) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the second Business Day prior to the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Securities the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Security purchased; (7) that Holders whose Securities are purchased only in part will be issued new Securities in a principal amount equal to the unpurchased portion of the Securities surrendered; and (8) the circumstances and relevant facts regarding such Change of Control. On or before the Change of Control Payment Date, the Company shall (i) accept for payment Securities or portions thereof tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent U.S. Legal Tender sufficient to pay the purchase price plus accrued interest, if any, of all Securities so tendered and (iii) deliver to the Trustee Securities so accepted together with an Officers' Certificate stating the Securities or portions thereof being purchased by the Company. The Paying Agent shall promptly mail to the Holders of Securities so accepted payment in an amount equal to the purchase price plus accrued interest, if any, and upon written order of the Company the Trustee shall promptly authenticate and mail to such Holders new Securities equal in principal amount to any unpurchased portion of the Securities surrendered. Any -72- Securities not so accepted shall be promptly mailed by the Company to the Holder thereof. For purposes of this Section 4.15, the Trustee shall act as the Paying Agent. Any amounts remaining with the Paying Agent after the purchase of Securities pursuant to a Change of Control Offer shall be returned by the Trustee to the Company. The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Securities pursuant to a Change of Control Offer. To the extent the provisions of any securities laws or regulations conflict with the provisions of this Section 4.15, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section 4.15 by virtue thereof. SECTION 4.16. Limitation on Asset Sales. ------------------------- The Company shall not, and shall not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless: (1) the Company or the applicable Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets sold or otherwise disposed of (as determined in good faith by the Company's Board of Directors); (2) at least 75% of the consideration received by the Company or the Restricted Subsidiary, as the case may be, from such Asset Sale shall be in the form of cash or Cash Equivalents and is received at the time of such disposition; provided that the amount of (a) any liabilities (as shown on -------- the Company's or such Restricted Subsidiary's most recent balance sheet) of the Company or any Restricted Subsidiary (other than liabilities that are by their terms subordinated to the Securities) that are assumed by the transferee of any such assets, and (b) any notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are converted by the Company or such Restricted Subsidiary into cash within 180 days after such Asset Sale (to the extent of the cash received) shall be deemed to be cash for the purposes of this provision only; and -73- (3) upon the consummation of an Asset Sale, the Company shall apply, or cause such Restricted Subsidiary to apply, the Net Cash Proceeds relating to such Asset Sale within 360 days of receipt thereof either: (a) to prepay any Senior Debt or Guarantor Senior Debt and, in the case of any Senior Debt or Guarantor Senior Debt under any revolving credit facility, effect a permanent reduction in the availability under such revolving credit facility; (b) to make an Investment (x) in properties and assets that replace the properties and assets that were the subject of such Asset Sale, (y) in properties and assets that will be used in the business of the Company and its Restricted Subsidiaries as existing on the Issue Date or in businesses the same, similar or reasonably related thereto or (z) permitted by clause (1) of the definition of Permitted Investments (collectively, "Replacement Assets"); or ------------------ (c) a combination of prepayment and investment permitted by the foregoing clauses (3)(a) and (3)(b). On the 361st day after an Asset Sale or such earlier date, if any, as the Board of Directors of the Company or of such Restricted Subsidiary determines not to apply the Net Cash Proceeds relating to such Asset Sale as set forth in clauses (3)(a), (3)(b) and (3)(c) of the next preceding paragraph (each, a "Net Proceeds Offer Trigger Date"), such aggregate amount of Net Cash ------------------------------- Proceeds which have not been applied on or before such Net Proceeds Offer Trigger Date as permitted in clauses (3)(a), (3)(b) and (3)(c) of the next preceding paragraph (each a "Net Proceeds Offer Amount") shall be applied by the ------------------------- Company or such Restricted Subsidiary to make an offer to purchase (the "Net --- Proceeds Offer") on a date (the "Net Proceeds Offer Payment Date") not less than - -------------- ------------------------------- 30 nor more than 60 days following the applicable Net Proceeds Offer Trigger Date, from all Holders on a pro rata basis, that amount of Securities equal to --- ---- the Net Proceeds Offer Amount at a price equal to 100% of the principal amount of the Securities to be purchased, plus accrued and unpaid interest thereon, if any, to the date of purchase; provided, however, that if at any time any non- -------- ------- cash consideration received by the Company or any Restricted Subsidiary of the Company, as the case may be, in connection with any Asset Sale is converted into or sold or otherwise disposed of for cash (other than interest received with respect to any -74- such non-cash consideration), then such conversion or disposition shall be deemed to constitute an Asset Sale hereunder as of the date of such conversion or disposition and the Net Cash Proceeds thereof shall be applied in accordance with this covenant. The Company may defer the Net Proceeds Offer until there is an aggregate unutilized Net Proceeds Offer Amount equal to or in excess of $7.5 million resulting from one or more Asset Sales (at which time, the entire unutilized Net Proceeds Offer Amount, and not just the amount in excess of $7.5 million, shall be applied as required pursuant to the preceding paragraph). In the event of the transfer of substantially all (but not all) of the property and assets of the Company and its Restricted Subsidiaries as an entirety to a Person in a transaction permitted under Section 5.01, which transaction does not constitute a Change of Control, the successor corporation shall be deemed to have sold the properties and assets of the Company and its Restricted Subsidiaries not so transferred for purposes of this covenant, and shall comply with the provisions of this covenant with respect to such deemed sale as if it were an Asset Sale. In addition, the fair market value of such properties and assets of the Company or its Restricted Subsidiaries deemed to be sold shall be deemed to be Net Cash Proceeds for purposes of this covenant. Notwithstanding the first two paragraphs of this Section 4.16, the Company and its Restricted Subsidiaries will be permitted to consummate an Asset Sale without complying with such paragraphs to the extent that: (1) at least 75% of the consideration for such Asset Sale constitutes Replacement Assets; and (2) such Asset Sale is for fair market value; provided that any -------- consideration not constituting Replacement Assets received by the Company or any of its Restricted Subsidiaries in connection with any Asset Sale permitted to be consummated under this paragraph shall constitute Net Cash Proceeds subject to the provisions of the first two paragraphs of this Section 4.16. Notice of each Net Proceeds Offer pursuant to this Section 4.16 shall be mailed or caused to be mailed, by first class mail, by the Company within 25 days following the applicable Net Proceeds Offer Trigger Date to all Holders at their -75- last registered addresses, with a copy to the Trustee. A Net Proceeds Offer shall remain open for a period of 20 Business Days or such longer period as may be required by law. The notice shall contain all instructions and materials necessary to enable such Holders to tender Securities pursuant to the Net Proceeds Offer and shall state the following terms: (1) that Holders may elect to have their Securities purchased by the Company either in whole or in part (subject to prorationing as hereinafter described in the event the Net Proceeds Offer is oversubscribed) in integral multiples of $1,000 of principal amount, at the applicable purchase price; (2) that the Net Proceeds Offer is being made pursuant to this Section 4.16 and that all Securities tendered will be accepted for payment; provided, however, that if the principal amount of Securities tendered in -------- ------- the Net Proceeds Offer exceeds the aggregate amount of the Net Proceeds Offer Amount, the Company shall select the Securities to be purchased on a pro rata basis (based on amounts tendered); --- ---- (3) the purchase price (including the amount of accrued interest, if any) and the purchase date (which shall be no earlier than 30 days nor later than 60 days from the Net Proceeds Offer Trigger Date, other than as may be required by applicable law); (4) that any Security not tendered will continue to accrue interest; (5) that, unless the Company defaults in making payment therefor, any Security accepted for payment pursuant to the Net Proceeds Offer shall cease to accrue interest after the Net Proceeds Offer Payment Date; (6) that Holders electing to have a Security purchased pursuant to the Net Proceeds Offer will be required to surrender the Security, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Security completed, to the Paying Agent at the address specified in the notice prior to the close of business on the Net Proceeds Offer Payment Date; (7) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the second Business Day prior to the Net Proceeds Offer Pay- -76- ment Date, a facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Security purchased; and (8) that Holders whose Securities are purchased only in part will be issued new Securities in a principal amount at maturity equal to the unpurchased portion of the Securities surrendered. On or before the Net Proceeds Offer Payment Date, the Company shall (i) accept for payment Securities or portions thereof tendered pursuant to the Net Proceeds Offer, (ii) deposit with the Paying Agent U.S. Legal Tender sufficient to pay the purchase price, plus accrued interest, if any, of all Securities to be purchased and (iii) deliver to the Trustee Securities so accepted together with an Officers' Certificate stating the Securities or portions thereof being purchased by the Company. The Paying Agent shall promptly mail to the Holders of Securities so accepted payment in an amount equal to the purchase price, plus accrued interest, if any, thereon set forth in the notice of such Net Proceeds Offer. Any Security not so accepted shall be promptly mailed by the Company to the Holder thereof. For purposes of this Section 4.16, the Trustee shall act as the Paying Agent. Any amounts remaining after the purchase of Securities pursuant to a Net Proceeds Offer shall be returned by the Trustee to the Company. To the extent that the aggregate amount of the Securities tendered pursuant to a Net Proceeds Offer is less than the Net Proceeds Offer Amount, the Company may use such excess Net Proceeds Offer Amount for general corporate purposes or for any other purposes not prohibited by this Indenture. Upon completion of any such Net Proceeds Offer, the Net Proceeds Offer Amount shall be reset at zero. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Securities pursuant to a Net Proceeds Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 4.16, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section 4.16 by virtue thereof. -77- SECTION 4.17. Prohibition on Incurrence of Senior Subordinated Debt. ----------------------------------------------------- The Company and the Guarantors shall not incur or suffer to exist Indebtedness that is senior in right of payment to the Securities or the Guarantees, as the case may be, and subordinate in right of payment by its terms to any other Indebtedness of the Company or such Guarantor, as the case may be. SECTION 4.18. Additional Subsidiary Guarantees. -------------------------------- If the Company or any of its Restricted Subsidiaries transfers or causes to be transferred, in one transaction or a series of related transactions, any property to any Domestic Restricted Subsidiary that is not a Guarantor, or if the Company or any of its Restricted Subsidiaries shall organize, acquire or otherwise invest in another Domestic Restricted Subsidiary having total equity value in excess of $1.0 million, then such transferee or acquired or other Restricted Subsidiary shall: (1) execute and deliver to the Trustee a supplemental indenture, in form reasonably satisfactory to the Trustee, pursuant to which such Restricted Subsidiary shall unconditionally guarantee all of the Company's obligations under the Securities and this Indenture on the terms set forth in this Indenture; (2) deliver to the Trustee an Opinion of Counsel that such supplemental indenture has been duly authorized, executed and delivered by such Restricted Subsidiary and constitutes a legal, valid, binding and enforceable obligation of such Restricted Subsidiary; and (3) execute a Guarantee. Thereafter, such Restricted Subsidiary shall be a Guarantor for all purposes of this Indenture. -78- ARTICLE FIVE SUCCESSOR CORPORATION SECTION 5.01. Merger, Consolidation and Sale of Assets. ---------------------------------------- (a) The Company shall not, in a single transaction or series of related transactions, consolidate or merge with or into any Person, or sell, assign, transfer, lease, convey or otherwise dispose of (or cause or permit any Restricted Subsidiary of the Company to sell, assign, transfer, lease, convey or otherwise dispose of) all or substantially all of the Company's assets (determined on a consolidated basis for the Company and the Company's Restricted Subsidiaries) whether as an entirety or substantially as an entirety to any Person unless: (1) either (a) the Company shall be the surviving or continuing corporation or (b) the Person (if other than the Company) formed by such consolidation or into which the Company is merged or the Person which acquires by sale, assignment, transfer, lease, conveyance or other disposition the properties and assets of the Company and of the Company's Restricted Subsidiaries substantially as an entirety (the "Surviving --------- Entity"): ------ (x) shall be a corporation organized and validly existing under the laws of the United States or any State thereof or the District of Columbia and (y) shall expressly assume, by supplemental indenture (in form and substance reasonably satisfactory to the Trustee), executed and delivered to the Trustee, the due and punctual payment of the principal of, and premium, if any, and interest on all of the Securities and the performance of every covenant of the Securities and this Indenture on the part of the Company to be performed or observed; (2) immediately after giving effect to such transaction on a pro --- forma basis and the assumption contemplated by clause (1)(b)(y) above ----- (including giving effect to any Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred in connection with or in respect of such transaction), the Company or such Surviving Entity, as the case may be, shall be able to incur at least $1.00 -79- of additional Indebtedness (other than Permitted Indebtedness) pursuant to Section 4.04; (3) immediately before and immediately after giving effect to such transaction on a pro forma basis and the assumption contemplated by clause --- ----- (1)(b)(y) above (including, without limitation, giving effect to any Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred or repaid and any Lien granted or to be released in connection with or in respect of the transaction), no Default or Event of Default shall have occurred or be continuing; and (4) the Company or the Surviving Entity, as the case may be, shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, sale, assignment, transfer, lease, conveyance or other disposition and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with the applicable provisions of this Indenture and that all conditions precedent in this Indenture relating to such transaction have been satisfied. Notwithstanding the foregoing, the merger of the Company with an Affiliate incorporated solely for the purpose of reincorporating the Company in another jurisdiction shall be permitted, subject to compliance with clauses (1) and (4) of this Section 5.01. (b) No Guarantor (other than any Guarantor whose Guarantee is to be released in accordance with the terms of the Guarantee and this Indenture in connection with any transaction complying with the provisions of Section 4.16) shall, and the Company shall not cause or permit any Guarantor to, consolidate with or merge with or into any Person other than the Company or any other Guarantor unless: (1) the entity formed by or surviving any such consolidation or merger (if other than the Guarantor) or to which such sale, lease, conveyance or other disposition shall have been made is a corporation organized and existing under the laws of the United States or any State thereof or the District of Columbia; (2) such entity assumes by supplemental indenture all of the Obligations of the Guarantor under the Guarantee; -80- (3) immediately after giving effect to such transaction on a pro --- forma basis, no Default or Event of Default shall have occurred and be ----- continuing; (4) immediately after giving effect to such transaction and the use of any net proceeds therefrom on a pro forma basis, the Company could --- ----- satisfy the provisions of clause (2) of Section 5.01(a); and (5) the Company or the Surviving Entity, as the case may be, shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, sale, assignment, transfer, lease, conveyance or other disposition and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with the applicable provisions of this Indenture and that all conditions precedent in this Indenture relating to such transaction have been satisfied. Any merger or consolidation of a Guarantor with and into the Company (with the Company being the Surviving Entity) or another Guarantor that is a Wholly Owned Restricted Subsidiary of the Company need only comply with clause (4) of Section 5.01(a). (c) For purposes of the foregoing paragraph (a), the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties or assets of one or more Restricted Subsidiaries of the Company the Capital Stock of which constitutes all or substantially all of the properties and assets of the Company, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company. SECTION 5.02. Successor Corporation Substituted. --------------------------------- Upon any consolidation, combination or merger or any transfer of all or substantially all of the assets of the Company in accordance with Section 5.01 in which the Company or any Guarantor, as applicable, is not the continuing corporation, the successor Person formed by such consolidation or into which the Company or such Guarantor is merged or to which such conveyance, lease or transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company or such Guarantor under this Indenture and the Securities or the Guarantee, as applicable, with the same effect as if such Surviving Entity had been named as such. -81- ARTICLE SIX DEFAULT AND REMEDIES SECTION 6.01. Events of Default. ----------------- Each of the following shall be an "Event of Default": ---------------- (1) the failure to pay interest on any Securities when the same becomes due and payable and the default continues for a period of 30 days (whether or not such payment shall be prohibited by Article Ten or Twelve of this Indenture); (2) the failure to pay the principal on any Securities, when such principal becomes due and payable, at maturity, upon redemption or otherwise (including the failure to make a payment to purchase Securities tendered pursuant to a Change of Control Offer or a Net Proceeds Offer) (whether or not such payment shall be prohibited by Article Ten or Twelve of this Indenture); (3) a default in the observance or performance of any other covenant or agreement contained in this Indenture, which default continues for a period of 30 days after the Company receives written notice specifying the default (and demanding that such default be remedied) from the Trustee or from the Holders of at least 25% of the outstanding principal amount of the Securities; (4) the failure to pay at final stated maturity (giving effect to any applicable grace periods and any extensions thereof) the principal amount of any Indebtedness of the Company or any Restricted Subsidiary of the Company, or the acceleration of the final stated maturity of any such Indebtedness if the aggregate principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness in default for failure to pay principal at final stated maturity or which has been accelerated, aggregates $10.0 million or more at any time; (5) one or more judgments in an aggregate amount in excess of $10.0 million shall have been rendered against the Company or any of its Restricted Subsidiaries and such judgments remain undischarged, unpaid or unstayed for a period of 60 days after such judgment or judgments become final and non-appealable; -82- (6) the Company or any of its Significant Subsidiaries (i) commences a voluntary case or proceeding under any Bankruptcy Law with respect to itself, (ii) consents to the entry of a judgment, decree or order for relief against it in an involuntary case or proceeding under any Bankruptcy Law, (iii) consents to the appointment of a custodian of it or for substantially all of its property, (iv) consents to or acquiesces in the institution of a bankruptcy or an insolvency proceeding against it, (v) makes a general assignment for the benefit of its creditors or (vi) takes any corporate action to authorize or effect any of the foregoing; (7) a court of competent jurisdiction enters a judgment, decree or order for relief in respect of the Company or any of its Significant Subsidiaries in an involuntary case or proceeding under any Bankruptcy Law, which shall (i) approve as properly filed a petition seeking reorganization, arrangement, adjustment or composition in respect of the Company or any of its Significant Subsidiaries, (ii) appoint a Custodian of the Company or any of its Significant Subsidiaries or for substantially all of any of its property or (iii) order the winding-up or liquidation of its affairs; and such judgment, decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (8) any of the Guarantees of a Significant Subsidiary ceases to be in full force and effect or any of the Guarantees of a Significant Subsidiary is declared to be null and void and unenforceable or any of the Guarantees of a Significant Subsidiary is found to be invalid or any Guarantor that is a Significant Subsidiary denies its liability under its Guarantee (other than by reason of release of such Guarantor in accordance with the terms of this Indenture). If, pursuant to clause (3) above, the Holders of at least 25% of the then outstanding principal amount of Securities notify the Company as specified in such clause, such Holders shall similarly notify the Trustee. Any notice given pursuant to clause (3) above or the immediately preceding sentence shall be given by registered or certified mail, return receipt requested. -83- SECTION 6.02. Acceleration. ------------ If an Event of Default (other than an Event of Default specified in clause (6) or (7) of Section 6.01 above with respect to the Company) shall occur and be continuing, the Trustee or the Holders of at least 25% in principal amount of outstanding Securities may declare the principal of and accrued interest on all the Securities to be due and payable by notice in writing to the Company (and the Trustee if given by the Holders) specifying the respective Event of Default and that it is a "notice of acceleration" (the "Acceleration ------------ Notice"), and the same (i) shall become immediately due and payable or (ii) if - ------ there are any amounts outstanding under the Credit Agreement, shall become immediately due and payable upon the first to occur of an acceleration under the Credit Agreement or five (5) Business Days after receipt by the Company and the Representative under the Credit Agreement of such Acceleration Notice but only if such Event of Default is then continuing. If an Event of Default specified in clause (6) or (7) of Section 6.01 above with respect to the Company occurs and is continuing, then all unpaid principal of, and premium, if any, and accrued and unpaid interest on all of the outstanding Securities shall ipso ---- facto become and be immediately due and payable without any declaration or other - ----- act on the part of the Trustee or any Holder. At any time after a declaration of acceleration with respect to the Securities as described in the preceding paragraph, the Holders of a majority in principal amount of the Securities may rescind and cancel such declaration and its consequences (i) if the rescission would not conflict with any judgment or decree, (ii) if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration, (iii) to the extent the payment of such interest is lawful, interest on overdue installments of interest and overdue principal, which has become due otherwise than by such declaration of acceleration, has been paid, (iv) if the Company has paid the Trustee its reasonable compensation and reimbursed the Trustee for its expenses, disbursements and advances, and any other amounts due to the Trustee under Section 7.07 and (v) in the event of the cure or waiver of an Event of Default of the type described in clause (6) or (7) of Section 6.01, the Trustee shall have received an Officers' Certificate and an Opinion of Counsel that such Event of Default has been cured or waived. No such rescission shall affect any subsequent Default or Event of Default or impair any right consequent thereto. -84- SECTION 6.03. Other Remedies. -------------- If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the payment of principal of or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative to the extent permitted by law. SECTION 6.04. Waiver of Past Defaults. ----------------------- Subject to Sections 2.09, 6.07 and 9.02, the Holders of not less than a majority in principal amount of the outstanding Securities by notice to the Trustee may waive an existing Default or Event of Default and its consequences, except a Default or Event of Default in the payment of principal of or interest on any Security as specified in clauses (1) and (2) of Section 6.01. The Company shall deliver to the Trustee an Officers' Certificate stating that the requisite percentage of Holders have consented to such waiver and attaching copies of such consents. When a Default or Event of Default is waived, it is cured and ceases. SECTION 6.05. Control by Majority. ------------------- The Holders of not less than a majority in principal amount of the outstanding Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it. Subject to Section 7.01, however, the Trustee may refuse to follow any direction that conflicts with any law or this Indenture, that the Trustee determines may be unduly prejudicial to the rights of another Securityholder, or that may involve the Trustee in personal liability; provided -------- that the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. In the event the Trustee takes any action or follows any direction pursuant to this Indenture, the Trustee shall be entitled to indemnification satisfactory to it in its sole dis- -85- cretion against any loss or expense caused by taking such action or following such direction. SECTION 6.06. Limitation on Suits. ------------------- A Securityholder may not pursue any remedy with respect to this Indenture or the Securities unless: (1) the Holder gives to the Trustee written notice of a continuing Event of Default; (2) the Holder or Holders of at least 25% in principal amount of the outstanding Securities make a written request to the Trustee to pursue the remedy; (3) such Holder or Holders offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (4) the Trustee does not comply with the request within 45 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (5) during such 45-day period the Holder or Holders of a majority in principal amount of the outstanding Securities do not give the Trustee a direction which, in the opinion of the Trustee, is inconsistent with the request. A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over such other Securityholder. SECTION 6.07. Rights of Holders To Receive Payment. ------------------------------------ Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of and interest on a Security, on or after the respective due dates expressed in such Security, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of the Holder. SECTION 6.08. Collection Suit by Trustee. -------------------------- If an Event of Default in payment of principal or interest specified in clause (1) or (2) of Section 6.01 occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company or -86- any other obligor on the Securities for the whole amount of principal and accrued interest and fees remaining unpaid, together with interest on overdue principal and, to the extent that payment of such interest is lawful, interest on overdue installments of interest, in each case at the rate per annum borne by --- ----- the Securities and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due to the Trustee under Section 7.07. SECTION 6.09. Trustee May File Proofs of Claim. -------------------------------- The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due to the Trustee under Section 7.07) and the Securityholders allowed in any judicial proceedings relating to the Company, its creditors or its property and shall be entitled and empowered to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same, and any Custodian in any such judicial proceedings is hereby authorized by each Securityholder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Securityholders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agent and counsel, and any other amounts due the Trustee under Section 7.07. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Securityholder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Securityholder in any such proceeding. SECTION 6.10. Priorities. ---------- If the Trustee collects any money or property pursuant to this Article Six, it shall pay out the money or property in the following order: First: to the Trustee for amounts due under Section 7.07; -87- Second: subject to Articles Ten and Twelve, to Holders for interest accrued on the Securities, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for interest; Third: subject to Articles Ten and Twelve, to Holders for principal amounts due and unpaid on the Securities, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal; and Fourth: to the Company or, if applicable, the Guarantors, as their respective interests may appear. The Trustee, upon prior notice to the Company, may fix a record date and payment date for any payment to Securityholders pursuant to this Section 6.10. SECTION 6.11. Undertaking for Costs. --------------------- In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07, or a suit by a Holder or Holders of more than 10% in principal amount of the outstanding Securities. ARTICLE SEVEN TRUSTEE SECTION 7.01. Duties of Trustee. ----------------- (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. -88- (b) Except during the continuance of an Event of Default: (1) The Trustee need perform only those duties as are specifically set forth herein or in the TIA and no duties, covenants, responsibilities or obligations shall be implied in this Indenture against the Trustee. (2) In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates (including Officers' Certificates) or opinions (including Opinions of Counsel) furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) Notwithstanding anything to the contrary herein, the Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (1) This paragraph does not limit the effect of paragraph (b) of this Section 7.01. (2) The Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts. (3) The Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05. (d) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or to take or omit to take any action under this Indenture or take any action at the request or direction of Holders if it shall have reasonable grounds for believing that repayment of such funds is not assured to it. (e) Every provision of this Indenture that in any way relates to the Trustee is subject to this Section 7.01. -89- (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. (g) In the absence of bad faith, negligence or willful misconduct on the part of the Trustee, the Trustee shall not be responsible for the application of any money by any Paying Agent other than the Trustee. SECTION 7.02. Rights of Trustee. ----------------- Subject to Section 7.01: (a) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate and an Opinion of Counsel, which shall conform to the provisions of Section 13.05. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such certificate or opinion. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent (other than an agent who is an employee of the Trustee) appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it reasonably believes to be authorized or within its rights or powers. (e) The Trustee may consult with counsel and the advice or opinion of such counsel as to matters of law shall be full and complete authorization and protection from liability in respect of any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Holders pursuant to the provisions of this Indenture, un- -90- less such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby. (g) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate (including any Officers' Certificate), statement, instrument, opinion (including any Opinion of Counsel), notice, request, direction, consent, order, bond, debenture, or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled, upon reasonable notice to the Company, to examine the books, records, and premises of the Company, personally or by agent or attorney. (h) The Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties hereunder. (i) The permissive rights of the Trustee to do things enumerated in this Indenture shall not be construed as duties. (j) The Trustee shall not be charged with knowledge of any Default or Event of Default, of the identity of any Restricted Subsidiary or the existence of any Change of Control or Asset Sale unless either (i) a Responsible Officer shall have actual knowledge thereof or (ii) the Trustee shall have received written notice thereof from the Company or any Holder. SECTION 7.03. Individual Rights of Trustee. ---------------------------- The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company, its Subsidiaries (including the Guarantors), or their respective Affiliates with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11. SECTION 7.04. Trustee's Disclaimer. -------------------- The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture, the Guarantees or the Securities, it shall not be ac- -91- countable for the Company's use of the proceeds from the Securities, and it shall not be responsible for any statement of the Company in this Indenture or any document issued in connection with the sale of Securities or any statement in the Securities other than the Trustee's certificate of authentication. The Trustee makes no representations with respect to the effectiveness or adequacy of this Indenture. SECTION 7.05. Notice of Default. ----------------- If a Default or an Event of Default occurs and is continuing and the Trustee receives actual notice of such Default or Event of Default, the Trustee shall mail to each Securityholder notice of the uncured Default or Event of Default within 60 days after such Default or Event of Default occurs. Except in the case of a Default or an Event of Default in payment of principal of, or interest on, any Security, including an accelerated payment and the failure to make payment on the Change of Control Payment Date pursuant to a Change of Control Offer or the Net Proceeds Offer Payment Date pursuant to a Net Proceeds Offer, the Trustee may withhold the notice if and so long as the Board of Directors, the executive committee, or a trust committee of directors and/or Responsible Officers, of the Trustee in good faith determines that withholding the notice is in the interest of the Securityholders. SECTION 7.06. Reports by Trustee to Holders. ----------------------------- Within 60 days after each May 15, beginning with the first May 15 following the date of this Indenture, the Trustee shall, to the extent that any of the events described in TIA (S) 313(a) occurred within the previous twelve months, but not otherwise, mail to each Securityholder a brief report dated as of such date that complies with TIA (S) 313(a). The Trustee also shall comply with TIA (S)(S) 313(b), 313(c) and 313(d). A copy of each report at the time of its mailing to Securityholders shall be mailed to the Company and filed with the Commission and each securities exchange, if any, on which the Securities are listed. The Company shall notify the Trustee if the Securities become listed on any securities exchange or of any delisting thereof and the Trustee shall comply with TIA (S) 313(d). -92- SECTION 7.07. Compensation and Indemnity. -------------------------- The Company shall pay to the Trustee from time to time reasonable compensation for its services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable disbursements, expenses and advances (including reasonable fees and expenses of counsel) incurred or made by it in addition to the compensation for its services, except any such disbursements, expenses and advances as may be attributable to the Trustee's negligence, bad faith or willful misconduct. Such expenses shall include the reasonable fees and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee and its agents, employees, officers, stockholders and directors for, and hold them harmless against, any loss, liability or expense incurred by them except for such actions to the extent caused by any negligence, bad faith or willful misconduct on their part, arising out of or in connection with the acceptance or administration of this trust including the reasonable costs and expenses of defending themselves against or investigating any claim or liability in connection with the exercise or performance of any of the Trustee's rights, powers or duties hereunder. The Trustee shall notify the Company promptly of any claim asserted against the Trustee or any of its agents, employees, officers, stockholders and directors for which it may seek indemnity. The Company may, subject to the approval of the Trustee, defend the claim and the Trustee shall cooperate in the defense. The Trustee and its agents, employees, officers, stockholders and directors subject to the claim may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel; provided, however, that the Company will not -------- ------- be required to pay such fees and expenses if, subject to the approval of the Trustee, it assumes the Trustee's defense and there is no conflict of interest between the Company and the Trustee and its agents, employees, officers, stockholders and directors subject to the claim in connection with such defense as reasonably determined by the Trustee. The Company need not pay for any settlement made without its written consent. The Company need not reimburse any expense or indemnify against any loss or liability to the extent incurred by the Trustee through its negligence, bad faith or willful misconduct. To secure the Company's payment obligations in this Section 7.07, the Trustee shall have a senior claim prior to -93- the Securities against all money or property held or collected by the Trustee, in its capacity as Trustee. The obligations of the Company and the Guarantors under this Section shall not be subordinated to the payment of Senior Debt pursuant to Article Ten or Article Twelve except assets or money held in trust to pay principal of or interest on particular Securities. When the Trustee incurs expenses or renders services after an Event of Default specified in clause (6) or (7) of Section 6.01 occurs, such expenses and the compensation for such services shall be paid to the extent allowed under any Bankruptcy Law. Notwithstanding any other provision in this Indenture, the foregoing provisions of this Section 7.07 shall survive the satisfaction and discharge of this Indenture or the appointment of a successor Trustee. SECTION 7.08. Replacement of Trustee. ---------------------- The Trustee may resign at any time by so notifying the Company in writing. The Holders of a majority in principal amount of the outstanding Securities may remove the Trustee by so notifying the Company and the Trustee and may appoint a successor Trustee. The Company may remove the Trustee if: (1) the Trustee fails to comply with Section 7.10; (2) the Trustee is adjudged bankrupt or insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall notify each Holder of such event and shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the Securities may appoint a successor Trustee to replace the successor Trustee appointed by the Company. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Immediately after that, the retiring Trustee shall transfer, after payment of all sums then owing to the Trustee pursuant to Section 7.07, all property held by it as Trustee to -94- the successor Trustee, subject to the Lien provided in Section 7.07, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each Securityholder. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of at least 10% in principal amount of the outstanding Securities may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 shall continue for the benefit of the retiring Trustee. SECTION 7.09. Successor Trustee by Merger, Etc. -------------------------------- If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the resulting, surviving or transferee corporation without any further act shall, if such resulting, surviving or transferee corporation is otherwise eligible hereunder, be the successor Trustee; provided that such -------- corporation shall be otherwise qualified and eligible under this Article Seven. SECTION 7.10. Eligibility; Disqualification. ----------------------------- This Indenture shall always have a Trustee who satisfies the requirement of TIA (S)(S) 310(a)(1), 310(a)(2) and 310(a)(5). The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. In addition, if the Trustee is a corporation included in a bank holding company system, the Trustee, independently of the bank holding company, shall meet the capital requirements of TIA (S) 310(a)(2). The Trustee shall comply with TIA (S) 310(b); provided, -------- however, that there shall be excluded from the operation of TIA (S) 310(b)(1) - ------- any indenture or indentures under which other securities, or certificates of interest or participation in other securities, -95- of the Company are outstanding, if the requirements for such exclusion set forth in TIA (S) 310(b)(1) are met. The provisions of TIA (S) 310 shall apply to the Company and any other obligor of the Securities. SECTION 7.11. Preferential Collection of Claims Against Company. ------------------------------------------------- The Trustee, in its capacity as Trustee hereunder, shall comply with TIA (S) 311(a), excluding any creditor relationship listed in TIA (S) 311(b). A Trustee who has resigned or been removed shall be subject to TIA (S) 311(a) to the extent indicated. ARTICLE EIGHT DISCHARGE OF INDENTURE; DEFEASANCE SECTION 8.01. Termination of the Company's Obligations. ---------------------------------------- The Company may terminate its obligations under the Securities and this Indenture, except those obligations referred to in the penultimate paragraph of this Section 8.01, if all Securities previously authenticated and delivered (other than destroyed, lost or stolen Securities which have been replaced or paid or Securities for whose payment U.S. Legal Tender has theretofore been deposited with the Trustee or the Paying Agent in trust or segregated and held in trust by the Company and thereafter repaid to the Company, as provided in Section 8.05) have been delivered to the Trustee for cancellation and the Company has paid all sums payable by it hereunder, or if: (a) either (i) pursuant to Article Three, the Company shall have given notice to the Trustee and mailed a notice of redemption to each Holder of the redemption of all of the Securities in accordance with the provisions hereof or (ii) all Securities have otherwise become due and payable hereunder; (b) the Company shall have irrevocably deposited or caused to be deposited with the Trustee or a trustee satisfactory to the Trustee, under the terms of an irrevocable trust agreement in form and substance satisfactory to the Trustee, as trust funds in trust solely for the benefit of the Holders of that purpose, U.S. Legal Tender in -96- such amount as is sufficient without consideration of reinvestment of such interest, to pay principal of, premium, if any, and interest on the outstanding Securities to maturity or redemption; provided that the Trustee -------- shall have been irrevocably instructed to apply such U.S. Legal Tender to the payment of said principal, premium, if any, and interest with respect to the Securities and provided, further, that from and after the time of -------- ------- deposit, the money deposited shall not be subject to the rights of holders of Senior Debt or Guarantor Senior Debt pursuant to the provisions of Article Ten or Twelve, as the case may be; (c) no Default or Event of Default with respect to this Indenture or the Securities shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, any other instrument or agreement (including, without limitation, the Credit Agreement) to which the Company is a party or by which it is bound; (d) the Company shall have paid all other sums payable by it hereunder; and (e) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent providing for or relating to the termination of the Company's obligations under the Securities and this Indenture have been complied with. Such Opinion of Counsel shall also state that such satisfaction and discharge does not result in a default under the Credit Agreement or any other material agreement or instrument then known to such counsel that binds or affects the Company. Subject to the next sentence and notwithstanding the foregoing paragraph, the Company's obligations in Sections 2.05, 2.06, 2.07, 2.08, 4.01, 4.02, 7.07, 8.05 and 8.06 shall survive until the Securities are no longer outstanding pursuant to the last paragraph of Section 2.08. After the Securities are no longer outstanding, the Company's obligations in Sections 7.07, 8.05 and 8.06 shall survive. After such delivery or irrevocable deposit, the Trustee upon request shall acknowledge in writing the discharge of the Company's obligations under the Securities and this Indenture except for those surviving obligations specified above. -97- SECTION 8.02. Legal Defeasance and Covenant Defeasance. ---------------------------------------- (a) The Company may, at its option by Board Resolution of the Board of Directors of the Company, at any time, elect to have either paragraph (b) or (c) below applied to all outstanding Securities upon compliance with the conditions set forth in Section 8.03. (b) Upon the Company's exercise under paragraph (a) hereof of the option applicable to this paragraph (b), the Company and each of the Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.03, be deemed to have been discharged from their respective obligations with respect to all outstanding Securities and the corresponding Guarantees on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For ---------------- this purpose, Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Securities, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.04 hereof and the other Sections of this Indenture referred to in (i) and (ii) below, and to have satisfied all its other obligations under such Securities and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), and Holders of the Securities and any amounts deposited under Section 8.03 hereof shall cease to be subject to any obligations to, or the rights of, any holder of Senior Debt under Article Ten or otherwise, except for the following provisions, which shall survive until otherwise terminated or discharged hereunder: (i) the rights of Holders of outstanding Securities to receive solely from the trust fund described in Section 8.04 hereof, and as more fully set forth in such Section, payments in respect of the principal of and interest on such Securities when such payments are due, (ii) the Company's obligations with respect to such Securities under Article Two and Section 4.02 hereof, (iii) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's obligations in connection therewith and (iv) this Article Eight. Subject to compliance with this Article Eight, the Company may exercise its option under this paragraph (b) notwithstanding the prior exercise of its option under paragraph (c) hereof. (c) Upon the Company's exercise under paragraph (a) hereof of the option applicable to this paragraph (c), the Company and each of the Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.03 hereof, be released from their obligations, if any, under the covenants con- -98- tained in Sections 4.03, 4.04 and Sections 4.12 through 4.18 and Article Five hereof with respect to the outstanding Securities and the corresponding Guarantees on and after the date the conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"), and the Securities shall thereafter be -------------------- deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Securities shall not be deemed outstanding for accounting purposes) and Holders of the Securities and any amounts deposited under Section 8.03 hereof shall cease to be subject to any obligations to, or the rights of, any holder of Senior Debt under Article Ten or otherwise. For this purpose, such Covenant Defeasance means that, with respect to the outstanding Securities, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01(c) hereof, but, except as specified above, the remainder of this Indenture and such Securities shall be unaffected thereby. In addition, upon the Company's exercise under paragraph (a) hereof of the option applicable to this paragraph (c), subject to the satisfaction of the conditions set forth in Section 8.03 hereof, Sections 6.01(3), 6.01(4) and 6.01(5) shall not constitute Events of Default. SECTION 8.03. Conditions to Legal Defeasance or Covenant Defeasance. ----------------------------------------------------- The following shall be the conditions to the application of either Section 8.02(b) or 8.02(c) hereof to the outstanding Securities: In order to exercise either Legal Defeasance or Covenant Defeasance: (a) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, U.S. Legal Tender or non-callable U.S. Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms, will provide, not later than one day before the due date of any payment on the Securities, U.S. Legal Tender, or a -99- combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest on the Securities on the stated date for payment thereof or on the applicable redemption date, as the case may be; (b) in the case of an election under Section 8.02(b) hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of the execution of this Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (c) in the case of an election under Section 8.02(c) hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the Securities will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (d) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the incurrence of Indebtedness all or a portion of the proceeds of which will be used to defease the Securities pursuant to this Article Eight concurrently with such incurrence) or insofar as Sections 6.01(6) and 6.01(7) hereof are concerned, at any time in the period ending on the 91st day after the date of such deposit; (e) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under this Indenture, the Credit Agreement or any other material agreement or instrument to which the -100- Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (f) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company or others; (g) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent hereunder provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with; and (h) the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that (i) the trust funds will not be subject to any rights of any holders of Senior Debt, including, without limitation, those arising under this Indenture, and (ii) assuming no intervening bankruptcy or insolvency of the Company between the date of deposit and the 91st day following the deposit and that no Holder is an insider of the Company, after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable Bankruptcy Law. Notwithstanding the foregoing, the Opinion of Counsel required by clause (b) above of this Section 8.03 need not be delivered if all Securities not theretofore delivered to the Trustee for cancellation (i) have become due and payable, (ii) will become due and payable on the Maturity Date within one year or (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company. SECTION 8.04. Application of Trust Money. -------------------------- The Trustee or Paying Agent shall hold in trust U.S. Legal Tender or U.S. Government Obligations deposited with it pursuant to this Article Eight, and shall apply the deposited U.S. Legal Tender and the money from U.S. Government Obligations in accordance with this Indenture to the payment of principal of and interest on the Securities. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed -101- against the U.S. Legal Tender or U.S. Government Obligations deposited pursuant to Section 8.03 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Securities. Anything in this Article Eight to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the Company's request any U.S. Legal Tender or U.S. Government Obligations held by it as provided in Section 8.03 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. SECTION 8.05. Repayment to the Company. ------------------------ The Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal or interest that remains unclaimed for two years; provided that the Trustee or such Paying Agent, before -------- being required to make any payment, may at the expense of the Company cause to be published once in a newspaper of general circulation in The City of New York or mail to each Holder entitled to such money notice that such money remains unclaimed and that after a date specified therein which shall be at least 30 days from the date of such publication or mailing any unclaimed balance of such money then remaining will be repaid to the Company. After payment to the Company, Holders entitled to such money must look to the Company for payment as general creditors unless an applicable law designates another Person. SECTION 8.06. Reinstatement. ------------- If the Trustee or Paying Agent is unable to apply any U.S. Legal Tender or U.S. Government Obligations in accordance with this Article Eight by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to this Article Eight until such time as the Trustee or Paying Agent is permitted to apply all such U.S. Legal Tender or U.S. Government Obligations in accordance with this Article Eight; provided that if the Company has made any -------- payment of interest on or principal of any Securities -102- because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the U.S. Legal Tender or U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 9.01. Without Consent of Holders. -------------------------- Subject to Section 9.03, the Company, the Guarantors and the Trustee, together, may amend or supplement this Indenture, the Securities or the Guarantees without notice to or consent of any Securityholder: (1) to cure any ambiguity, defect or inconsistency, so long as such change does not, in the opinion of the Trustee, adversely affect the rights of any of the Holders in any material respect. In formulating its opinion on such matters, the Trustee will be entitled to rely on such evidence as it deems appropriate, including, without limitation, solely an Opinion of Counsel; (2) to evidence the succession in accordance with Article Five hereof of another Person to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities; (3) to provide for uncertificated Securities in addition to or in place of certificated Securities; (4) to make any other change that does not adversely affect the rights of any Securityholders hereunder in any material respect; (5) to comply with any requirements of the Commission in connection with the qualification of this Indenture under the TIA; (6) to add or release any Guarantor pursuant to the terms of this Indenture; or (7) to provide for issuance of the Exchange Notes, which will have terms substantially identical in all mate- -103- rial respects to the Initial Notes (except that the transfer restrictions contained in the Initial Notes will be modified or eliminated, as appropriate), and which will be treated together with any outstanding Initial Notes, as a single issue of securities, provided that for purposes of this clause (7), the terms Initial Notes and Exchange Notes, shall include any other Securities issued in accordance with clause (iii) of the fourth paragraph of Section 2.02 or Securities issued in exchange therefor which are identical in all material respects to such Securities (except that the transfer restrictions on the Securities issued in exchange for Securities issued in accordance with clause (iii) of the fourth paragraph of Section 2.02 shall be modified or eliminated, as appropriate); provided that the Company has delivered to the Trustee an Opinion of Counsel and - -------- an Officers' Certificate, each stating that such amendment or supplement complies with the provisions of this Section 9.01. SECTION 9.02. With Consent of Holders. ----------------------- Subject to Sections 6.07 and 9.03, the Company, the Guarantors and the Trustee, together, with the written consent of the Holder or Holders of at least a majority in aggregate principal amount of the outstanding Securities, may amend or supplement this Indenture, the Securities or the Guarantees, without notice to any other Securityholders. Subject to Sections 6.07 and 9.03, the Holder or Holders of a majority in aggregate principal amount of the outstanding Securities may waive compliance by the Company with any provision of this Indenture, the Securities or the Guarantees without notice to any other Securityholder. Without the consent of each Securityholder affected, however, no amendment, supplement or waiver, including a waiver pursuant to Section 6.04, may: (1) reduce the amount of Securities whose Holders must consent to an amendment, supplement or waiver; (2) reduce the rate of or change or have the effect of changing the time for payment of interest, including default interest, on any Security; (3) reduce the principal of or change or have the effect of changing the fixed maturity of any Security, or change the date on which any Securities may be subject to redemption or repurchase, or reduce the redemption or purchase price therefor; -104- (4) make any Securities payable in money other than that stated in the Securities; (5) make any change in provisions of this Indenture protecting the right of each Holder to receive payment of principal of and interest on such Security on or after the due date thereof or to bring suit to enforce such payment, or permitting Holders of a majority in principal amount of the Securities to waive Defaults or Events of Default; (6) make any changes in Section 6.04, 6.07 or this Section 9.02; (7) modify or change any provision of this Indenture or the related definitions affecting the subordination or ranking of the Securities or any Guarantee, in a manner which adversely affects the Holders; (8) amend, change or modify in any material respect the obligation of the Company to make and consummate a Change of Control Offer in the event of a Change of Control that has already occurred or make and consummate a Net Proceeds Offer with respect to any Asset Sale that has been consummated or modify any of the provisions or definitions with respect thereto after a Change of Control has occurred or the subject Asset Sale has been consummated; or (9) release any Guarantor that is a Significant Subsidiary from any of its obligations under its Guarantee or this Indenture otherwise than in accordance with the terms of this Indenture. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Company shall mail to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. -105- SECTION 9.03. Effect on Senior Debt. --------------------- No amendment of, or supplement or waiver to, this Indenture shall adversely affect the rights of any holder of Senior Debt or Guarantor Senior Debt under Article Ten or Article Twelve, as the case may be, of this Indenture, without the consent of such holder. SECTION 9.04. Compliance with TIA. ------------------- From the date on which this Indenture is qualified under the TIA, every amendment, waiver or supplement of this Indenture, the Securities or the Guarantees shall comply with the TIA as then in effect. SECTION 9.05. Revocation and Effect of Consents. --------------------------------- Until an amendment, waiver or supplement becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent is not made on any Security. However, any such Holder or subsequent Holder may revoke the consent as to his Security or portion of his Security by notice to the Trustee or the Company received before the date on which the Trustee receives an Officers' Certificate certifying that the Holders of the requisite principal amount of Securities have consented (and not theretofore revoked such consent) to the amendment, supplement or waiver. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver. If a record date is fixed, then notwithstanding the last sentence of the immediately preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 90 days after such record date. After an amendment, supplement or waiver becomes effective, it shall bind every Securityholder, unless it makes a change described in any of clauses (1) through (9) of Section 9.02, in which case, the amendment, supplement or waiver shall bind only each Holder of a Security who has consented to it and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Secu- -106- rity; provided that any such waiver shall not impair or affect the right of any -------- Holder to receive payment of principal of and interest on a Security, on or after the respective due dates expressed in such Security, or to bring suit for the enforcement of any such payment on or after such respective dates without the consent of such Holder. SECTION 9.06. Notation on or Exchange of Securities. ------------------------------------- If an amendment, supplement or waiver changes the terms of a Security, the Company may require the Holder of the Security to deliver it to the Trustee. The Company shall provide the Trustee with an appropriate notation on the Security about the changed terms and cause the Trustee to return it to the Holder at the Company's expense. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or issue a new Security shall not affect the validity and effect of such amendment, supplement or waiver. SECTION 9.07. Trustee To Sign Amendments, Etc. ------------------------------- The Trustee shall execute any amendment, supplement or waiver authorized pursuant to this Article Nine; provided that the Trustee may, but -------- shall not be obligated to, execute any such amendment, supplement or waiver which affects the Trustee's own rights, duties or immunities under this Indenture. The Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel and an Officers' Certificate each complying with Sections 13.04 and 13.05 and stating that the execution of any amendment, supplement or waiver authorized pursuant to this Article Nine is authorized or permitted by this Indenture and constitutes the legal, valid and binding obligations of the Company enforceable in accordance with its terms. Such Opinion of Counsel shall be at the expense of the Company. -107- ARTICLE TEN SUBORDINATION OF SECURITIES SECTION 10.01. Securities Subordinated to Senior Debt. -------------------------------------- Anything herein to the contrary notwithstanding, the Company, for itself and its successors, and each Holder, by his or her acceptance of Securities, agrees that the payment of all Obligations owing to the Holders in respect of the Securities is subordinated, to the extent and in the manner provided in this Article Ten, to the prior payment in full in cash or Cash Equivalents, or such payment duly provided for to the satisfaction of the holders of Senior Debt, of all Obligations on Senior Debt (including the Obligations with respect to the Credit Agreement). This Article Ten shall constitute a continuing offer to all Persons who become holders of, or continue to hold, Senior Debt, and such provisions are made for the benefit of the holders of Senior Debt and such holders are made obligees hereunder and any one or more of them may enforce such provisions. SECTION 10.02. Suspension of Payment When Senior Debt Is in Default. ---------------------------------------------------- (a) Unless Section 10.03 shall be applicable, if any default occurs and is continuing in the payment when due, whether at maturity, upon any redemption, by declaration or otherwise, of any principal of, interest on, unpaid drawings for letters of credit issued in respect of, or regularly accruing fees with respect to, any Senior Debt (a "Payment Default"), then no --------------- payment or distribution of any kind or character shall be made by or on behalf of the Company or any other Person on its or their behalf with respect to any Obligations on the Securities or to acquire any of the Securities for cash or property or otherwise and until such Payment Default shall have been cured or waived or shall have ceased to exist or such Senior Debt as to which such Payment Default relates shall have been paid in full in cash or Cash Equivalents, after which the Company shall (subject to other provisions of this Article Ten) resume making any and all required payments in respect of the Securities, including any missed payments. (b) Unless Section 10.03 shall be applicable, if any other event of default (other than a Payment Default) occurs -108- and is continuing with respect to any Designated Senior Debt (as such event of default is defined in the instrument creating or evidencing such Designated Senior Debt) permitting the holders of such Designated Senior Debt then outstanding to accelerate the maturity thereof (a "Non-payment Default") and if ------------------- the Representative for the respective issue of Designated Senior Debt gives written notice of the event of default to the Trustee (a "Default Notice"), -------------- then, unless and until all events of default have been cured or waived or have ceased to exist or the Trustee receives notice thereof from the Representative for the respective issue of Designated Senior Debt terminating the Payment Blockage Period (as defined below), during the 180 days after the delivery of such Default Notice (the "Payment Blockage Period"), neither the Company nor any ------------------------ other Person on its behalf shall (x) make any payment of any kind or character with respect to any Obligations on or with the respect to the Securities or (y) acquire any of the Securities for cash or property or otherwise. Notwithstanding anything herein to the contrary, (x) in no event will a Payment Blockage Period extend beyond 180 days from the date the applicable Default Notice is received by the Trustee and (y) only one such Payment Blockage Period may be commenced within any 360 consecutive days. For all purposes of this Section 10.02(b), no event of default which existed or was continuing on the date of the commencement of any Payment Blockage Period with respect to the Designated Senior Debt shall be, or be made, the basis for the commencement of a second Payment Blockage Period by the Representative of such Designated Senior Debt whether or not within a period of 360 consecutive days, unless such event of default shall have been cured or waived for a period of not less than 90 consecutive days (it being acknowledged that any subsequent action, or any breach of any financial covenants for a period commencing after the date of commencement of such Payment Blockage Period that, in either case, would give rise to an event of default pursuant to any provisions under which an event of default previously existed or was continuing shall constitute a new event of default for this purpose). (c) In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee or any Holder when such payment is prohibited by the foregoing provisions of this Section 10.02, such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Debt (pro rata to such holders on the basis of the respective amount of --- ---- Senior Debt held by such holders) or their respective Representatives, as their respective interests may appear. The Trustee shall be entitled to rely on information regarding amounts then due and owing on the Senior Debt, if -109- any, received from the holders of Senior Debt (or their Representatives) or, if such information is not received from such holders or their Representatives, from the Company and only amounts included in the information provided to the Trustee shall be paid to the holders of Senior Debt. Nothing contained in this Article Ten shall limit the right of the Trustee or the Holders of Securities to take any action to accelerate the maturity of the Securities pursuant to Section 6.02 or to pursue any rights or remedies hereunder; provided that all Senior Debt thereafter due or declared to -------- be due shall first be paid in full in cash or Cash Equivalents before the Holders are entitled to receive any payment of any kind or character with respect to Obligations on the Securities. SECTION 10.03. Securities Subordinated to Prior Payment of All Senior Debt on -------------------------------------------------------------- Dissolution, Liquidation or Reorganization of Company. ----------------------------------------------------- (a) Upon any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any liquidation, dissolution, winding-up, reorganization, assignment for the benefit of creditors or marshaling of assets of the Company or in a bankruptcy, reorganization, insolvency, receivership or other similar proceeding relating to the Company or its property, whether voluntary or involuntary, all Obligations due or to become due upon all Senior Debt shall first be paid in full in cash or Cash Equivalents, or such payment duly provided for to the satisfaction of the holders of Senior Debt, before any payment or distribution of any kind or character is made on account of any Obligations on the Securities, or for the acquisition of any of the Securities for cash or property or otherwise. Upon any such dissolution, winding-up, liquidation, reorganization, receivership or similar proceeding, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Holders of the Securities or the Trustee under this Indenture would be entitled, except for the provisions hereof, shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Holders or by the Trustee under this Indenture if received by them, directly to the holders of Senior Debt (pro rata -------- to such holders on the basis of the respective amounts of Senior Debt held by such holders) or their respective Representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Debt may have been issued, as -110- their respective interests may appear, for application to the payment of Senior Debt remaining unpaid until all such Senior Debt has been paid in full in cash or Cash Equivalents after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of Senior Debt. (b) To the extent any payment of Senior Debt (whether by or on behalf of the Company, as proceeds of security or enforcement of any right of setoff or otherwise) is declared to be fraudulent or preferential, set aside or required to be paid to any receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person under any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then, if such payment is recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person, the Senior Debt or part thereof originally intended to be satisfied shall be deemed to be reinstated and outstanding as if such payment had not occurred. (c) In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, shall be received by any Holder when such payment or distribution is prohibited by this Section 10.03, such payment or distribution shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Debt (pro rata to such holders on the basis of the -------- respective amount of Senior Debt held by such holders) or their respective Representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Debt may have been issued, as their respective interests may appear, for application to the payment of Senior Debt remaining unpaid until all such Senior Debt has been paid in full in cash or Cash Equivalents, after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of such Senior Debt. (d) The consolidation of the Company with, or the merger of the Company with or into, another corporation or the liquidation or dissolution of the Company following the conveyance or transfer of all or substantially all of its assets, to another corporation upon the terms and conditions provided in Article Five hereof and as long as permitted under the terms of the Senior Debt shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, assume the Company's obligations hereunder in accordance with Article Five hereof. -111- SECTION 10.04. Payments May Be Paid Prior to Dissolution. ----------------------------------------- Nothing contained in this Article Ten or elsewhere in this Indenture shall prevent (i) the Company, except under the conditions described in Sections 10.02 and 10.03, from making payments at any time for the purpose of making payments of principal of and interest on the Securities, or from depositing with the Trustee any moneys for such payments, or (ii) in the absence of actual knowledge by the Trustee that a given payment would be prohibited by Section 10.02 or 10.03, the application by the Trustee of any moneys deposited with it for the purpose of making such payments of principal of, and interest on, the Securities to the Holders entitled thereto unless at least two Business Days prior to the date upon which such payment would otherwise become due and payable a Responsible Officer shall have actually received the written notice provided for in the first sentence of Section 10.02(b) or in Section 10.07 (provided -------- that, notwithstanding the foregoing, the Holders receiving any payments made in contravention of Section 10.02 and/or 10.03 (and the respective such payments) shall otherwise be subject to the provisions of Section 10.02 and Section 10.03). The Company shall give prompt written notice to the Trustee of any dissolution, winding-up, liquidation or reorganization of the Company, although any delay or failure to give any such notice shall have no effect on the subordination provisions contained herein. SECTION 10.05. Holders To Be Subrogated to Rights of Holders of Senior Debt. ------------------------------------------------------------ Subject to the payment in full in cash or Cash Equivalents of all Senior Debt, the Holders of the Securities shall be subrogated to the rights of the holders of Senior Debt to receive payments or distributions of cash, property or securities of the Company applicable to the Senior Debt until the Securities shall be paid in full; and, for the purposes of such subrogation, no such payments or distributions to the holders of the Senior Debt by or on behalf of the Company, or by or on behalf of the Holders by virtue of this Article Ten, which otherwise would have been made to the Holders shall, as between the Company and the Holders, be deemed to be a payment by the Company to or on account of the Senior Debt, it being understood that the provisions of this Article Ten are and are intended solely for the purpose of defining the relative rights of the Holders, on the one hand, and the holders of Senior Debt, on the other hand. -112- SECTION 10.06. Obligations of the Company Unconditional. ---------------------------------------- Nothing contained in this Article Ten or elsewhere in this Indenture or in the Securities is intended to or shall impair, as among the Company, its creditors other than the holders of Senior Debt, and the Holders, the obligation of the Company, which is absolute and unconditional, to pay to the Holders the principal of and any interest on the Securities as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders and creditors of the Company other than the holders of the Senior Debt, nor shall anything herein or therein prevent the Holder of any Security or the Trustee on its behalf from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, in respect of cash, property or securities of the Company received upon the exercise of any such remedy. SECTION 10.07. Notice to Trustee. ----------------- The Company shall give prompt written notice to the Trustee of any fact known to the Company which would prohibit the making of any payment to or by the Trustee in respect of the Securities pursuant to the provisions of this Article Ten, although any delay or failure to give any such notice shall have no effect on the subordination provisions contained herein. Regardless of anything to the contrary contained in this Article Ten or elsewhere in this Indenture, the Trustee shall not be charged with knowledge of the existence of any default or event of default with respect to any Senior Debt or of any other facts which would prohibit the making of any payment to or by the Trustee unless and until the Trustee shall have received notice in writing from the Company, or from a holder of Senior Debt or a Representative therefor, and, prior to the receipt of any such written notice, the Trustee shall be entitled to assume (in the absence of actual knowledge to the contrary) that no such facts exist. The Trustee shall be entitled to rely on the delivery to it of any notice pursuant to this Section 10.07 to establish that such notice has been given by a holder of Senior Debt (or a Representative therefor). In the event that the Trustee determines in good faith that any evidence is required with respect to the right of any Person as a holder of Senior Debt to participate in any payment or distribution pursuant to this Article Ten, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amounts of Senior Debt held by such Person, the extent to which such Person is -113- entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article Ten, and if such evidence is not furnished the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. SECTION 10.08. Reliance on Judicial Order or Certificate of Liquidating Agent. -------------------------------------------------------------- Upon any payment or distribution of assets of the Company referred to in this Article Ten, the Trustee, subject to the provisions of Article Seven hereof, and the Holders of the Securities shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which any insolvency, bankruptcy, receivership, dissolution, winding-up, liquidation, reorganization or similar case or proceeding is pending, or upon a certificate of the receiver, trustee in bankruptcy, liquidating trustee, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Trustee or the Holders of the Securities, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Debt and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article Ten. SECTION 10.09. Trustee's Relation to Senior Debt. --------------------------------- The Trustee and any agent of the Company or the Trustee shall be entitled to all the rights set forth in this Article Ten with respect to any Senior Debt which may at any time be held by it in its individual or any other capacity to the same extent as any other holder of Senior Debt and nothing in this Indenture shall deprive the Trustee or any such agent of any of its rights as such holder. With respect to the holders of Senior Debt, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article Ten, and no implied covenants or obligations with respect to the holders of Senior Debt shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt. Whenever a distribution is to be made or a notice given to holders or owners of Senior Debt, the distribution may -114- be made and the notice may be given to their Representative, if any. SECTION 10.10. Subordination Rights Not Impaired by Acts or Omissions of the ------------------------------------------------------------- Company or Holders of Senior Debt. --------------------------------- No right of any present or future holders of any Senior Debt to enforce subordination as provided herein shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms of this Indenture, regardless of any knowledge thereof which any such holder may have or otherwise be charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Debt may, at any time and from time to time, without the consent of or notice to the Trustee, without incurring responsibility to the Trustee or the Holders of the Securities and without impairing or releasing the subordination provided in this Article Ten or the obligations hereunder of the Holders of the Securities to the holders of the Senior Debt, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Debt, or otherwise amend or supplement in any manner Senior Debt, or any instrument evidencing the same or any agreement under which Senior Debt is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Debt; (iii) release any Person liable in any manner for the payment or collection of Senior Debt; and (iv) exercise or refrain from exercising any rights against the Company and any other Person. SECTION 10.11. Securityholders Authorize Trustee To Effectuate Subordination of ---------------------------------------------------------------- Securities. ---------- Each Holder of Securities by its acceptance of them authorizes and expressly directs the Trustee on its behalf to take such action as may be necessary or appropriate to effectuate, as between the holders of Senior Debt and the Holders of Securities, the subordination provided in this Article Ten, and appoints the Trustee its attorney-in-fact for such purposes, including, in the event of any dissolution, winding-up, liquidation or reorganization of the Company (whether in bankruptcy, insolvency, receivership, reorganization or similar proceedings or upon an assignment for the benefit of creditors or other- -115- wise) tending towards liquidation of the business and/or assets of the Company, the filing of a claim for the unpaid balance of its Securities and accrued interest in the form required in those proceedings. If the Trustee does not file a proper claim or proof of debt in the form required in such proceeding prior to 30 days before the expiration of the time to file such claim or claims, then the holders of the Senior Debt or their Representative are or is hereby authorized to have the right to file and are or is hereby authorized to file an appropriate claim for and on behalf of the Holders of said Securities. Nothing herein contained shall be deemed to authorize the Trustee or the holders of Senior Debt or their Representative to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee or the holders of Senior Debt or their Representative to vote in respect of the claim of any Holder in any such proceeding. SECTION 10.12. This Article Ten Not To Prevent Events of Default. ------------------------------------------------- The failure to make a payment on account of principal of or interest on the Securities by reason of any provision of this Article Ten will not be construed as preventing the occurrence of an Event of Default. SECTION 10.13. Trustee's Compensation Not Prejudiced. ------------------------------------- Nothing in this Article Ten will apply to amounts due to the Trustee pursuant to other sections of this Indenture. ARTICLE ELEVEN GUARANTEE OF SECURITIES SECTION 11.01. Unconditional Guarantee. ----------------------- Subject to the provisions of this Article Eleven, each of the Guarantors hereby, jointly and severally, unconditionally and irrevocably guarantees, on a senior subordinated basis (such guarantees to be referred to herein as a "Guarantee") to each Holder of a Security authenticated and --------- de- -116- livered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Securities or the obligations of the Company or any other Guarantors to the Holders or the Trustee hereunder or thereunder, that: (a) the principal of, premium, if any, and interest on the Securities shall be duly and punctually paid in full when due, whether at maturity, upon redemption at the option of Holders pursuant to the provisions of the Securities relating thereto, by acceleration or otherwise, and interest on the overdue principal and (to the extent permitted by law) interest, if any, on the Securities and all other obligations of the Company or the Guarantors to the Holders or the Trustee hereunder or thereunder (including amounts due the Trustee under Section 7.07 hereof) and all other obligations shall be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Securities or any of such other obligations, the same shall be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed, or failing performance of any other obligation of the Company to the Holders under this Indenture or under the Securities, for whatever reason, each Guarantor shall be obligated to pay, or to perform or cause the performance of, the same immediately. An Event of Default under this Indenture or the Securities shall constitute an event of default under the Guarantees, and shall entitle the Holders of Securities to accelerate the obligations of the Guarantors hereunder in the same manner and to the same extent as the obligations of the Company. Each of the Guarantors hereby agrees that its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Securities or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Securities with respect to any provisions hereof or thereof, any release of any other Guarantor, the recovery of any judgment against the Company, any action to enforce the same, whether or not a Guarantee is affixed to any particular Security, or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Guarantor. Each of the Guarantors hereby waives the benefit of diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenants that its Guarantee shall not be discharged except by complete performance of the obligations con- -117- tained in the Securities, this Indenture and the Guarantees. Each Guarantee is a guarantee of payment and not of collection. If any Holder or the Trustee is required by any court or otherwise to return to the Company or to any Guarantor, or any custodian, trustee, liquidator or other similar official acting in relation to the Company or such Guarantor, any amount paid by the Company or such Guarantor to the Trustee or such Holder, each Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor further agrees that, as between it, on the one hand, and the Holders of Securities and the Trustee, on the other hand, (a) subject to this Article Eleven, the maturity of the obligations guaranteed hereby may be accelerated as provided in Article Six hereof for the purposes of the Guarantees, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (b) in the event of any acceleration of such obligations as provided in Article Six hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of the Guarantees. No stockholder, officer, director or employee, past, present or future, of any Guarantor, as such, shall have any personal liability under such Guarantor's Guarantee by reason of his, her or its status as such stockholder, officer, director or employee. SECTION 11.02. Limitations on Guarantees. ------------------------- The obligations of each Guarantor under its Guarantee are limited to the maximum amount which, after giving effect to all other contingent and fixed liabilities of such Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Guarantee or pursuant to its contribution obligations under this Indenture, will result in the obligations of such Guarantor under the Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal or state law. Each Guarantor that makes a payment or distribution under a Guarantee shall be entitled to a contribution from each other Guarantor in an amount pro rata, based on the net assets of each --- ---- Guarantor, determined in accordance with GAAP. SECTION 11.03. Execution and Delivery of Guarantee. ----------------------------------- To further evidence the Guarantees set forth in Section 11.01, each Guarantor hereby agrees that a notation of its -118- Guarantee, substantially in the form of Exhibit C hereto, shall be endorsed on --------- each Security authenticated and delivered by the Trustee. The Guarantee of any Guarantor shall be executed on behalf of such Guarantor by either manual or facsimile signature of two Officers of such Guarantor, each of whom, in each case, shall have been duly authorized to so execute by all requisite corporate action. The validity and enforceability of any Guarantee shall not be affected by the fact that it is not affixed to any particular Security. Each of the Guarantors hereby agrees that its Guarantee set forth in Section 11.01 shall remain in full force and effect notwithstanding any failure to endorse on each Security a notation of such Guarantee. If an Officer of a Guarantor whose signature is on this Indenture or a Guarantee no longer holds that office at the time the Trustee authenticates the Security on which such Guarantee is endorsed or at any time thereafter, such Guarantor's Guarantee of such Security shall nevertheless be valid. The delivery of any Security by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of any Guarantee set forth in this Indenture on behalf of each Guarantor. SECTION 11.04. Release of a Guarantor. ---------------------- (a) If no Default or Event of Default exists or would exist under this Indenture, upon the sale or disposition of all of the Capital Stock of a Guarantor by the Company, in a transaction or series of related transactions that either (i) does not constitute an Asset Sale or (ii) constitutes an Asset Sale the Net Cash Proceeds of which are applied in accordance with Section 4.16, or upon the consolidation or merger of a Guarantor with or into any Person in compliance with Article Five (in each case, other than to the Company or an Affiliate of the Company), or if any Guarantor is dissolved or liquidated in accordance with this Indenture, such Guarantor's Guarantee will be automatically discharged and such Guarantor shall be released from all obligations under this Article Eleven without any further action required on the part of the Trustee or any Holder. Any Guarantor not so released or the entity surviving such Guarantor, as applicable, shall remain or be liable under its Guarantee as provided in this Article Eleven. (b) The Trustee shall deliver an appropriate instrument evidencing the release of a Guarantor upon receipt of a -119- request by the Company or such Guarantor accompanied by an Officers' Certificate and an Opinion of Counsel certifying as to the compliance with this Section 11.04; provided, however, that the legal counsel delivering such Opinion of Counsel may rely as to matters of fact on one or more Officers' Certificates of the Company. The Trustee shall execute any documents reasonably requested by the Company or a Guarantor in order to evidence the release of such Guarantor from its obligations under its Guarantee endorsed on the Securities and under this Article Eleven. Except as set forth in Articles Four and Five and this Section 11.04, nothing contained in this Indenture or in any of the Securities shall prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor. SECTION 11.05. Waiver of Subrogation. --------------------- Until this Indenture is discharged and all of the Securities are discharged and paid in full, each Guarantor hereby irrevocably waives and agrees not to exercise any claim or other rights which it may now or hereafter acquire against the Company that arise from the existence, payment, performance or enforcement of the Company's obligations under the Securities or this Indenture and such Guarantor's obligations under its Guarantee and this Indenture, in any such instance, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution, indemnification, and any right to participate in any claim or remedy of the Holders against the Company, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, including, without limitation, the right to take or receive from the Company, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim or other rights. If any amount shall be paid to any Guarantor in violation of the preceding sentence and any amounts owing to the Trustee or the Holders of Securities under the Securities, this Indenture, or any other document or instrument delivered under or in connection with such agreements or instruments, shall not have been paid in full, such amount shall have been deemed to have been paid to such Guarantor for the benefit of, and held in trust for the benefit of, the Trustee or the Holders and shall forthwith be paid to the Trustee -120- for the benefit of itself or such Holders to be credited and applied to the obligations in favor of the Trustee or the Holders, as the case may be, whether matured or unmatured, in accordance with the terms of this Indenture. Each Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by this Indenture and that the waiver set forth in this Section 11.05 is knowingly made in contemplation of such benefits. SECTION 11.06. Immediate Payment. ----------------- Each Guarantor agrees to make immediate payment to the Trustee, on behalf of the Holders or itself, of all Obligations due and owing or payable to the respective Holders or the Trustee upon receipt of a demand for payment therefor by the Trustee to such Guarantor in writing. SECTION 11.07. No Set-Off. ---------- Each payment to be made by a Guarantor hereunder in respect of the Obligations shall be payable in the currency or currencies in which such Obligations are denominated, and shall be made without set-off, counterclaim, reduction or diminution of any kind or nature. SECTION 11.08. Obligations Absolute. -------------------- The obligations of each Guarantor hereunder are and shall be absolute and unconditional and any monies or amounts expressed to be owing or payable by each Guarantor hereunder which may not be recoverable from such Guarantor on the basis of a Guarantee shall be recoverable from such Guarantor as a primary obligor and principal debtor in respect thereof. SECTION 11.09. Obligations Continuing. ---------------------- The obligations of each Guarantor hereunder shall be continuing and shall remain in full force and effect until all the obligations have been paid and satisfied in full. Each Guarantor agrees with the Trustee that it will from time to time deliver to the Trustee suitable acknowledgments of its continued liability hereunder and under any other instrument or instruments in such form as counsel to the Trustee may advise and as will prevent any action brought against it in respect of any default hereunder being barred by any statute of limitations now or hereafter in force and, in the event of the failure of a Guarantor so to do, it hereby irrevocably appoints the Trustee the attorney and agent of such Guarantor to make, exe- -121- cute and deliver such written acknowledgment or acknowledgments or other instruments as may from time to time become necessary or advisable, in the judgment of the Trustee on the advice of counsel, to fully maintain and keep in force the liability of such Guarantor hereunder and under its Guarantee. SECTION 11.10. Obligations Not Reduced. ----------------------- The obligations of each Guarantor hereunder shall not be satisfied, reduced or discharged solely by the payment of such principal, premium, if any, interest, fees and other monies or amounts as may at any time prior to discharge of this Indenture pursuant to Article Eight be or become owing or payable under or by virtue of or otherwise in connection with the Securities or this Indenture. SECTION 11.11. Obligations Reinstated. ---------------------- The obligations of each Guarantor hereunder shall continue to be effective or shall be reinstated, as the case may be, if at any time any payment which would otherwise have reduced the obligations of any Guarantor hereunder (whether such payment shall have been made by or on behalf of the Company or by or on behalf of a Guarantor) is rescinded or reclaimed from any of the Holders upon the insolvency, bankruptcy, liquidation or reorganization of the Company or any Guarantor or otherwise, all as though such payment had not been made. If demand for, or acceleration of the time for, payment by the Company is stayed upon the insolvency, bankruptcy, liquidation or reorganization of the Company, all such Indebtedness otherwise subject to demand for payment or acceleration shall nonetheless be payable by each Guarantor as provided herein. SECTION 11.12. Obligations Not Affected. ------------------------ The obligations of each Guarantor hereunder shall not be affected, impaired or diminished in any way by any act, omission, matter or thing whatsoever, occurring before, upon or after any demand for payment hereunder (and whether or not known or consented to by any Guarantor or any of the Holders) which, but for this provision, might constitute a whole or partial defense to a claim against any Guarantor hereunder or might operate to release or otherwise exonerate any Guarantor from any of its obligations hereunder or otherwise affect such obligations, whether occasioned by default of any of the Holders or otherwise, including, without limitation: -122- (a) any limitation of status or power, disability, incapacity or other circumstance relating to the Company or any other Person, including any insolvency, bankruptcy, liquidation, reorganization, readjustment, composition, dissolution, winding-up or other proceeding involving or affecting the Company or any other Person; (b) any irregularity, defect, unenforceability or invalidity in respect of any indebtedness or other obligation of the Company or any other Person under this Indenture, the Securities or any other document or instrument; (c) any failure of the Company, whether or not without fault on its part, to perform or comply with any of the provisions of this Indenture or the Securities, or to give notice thereof to a Guarantor; (d) the taking or enforcing or exercising or the refusal or neglect to take or enforce or exercise any right or remedy from or against the Company or any other Person or their respective assets or the release or discharge of any such right or remedy; (e) the granting of time, renewals, extensions, compromises, concessions, waivers, releases, discharges and other indulgences to the Company or any other Person; (f) any change in the time, manner or place of payment of, or in any other term of, any of the Securities, or any other amendment, variation, supplement, replacement or waiver of, or any consent to departure from, any of the Securities or this Indenture, including, without limitation, any increase or decrease in the principal amount of or premium, if any, or interest on any of the Securities; (g) any change in the ownership, control, name, objects, businesses, assets, capital structure or constitution of the Company or a Guarantor; (h) any merger or amalgamation of the Company or a Guarantor with any Person or Persons; (i) the occurrence of any change in the laws, rules, regulations or ordinances of any jurisdiction by any present or future action of any governmental authority or court amending, varying, reducing or otherwise affecting, or purporting to amend, vary, reduce or otherwise affect, -123- any of the Obligations or the obligations of a Guarantor under its Guarantee; and (j) any other circumstance, including release of a Guarantor pursuant to Section 11.04 (other than by complete, irrevocable payment) that might otherwise constitute a legal or equitable discharge or defense of the Company under this Indenture or the Securities or of another Guarantor in respect of its Guarantee hereunder; provided, that the provisions of this Section 11.12 are not intended to affect - -------- in any way any release of a Guarantor in accordance with the provisions of Section 11.04. SECTION 11.13. Waiver. ------ Without in any way limiting the provisions of Section 11.01 hereof, each Guarantor hereby waives notice of acceptance hereof, notice of any liability of any Guarantor hereunder, notice or proof of reliance by the Holders upon the obligations of any Guarantor hereunder, and diligence, presentment, demand for payment on the Company, protest, notice of dishonor or non-payment of any of the Obligations, or other notice or formalities to the Company or any Guarantor of any kind whatsoever. SECTION 11.14. No Obligation To Take Action Against the Company. ------------------------------------ Neither the Trustee nor any other Person shall have any obligation to enforce or exhaust any rights or remedies or to take any other steps under any security for the Obligations or against the Company or any other Person or any property of the Company or any other Person before the Trustee is entitled to demand payment and performance by any or all Guarantors of their liabilities and obligations under their Guarantees or under this Indenture. SECTION 11.15. Dealing with the Company and Others. ----------------------------------- The Holders, without releasing, discharging, limiting or otherwise affecting in whole or in part the obligations and liabilities of any Guarantor hereunder and without the consent of or notice to any Guarantor, may (a) grant time, renewals, extensions, compromises, concessions, waivers, releases, discharges and other indulgences to the Company or any other Person; -124- (b) take or abstain from taking security or collateral from the Company or from perfecting security or collateral of the Company; (c) release, discharge, compromise, realize, enforce or otherwise deal with or do any act or thing in respect of (with or without consideration) any and all collateral, mortgages or other security given by the Company or any third party with respect to the obligations or matters contemplated by this Indenture or the Securities; (d) accept compromises or arrangements from the Company; (e) apply all monies at any time received from the Company or from any security upon such part of the Obligations as the Holders may see fit or change any such application in whole or in part from time to time as the Holders may see fit; and (f) otherwise deal with, or waive or modify their right to deal with, the Company and all other Persons and any security as the Holders or the Trustee may see fit. SECTION 11.16. Default and Enforcement. ----------------------- If any Guarantor fails to pay in accordance with Section 11.06 hereof, the Trustee may proceed in its name as trustee hereunder in the enforcement of the Guarantee of any such Guarantor and such Guarantor's obligations thereunder and hereunder by any remedy provided by law, whether by legal proceedings or otherwise, and to recover from such Guarantor the obligations. SECTION 11.17. Amendment, Etc. -------------- No amendment, modification or waiver of any provision of this Indenture relating to any Guarantor or consent to any departure by any Guarantor or any other Person from any such provision will in any event be effective unless it is signed by such Guarantor and the Trustee. SECTION 11.18. Acknowledgment. -------------- Each Guarantor hereby acknowledges communication of the terms of this Indenture and the Securities and consents to and approves of the same. -125- SECTION 11.19. Costs and Expenses. ------------------ Each Guarantor shall pay on demand by the Trustee any and all costs, fees and expenses (including, without limitation, legal fees on a solicitor and client basis) incurred by the Trustee, its agents, advisors and counsel or any of the Holders in enforcing any of their rights under any Guarantee. SECTION 11.20. No Merger or Waiver; Cumulative Remedies. ---------------------------------------- No Guarantee shall operate by way of merger of any of the obligations of a Guarantor under any other agreement, including, without limitation, this Indenture. No failure to exercise and no delay in exercising, on the part of the Trustee or the Holders, any right, remedy, power or privilege hereunder or under this Indenture or the Securities, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder or under this Indenture or the Securities preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges in the Guarantee and under this Indenture, the Securities and any other document or instrument between a Guarantor and/or the Company and the Trustee are cumulative and not exclusive of any rights, remedies, powers and privilege provided by law. SECTION 11.21. Survival of Obligations. ----------------------- Without prejudice to the survival of any of the other obligations of each Guarantor hereunder, the obligations of each Guarantor under Section 11.01 shall survive the payment in full of the Obligations under the Securities, but only if and to the extent such payment is avoided, and in such case shall be enforceable against such Guarantor to the same extent as prior to any such payment and without regard to and without giving effect to any defense, right of offset or counterclaim available to or which may be asserted by the Company or any Guarantor. SECTION 11.22. Guarantee in Addition to Other Obligations. ------------------------------------------ The Obligations of each Guarantor under its Guarantee and this Indenture are in addition to and not in substitution for any other Obligations to the Trustee or to any of the Holders in relation to this Indenture or the Securities and any guarantees or security at any time held by or for the benefit of any of them. -126- SECTION 11.23. Severability. ------------ Any provision of this Article Eleven which is prohibited or unenforceable in any jurisdiction shall not invalidate the remaining provisions and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction unless its removal would substantially defeat the basic intent, spirit and purpose of this Indenture and this Article Eleven. SECTION 11.24. Successors and Assigns. ---------------------- Each Guarantee shall be binding upon and inure to the benefit of each Guarantor and the Trustee and the other Holders and their respective successors and permitted assigns, except that no Guarantor may assign any of its obligations hereunder or thereunder. ARTICLE TWELVE SUBORDINATION OF GUARANTEE SECTION 12.01. Guarantee Obligations Subordinated to Guarantor Senior Debt. ---------------------------------- Anything herein to the contrary notwithstanding, each of the Guarantors, for itself and its successors, and each Holder, by his or her acceptance of Guarantees, agrees that the payment of all Obligations owing to the Holders in respect of its Guarantee (collectively, as to any Guarantor, its "Guarantee Obligations") is subordinated, to the extent and in the manner --------------------- provided in this Article Twelve, to the prior payment in full in cash or Cash Equivalents, or such payment duly provided for to the satisfaction of the holders of Guarantor Senior Debt, of all Obligations on Guarantor Senior Debt of such Guarantor. This Article Twelve shall constitute a continuing offer to all Persons who become holders of, or continue to hold, Guarantor Senior Debt, and such provisions are made for the benefit of the holders of Guarantor Senior Debt and such holders are made obligees hereunder and any one or more of them may enforce such provisions. -127- SECTION 12.02. Suspension of Guarantee Obligations When Guarantor Senior Debt Is in Default. ---------------------------------------- (a) Unless Section 12.03 shall be applicable, if any payment default occurs and is continuing with respect to any Guarantor Senior Debt, then no payment of any kind or character shall be made by or on behalf of such Guarantor or any other Person on its behalf with respect to any Guarantee Obligations or to acquire any of the Securities for cash or property or otherwise and until such payment default shall have been cured or waived or shall have ceased to exist or such Guarantor Senior Debt shall have been discharged or paid in full in cash or Cash Equivalents, after which such Guarantor shall (subject to the other provisions of this Article Twelve) resume making any and all required payments in respect of its obligations under this Guarantee, including any missed payments. (b) At any time while any Payment Blockage Period is in existence, neither any Guarantor nor any other Person on any Guarantor's behalf shall (x) make any payment of any kind or character with respect to any Obligations on its Guarantee or (y) acquire any of the Securities for cash or otherwise. (c) In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee or any Holder when such payment is prohibited by the foregoing provisions of this Section 12.02, such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Guarantor Senior Debt (pro rata to such holders on the basis of the respective --- ---- amount of Guarantor Senior Debt held by such holders) or their respective Representatives, as their respective interests may appear. The Trustee shall be entitled to rely on information regarding amounts then due and owing on the Guarantor Senior Debt, if any, received from the holders of Guarantor Senior Debt (or their Representatives) or, if such information is not received from such holders or their Representatives, from a Guarantor and only amounts included in the information provided to the Trustee shall be paid to the holders of Guarantor Senior Debt. SECTION 12.03. Guarantee Obligations Subordinated to Prior Payment of All Guarantor Senior Debt on Dissolution, Liquidation or Reorganization of Such Guarantor. ------------------------------------- (a) Upon any payment or distribution of assets of any Guarantor of any kind or character, whether in cash, property or securities, to creditors upon any liquidation, dissolu- -128- tion, winding-up, reorganization, assignment for the benefit of creditors or marshaling of assets of such Guarantor or in a bankruptcy, reorganization, insolvency, receivership or other similar proceeding relating to such Guarantor or its property, whether voluntary or involuntary, all Obligations due or to become due upon all Guarantor Senior Debt shall first be paid in full in cash or Cash Equivalents, or such payment duly provided for to the satisfaction of the holders of Guarantor Senior Debt, before any payment or distribution of any kind or character is made on account of any Guarantee Obligations or for the acquisition of any of the Securities for cash or property or otherwise. Upon any such dissolution, winding-up, liquidation, reorganization, receivership or similar proceeding, any payment or distribution of assets of such Guarantor of any kind or character, whether in cash, property or securities, to which the Holders or the Trustee under this Indenture would be entitled, except for the provisions hereof, shall be paid by such Guarantor or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Holders or by the Trustee under this Indenture if received by them, directly to the holders of Guarantor Senior Debt (pro rata to -------- such holders on the basis of the respective amounts of Guarantor Senior Debt held by such holders) or their respective Representatives, or to the trustee or trustees under any indenture pursuant to which any of such Guarantor Senior Debt may have been issued, as their respective interests may appear, for application to the payment of Guarantor Senior Debt remaining unpaid until all such Guarantor Senior Debt has been paid in full in cash or Cash Equivalents after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of Guarantor Senior Debt. (b) To the extent any payment of Guarantor Senior Debt (whether by or on behalf of a Guarantor, as proceeds of security or enforcement of any right of setoff or otherwise) is declared to be fraudulent or preferential, set aside or required to be paid to any receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person under any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then, if such payment is recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person, the Guarantor Senior Debt or part thereof originally intended to be satisfied shall be deemed to be reinstated and outstanding as if such payment had not occurred. -129- (c) In the event that, notwithstanding the foregoing, any payment or distribution of assets of any Guarantor of any kind or character, whether in cash, property or securities, shall be received by any Holder when such payment or distribution is prohibited by this Section 12.03(c), such payment or distribution shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Guarantor Senior Debt (pro rata to such holders --- ---- on the basis of the respective amount of Guarantor Senior Debt held by such holders) or their respective Representatives, or to the trustee or trustees under any indenture pursuant to which any of such Guarantor Senior Debt may have been issued, as their respective interests may appear, for application to the payment of Guarantor Senior Debt remaining unpaid until all such Guarantor Senior Debt has been paid in full in cash or Cash Equivalents, after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of such Guarantor Senior Debt. (d) The consolidation of any Guarantor with, or the merger of any Guarantor with or into, another corporation or the liquidation or dissolution of a Guarantor following the conveyance or transfer of all or substantially all of its assets, to another corporation upon the terms and conditions provided in Article Five hereof and as long as permitted under the terms of the Guarantor Senior Debt shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, assumes the Guarantee of such Guarantor hereunder in accordance with Article Five hereof. SECTION 12.04. Payments May Be Paid Prior to Dissolution. -------------------------- Nothing contained in this Article Twelve or elsewhere in this Indenture shall prevent (i) any Guarantor, except under the conditions described in Sections 12.02 and 12.03, from making payments at any time for the purpose of making payments on Guarantee Obligations, or from depositing with the Trustee any moneys for such payments, or (ii) in the absence of actual knowledge by the Trustee that a given payment would be prohibited by Section 12.02 or 12.03, the application by the Trustee of any moneys deposited with it for the purpose of making such payments on Guarantee Obligations to the Holders entitled thereto unless at least two Business Days prior to the date upon which such payment would otherwise become due and payable a Responsible Officer shall have actually received the written -130- notice provided for in the first sentence of Section 10.02(b) or in Section 12.07 (provided that, notwithstanding the foregoing, the Holders receiving any -------- payments made in contravention of Sections 12.02 and/or 12.03 (and the respective such payments) shall otherwise be subject to the provisions of Section 12.02(a) and Section 12.03). Each Guarantor shall give prompt written notice to the Trustee of any dissolution, winding-up, liquidation or reorganization of such Guarantor, although any delay or failure to give any such notice shall have no effect on the subordination provisions contained herein. SECTION 12.05. Holders of Guarantee Obligations To Be Subrogated to Rights of Holders of Guarantor Senior Debt. -------------------------------- Subject to the payment in full in cash or Cash Equivalents of all Guarantor Senior Debt, the Holders of Guarantee Obligations of any Guarantor shall be subrogated to the rights of the holders of Guarantor Senior Debt of such Guarantor to receive payments or distributions of cash, property or securities of such Guarantor applicable to such Guarantor Senior Debt until all amounts owing on or in respect of the Guarantee Obligations shall be paid in full; and, for the purposes of such subrogation, no such payments or distributions to the holders of such Guarantor Senior Debt by or on behalf of such Guarantor, or by or on behalf of the Holders by virtue of this Article Twelve, which otherwise would have been made to the Holders shall, as between such Guarantor and the Holders, be deemed to be a payment by such Guarantor to or on account of such Guarantor Senior Debt, it being understood that the provisions of this Article Twelve are and are intended solely for the purpose of defining the relative rights of the Holders, on the one hand, and the holders of Guarantor Senior Debt, on the other hand. SECTION 12.06. Obligations of the Guarantors Unconditional. ------------------------------------------- Nothing contained in this Article Twelve or elsewhere in this Indenture or in the Guarantees is intended to or shall impair, as among the Guarantors, their creditors other than the holders of Guarantor Senior Debt, and the Holders, the obligation of the Guarantors, which is absolute and unconditional, to pay to the Holders all amounts due and payable under the Guarantees as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders and creditors of the Guarantors other than the holders of the Guarantor Senior Debt, nor shall anything herein or therein prevent any Holder or the -131- Trustee on its behalf from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, in respect of cash, property or securities of the Guarantors received upon the exercise of any such remedy. SECTION 12.07. Notice to Trustee. ----------------- Each Guarantor shall give prompt written notice to the Trustee of any fact known to such Guarantor which would prohibit the making of any payment to or by the Trustee in respect of the Guarantees pursuant to the provisions of this Article Twelve, although any delay or failure to give any such notice shall have no effect on the subordination provisions contained herein. Regardless of anything to the contrary contained in this Article Twelve or elsewhere in this Indenture, the Trustee shall not be charged with knowledge of the existence of any default or event of default with respect to any Guarantor Senior Debt or of any other facts which would prohibit the making of any payment to or by the Trustee unless and until the Trustee shall have received notice in writing from a Guarantor, or from a holder of Guarantor Senior Debt or a Representative therefor, and, prior to the receipt of any such written notice, the Trustee shall be entitled to assume (in the absence of actual knowledge to the contrary) that no such facts exist. The Trustee shall be entitled to rely on the delivery to it of any notice pursuant to this Section 12.07 to establish that such notice has been given by a holder of Guarantor Senior Debt (or a Representative therefor). In the event that the Trustee determines in good faith that any evidence is required with respect to the right of any Person as a holder of Guarantor Senior Debt to participate in any payment or distribution pursuant to this Article Twelve, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amounts of Guarantor Senior Debt held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article Twelve, and if such evidence is not furnished the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. -132- SECTION 12.08. Reliance on Judicial Order or Certificate of Liquidating Agent. -------------------------------- Upon any payment or distribution of assets of a Guarantor referred to in this Article Twelve, the Trustee, subject to the provisions of Article Seven hereof, and the Holders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which any insolvency, bankruptcy, receivership, dissolution, winding-up, liquidation, reorganization or similar case or proceeding is pending, or upon a certificate of the trustee in bankruptcy, liquidating trustee, receiver, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Trustee or the Holders, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Guarantor Senior Debt and other Indebtedness of such Guarantor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article Twelve. SECTION 12.09. Trustee's Relation to Guarantor Senior Debt. ------------------------------------------- The Trustee and any agent of a Guarantor or the Trustee shall be entitled to all the rights set forth in this Article Twelve with respect to any Guarantor Senior Debt which may at any time be held by it in its individual or any other capacity to the same extent as any other holder of Guarantor Senior Debt and nothing in this Indenture shall deprive the Trustee or any such agent of any of its rights as such holder. With respect to the holders of Guarantor Senior Debt, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article Twelve, and no implied covenants or obligations with respect to the holders of Guarantor Senior Debt shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Guarantor Senior Debt. Whenever a distribution is to be made or a notice given to holders or owners of Guarantor Senior Debt, the distribution may be made and the notice may be given to their Representative, if any. -133- SECTION 12.10. Subordination Rights Not Impaired by Acts or Omissions of the Guarantors or Holders of Guarantor Senior Debt. -------------------------------------- No right of any present or future holders of any Guarantor Senior Debt to enforce subordination as provided herein shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of any Guarantor or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by any Guarantor with the terms of this Indenture, regardless of any knowledge thereof which any such holder may have or otherwise be charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Guarantor Senior Debt may, at any time and from time to time, without the consent of or notice to the Trustee, without incurring responsibility to the Trustee or the Holders of the Securities and without impairing or releasing the subordination provided in this Article Twelve or the obligations hereunder of the Holders of the Securities to the holders of Guarantor Senior Debt, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Guarantor Senior Debt, or otherwise amend or supplement in any manner Guarantor Senior Debt, or any instrument evidencing the same or any agreement under which Guarantor Senior Debt is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Guarantor Senior Debt; (iii) release any Person liable in any manner for the payment or collection of Guarantor Senior Debt; and (iv) exercise or refrain from exercising any rights against the Guarantors and any other Person. SECTION 12.11. Holders Authorize Trustee To Effectuate Subordination of Guarantee Obligations. --------------------------------------- Each Holder of Guarantee Obligations by its acceptance of them authorizes and expressly directs the Trustee on its behalf to take such action as may be necessary or appropriate to effectuate, as between the holders of Guarantor Senior Debt and the Holders, the subordination provided in this Article Twelve, and appoints the Trustee its attorney-in-fact for such purposes, including, in the event of any dissolution, winding-up, liquidation or reorganization of any Guarantor (whether in bankruptcy, insolvency, receivership, reorganization or similar proceedings or upon an assignment for the benefit of credits or otherwise) tending towards liquidation of the business and assets of any Guarantor, the filing of a claim -134- for the unpaid balance under its Guarantee Obligations and accrued interest in the form required in those proceedings. If the Trustee does not file a proper claim or proof of debt in the form required in such proceeding prior to 30 days before the expiration of the time to file such claim or claims, then the holders of the Guarantor Senior Debt or their Representative are or is hereby authorized to have the right to file and are or is hereby authorized to file an appropriate claim for and on behalf of the Holders of said Guarantee Obligations. Nothing herein contained shall be deemed to authorize the Trustee or the holders of Guarantor Senior Debt or their Representative to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Guarantee Obligations or the rights of any Holder thereof, or to authorize the Trustee or the holders of Guarantor Senior Debt or their Representative to vote in respect of the claim of any Holder in any such proceeding. SECTION 12.12. This Article Twelve Not To Prevent Events of Default. -------------------------- The failure to make a payment on account of principal of or interest on the Guarantees by reason of any provision of this Article Twelve will not be construed as preventing the occurrence of an Event of Default. SECTION 12.13. Trustee's Compensation Not Prejudiced. --------------- Nothing in this Article Twelve will apply to amounts due to the Trustee pursuant to other sections of this Indenture. ARTICLE THIRTEEN MISCELLANEOUS SECTION 13.01. TIA Controls. ------------ If any provision of this Indenture limits, qualifies, or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control. -135- SECTION 13.02. Notices. ------- Any notices or other communications required or permitted hereunder shall be in writing, and shall be sufficiently given if made by hand delivery, by telex, by telecopier or registered or certified mail, postage prepaid, return receipt requested, addressed as follows: if to the Company or a Guarantor: Pacer International, Inc. 3746 Mt. Diablo Blvd., Suite 110 Lafayette, CA 94549 Attention: Donald C. Orris Telephone: (925) 284-7145 Telecopy: (925) 299-1939 with a copy to: Dewey Ballantine LLP 1301 Avenue of the Americas New York, New York 10019 Attention: Morton A. Pierce Douglas L. Getter Telephone: (212) 259-8000 Telecopy: (212) 259-6333 if to the Trustee for purposes of Section 2.03 and 4.06: Wilmington Trust Company c/o Wilmington Trust FSB 520 Madison Avenue, 33rd Floor New York, New York 10022 if to the Trustee for any other purpose: Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, DE 19890 Attention: Corporate Trust Administration Telephone: (302) 651-8681 Telecopy: (302) 651-8882 -136- Each of the Company and the Trustee by written notice to each other such Person may designate additional or different addresses for notices to such Person. Any notice or communication to the Company and the Trustee, shall be deemed to have been given or made as of the date so delivered if personally delivered; when answered back, if telexed; when receipt is acknowledged, if telecopied; and five (5) calendar days after mailing if sent by registered or certified mail, postage prepaid (except that a notice of change of address shall not be deemed to have been given until actually received by the addressee). Any notice or communication mailed to a Securityholder shall be mailed to him by first class mail or other equivalent means at his address as it appears on the registration books of the Registrar and shall be sufficiently given to him if so mailed within the time prescribed. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. SECTION 13.03. Communications by Holders with Other Holders. ------------------------- Securityholders may communicate pursuant to TIA (S) 312(b) with other Securityholders with respect to their rights under this Indenture, the Securities or the Guarantees. The Company, the Trustee, the Registrar and any other Person shall have the protection of TIA (S) 312(c). SECTION 13.04. Certificate and Opinion as to Conditions Precedent. -------------------------- Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee at the request of the Trustee: (1) an Officers' Certificate, in form and substance satisfactory to the Trustee, stating that, in the opinion of the signers, all conditions precedent to be performed or effected by the Company, if any, provided for in this Indenture relating to the proposed action have been complied with; and -137- (2) an Opinion of Counsel stating that, in the opinion of such counsel, any and all such conditions precedent have been complied with. SECTION 13.05. Statements Required in Certificate or Opinion. ---------------------- Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture, other than the Officers' Certificate required by Section 4.08, shall include: (1) a statement that the Person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such Person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of each such Person, such condition or covenant has been complied with; provided, -------- however, that with respect to matters of fact an Opinion of Counsel may ------- rely on an Officers' Certificate or certificates of public officials. SECTION 13.06. Rules by Trustee, Paying Agent, Registrar. ----------------------------------------- The Trustee, Paying Agent or Registrar may make reasonable rules for its functions. SECTION 13.07. Legal Holidays. -------------- If a payment date is not a Business Day, payment may be made on the next succeeding day that is a Business Day. SECTION 13.08. Governing Law. ------------- THIS INDENTURE, THE SECURITIES AND THE GUARANTEES WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO -138- PRINCIPLES OF CONFLICTS OF LAW. Each of the parties hereto agrees to submit to the jurisdiction of the courts of the State of New York in any action or proceeding arising out of or relating to this Indenture, the Securities or the Guarantees. SECTION 13.09. No Adverse Interpretation of Other Agreements. ---------------------------------------------- This Indenture may not be used to interpret another indenture, loan or debt agreement of any of the Company or any of its Subsidiaries. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 13.10. No Recourse Against Others. -------------------------- No director, officer, employee or stockholder of the Company or any Subsidiary, as such, shall have any liability for any obligations of the Company under the Securities, this Indenture or the Guarantees or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Securityholder by accepting a Security waives and releases all such liability. Such waiver and release are part of the consideration for the issuance of the Securities. SECTION 13.11. Successors. ---------- All agreements of the Company and the Guarantors in this Indenture, the Securities and the Guarantees shall bind their respective successors. All agreements of the Trustee in this Indenture shall bind its successor. SECTION 13.12. Duplicate Originals. ------------------- All parties may sign any number of copies of this Indenture. Each signed copy or counterpart shall be an original, but all of them together shall represent the same agreement. SECTION 13.13. Severability. ------------ In case any one or more of the provisions in this Indenture, in the Securities or in the Guarantees shall be held invalid, illegal or unenforceable, in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions shall not in any way be affected or impaired thereby, it being intended that all of the provisions hereof shall be enforceable to the full extent permitted by law. S-1 SIGNATURES IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the date first written above. ISSUER PACER INTERNATIONAL, INC., By: /s/ Donald C. Orris __________________________ Name: Donald C. Orris Title: Chairman, President and Chief Executive Officer S-2 GUARANTORS PACER LOGISTICS, INC., CROSS CON TRANSPORT, INC., CROSS CON TERMINALS, INC., PACIFIC MOTOR TRANSPORT COMPANY, PACER EXPRESS, INC., PACER INTEGRATED LOGISTICS, INC., PLM ACQUISITION CORPORATION, MANUFACTURERS CONSOLIDATION SERVICE, INC., LEVCON, INC., MANUFACTURERS CONSOLIDATION SERVICE OF CANADA, INC., INTERSTATE CONSOLIDATION SERVICE, INC., INTERSTATE CONSOLIDATION, INC., INTERMODAL CONTAINER SERVICE, INC., KEYSTONE TERMINALS ACQUISITION CORP. By: /s/ Lawrence C. Yarberry __________________________ Name: Lawrence C. Yarberry Title: Executive Vice President S-3 PACER INTERNATIONAL RAIL SERVICES LLC, PACER INTERNATIONAL CONSULTING LLC, PACER RAIL SERVICES LLC, By: PACER LOGISTICS, INC., as Manager By: /s/ Lawrence C. Yarberry __________________________ Name: Lawrence C. Yarberry Title: Executive Vice President S-4 WILMINGTON TRUST COMPANY, as Trustee By: /s/ James D. Nesci ___________________________ Name: James D. Nesci Title: Authorized Signer Exhibit A --------- [FORM OF INITIAL NOTE] [FACE OF SECURITY] PACER INTERNATIONAL, INC. 11 3/4% Senior Subordinated Note due 2007 CUSIP No. No. $ PACER INTERNATIONAL, INC., a Tennessee corporation (the "Company", which term includes any successor corporation), for value received promises to pay to or registered assigns, the principal sum of $ Dollars, on June 1, 2007. Interest Payment Dates: June 1 and December 1, commencing December 1, 1999. Record Dates: May 15 and November 15. Reference is made to the further provisions of this Security contained herein, which will for all purposes have the same effect as if set forth at this place. IN WITNESS WHEREOF, the Company has caused this Security to be signed manually or by facsimile by its duly authorized officers. Dated: PACER INTERNATIONAL, INC. By: ______________________ Name: Title: By: ______________________ Name Title: -2- [FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This is one of the 11 3/4% Senior Subordinated Notes due 2007 described in the within-mentioned Indenture. WILMINGTON TRUST COMPANY, as Trustee By: _________________________ Authorized Signatory -3- [REVERSE OF SECURITY] PACER INTERNATIONAL, INC. 11 3/4% Senior Subordinated Note due 2007 1. Interest. -------- PACER INTERNATIONAL, INC., a Tennessee corporation (the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company will pay interest semi-annually on June 1 and December 1 of each year (the "Interest Payment Date"), commencing December 1, 1999. Interest on this Security will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from and including May 28, 1999. Interest on this Security will be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal from time to time on demand at the rate borne by this Security plus 2% and on overdue installments of interest (without regard to any applicable grace periods) to the extent lawful. 2. Method of Payment. ----------------- The Company shall pay interest on the Securities (except defaulted interest) to the Persons who are the registered Holders at the close of business on the Record Date immediately preceding the Interest Payment Date even if the Securities are canceled on registration of transfer or registration of exchange (including pursuant to an Exchange Offer (as defined in the Indenture)) after such Record Date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company shall pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts ("U.S. Legal Tender"). However, the Company may pay principal and interest by wire transfer of federal funds, or interest by check payable in such U.S. Legal Tender. The Company may deliver any such interest payment to the Paying Agent or to a Holder at the Holder's registered address. -4- 3. Paying Agent and Registrar. -------------------------- Initially, Wilmington Trust Company (the "Trustee") will act as Paying Agent and Registrar. The Company may change any Paying Agent, Registrar or co- Registrar without notice to the Holders. The Company or any of its Subsidiaries may, subject to certain exceptions, act as Registrar or co-Registrar. 4. Indenture. --------- The Company issued the Securities under an Indenture, dated as of May 28, 1999 (the "Indenture"), among the Company, the Guarantors named therein and the Trustee. This Security is one of a duly authorized issue of Initial Notes of the Company designated as its 11 3/4% Senior Subordinated Notes due 2007 (the "Initial Notes"). Capitalized terms herein are used as defined in the Indenture unless otherwise defined herein. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture until such time as the Indenture is qualified under the TIA, and thereafter as in effect on the date on which the Indenture is qualified under the TIA. Notwithstanding anything to the contrary herein, the Securities are subject to all such terms, and Holders of Securities are referred to the Indenture and the TIA for a statement of them. The Securities are general obligations of the Company unlimited in amount, of which an aggregate principal amount of $150,000,000 are being issued on the Issue Date. 5. Subordination. ------------- The Securities are subordinated in right of payment, in the manner and to the extent set forth in the Indenture, to the prior payment in full in cash or Cash Equivalents of all Senior Debt of the Company, whether outstanding on the date of the Indenture or thereafter created, incurred, assumed or guaranteed. Each Holder by his acceptance hereof agrees to be bound by such provisions and authorizes and expressly directs the Trustee, on his behalf, to take such action as may be necessary or appropriate to effectuate the subordination provided for in the Indenture and appoints the Trustee his attorney-in-fact for such purposes. 6. Optional Redemption. ------------------- The Company may redeem the Securities, in whole at any time or in part from time to time, on and after June 1, -5- 2003, upon not less than 30 nor more than 60 days' notice, at the following redemption prices (expressed as percentages of the principal amount thereof) if redeemed during the twelve-month period commencing on June 1 of the years set forth below, plus, in each case, accrued and unpaid interest thereon, if any, to the date of redemption: Year Percentage ---- ---------- 2003.................................. 105.875% 2004.................................. 102.938% 2005 and thereafter................... 100.000% In addition, at any time prior to June 1, 2003, upon the occurrence of a Change of Control, the Company may redeem the Securities, in whole but not in part, at a redemption price equal to the principal amount thereof plus the Applicable Premium plus accrued and unpaid interest, if any, to the date of redemption. Notice of redemption of the Securities pursuant to this paragraph shall be mailed to Holders of the Securities not more than 30 days following the occurrence of a Change of Control. The Company may not redeem Securities pursuant to this paragraph if it has made an offer to repurchase Securities with respect to such Change of Control. 7. Optional Redemption upon Equity Offerings. ----------------------------------------- At any time, or from time to time, on or prior to June 1, 2002, the Company may, at its option, use the net cash proceeds of one or more Equity Offerings to redeem up to 35% in aggregate principal amount of the Securities originally issued under the Indenture at a redemption price equal to 111.750% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the date of redemption; provided, however, that after any such redemption the -------- ------- aggregate principal amount of the Securities outstanding must equal at least 65% of the aggregate amount of the Securities originally issued under the Indenture. In order to effect the foregoing redemption with the net cash proceeds of any Equity Offering, the Company shall make such redemption not more than 120 days after the consummation of any such Equity Offering. As used in the preceding paragraph, "Equity Offering" means a public or private sale of Qualified Capital Stock (other than public offerings with respect to the Company's Common Stock on Form S-8) of the Company. -6- 8. Notice of Redemption. -------------------- Notice of redemption shall be mailed by first-class mail at least 30 days but not more than 60 days before the Redemption Date to each Holder of Securities to be redeemed at such Holder's registered address. Securities in denominations of $1,000 may be redeemed only in whole. The Trustee may select for redemption portions (equal to $1,000 or any integral multiple thereof) of the principal of Securities that have denominations larger than $1,000. If any Security is to be redeemed in part only, the notice of redemption that relates to such Security shall state the portion of the principal amount thereof to be redeemed. A new Security in a principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Security. On and after the Redemption Date, interest will cease to accrue on Securities or portions thereof called for redemption, subject to the provisions of the Indenture. 9. Change of Control Offer. ----------------------- Upon the occurrence of a Change of Control, the Company will be required to offer to purchase all of the outstanding Securities at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, thereon to the date of repurchase. 10. Limitation on Asset Sales. ------------------------- The Company is, subject to certain conditions, obligated to make an offer to purchase Securities at 100% of their principal amount, plus accrued and unpaid interest, if any, thereon to the date of repurchase with certain net cash proceeds of certain sales or other dispositions of assets in accordance with the Indenture. 11. Registration Rights. ------------------- Pursuant to the Registration Rights Agreement, the Company will be obligated to consummate an exchange offer pursuant to which the Holder of this Security shall have the right to exchange this Security for the Company's 11 3/4% Series B Senior Subordinated Notes due 2007 (the "Exchange Notes"), which shall have been registered under the Securities Act, in like principal amount and having terms identical in all material respects to the Initial Notes. The Holders of the Initial -7- Notes shall be entitled to receive certain additional interest payments in the event such exchange offer is not consummated and upon certain other conditions, all pursuant to and in accordance with the terms of the Registration Rights Agreement. 12. Denominations; Transfer; Exchange. --------------------------------- The Securities are in registered form, without coupons, in denominations of $1,000 and integral multiples of $1,000. A Holder shall register the transfer of or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay certain transfer taxes or similar governmental charges payable in connection therewith as permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities or portions thereof selected for redemption, except the unredeemed portion of any security being redeemed in part. 13. Persons Deemed Owners. --------------------- The registered Holder of a Security shall be treated as the owner of it for all purposes. 14. Unclaimed Funds. --------------- If funds for the payment of principal or interest remain unclaimed for one year, the Trustee and the Paying Agent will repay the funds to the Company at its request. After that, all liability of the Trustee and such Paying Agent with respect to such funds shall cease. 15. Discharge Prior to Redemption or Maturity. ----------------------------------------- The Company and the Guarantors may be discharged from their obligations under the Indenture, the Securities and the Guarantees except for certain provisions thereof, and may be discharged from obligations to comply with certain covenants contained in the Indenture, the Securities and the Guarantees, in each case upon satisfaction of certain conditions specified in the Indenture. 16. Amendment; Supplement; Waiver. ----------------------------- Subject to certain exceptions, the Indenture, the Securities and the Guarantees may be amended or supplemented with the written consent of the Holders of at least a majority in aggregate principal amount of the Securities then outstanding, -8- and any existing Default or Event of Default or compliance with any provision may be waived with the consent of the Holders of a majority in aggregate principal amount of the Securities then outstanding. Without notice to or consent of any Holder, the parties thereto may amend or supplement the Indenture, the Securities and the Guarantees to, among other things, cure any ambiguity, defect or inconsistency, provide for uncertificated Securities in addition to or in place of certificated Securities or comply with any requirements of the Commission in connection with the qualification of the Indenture under the TIA, or make any other change that does not materially adversely affect the rights of any Holder of a Security. 17. Restrictive Covenants. --------------------- The Indenture contains certain covenants that, among other things, limit the ability of the Company and its Restricted Subsidiaries to make restricted payments, to incur indebtedness, to create liens, to sell assets, to permit restrictions on dividends and other payments by Restricted Subsidiaries of the Company to the Company, to consolidate, merge or sell all or substantially all of its assets or to engage in transactions with affiliates. The limitations are subject to a number of important qualifications and exceptions. The Company must annually report to the Trustee on compliance with such limitations. 18. Defaults and Remedies. --------------------- If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of Securities then outstanding may declare all the Securities to be due and payable immediately in the manner and with the effect provided in the Indenture. Holders of Securities may not enforce the Indenture, the Securities or the Guarantees except as provided in the Indenture. The Trustee is not obligated to enforce the Indenture, the Securities or the Guarantees unless it has received indemnity satisfactory to it. The Indenture permits, subject to certain limitations therein provided, Holders of a majority in aggregate principal amount of the Securities then outstanding to direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of Securities notice of certain continuing Defaults or Events of Default if it determines that withholding notice is in their interest. 19. Trustee Dealings with Company. ----------------------------- -9- The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Company, its Subsidiaries or their respective Affiliates as if it were not the Trustee. 20. No Recourse Against Others. -------------------------- No stockholder, director, officer or employee, as such, of the Company shall have any liability for any obligation of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Holder of a Security by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Securities. 21. Authentication. -------------- This Security shall not be valid until the Trustee or authenticating agent signs the certificate of authentication on this Security. 22. Abbreviations and Defined Terms. ------------------------------- Customary abbreviations may be used in the name of a Holder of a Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 23. Governing Law. ------------- This Security shall be governed by, and construed in accordance with, the laws of the State of New York without giving effect to applicable principles of conflicts of laws to the extent that the application of the laws of another jurisdiction would be required thereby. 24. CUSIP Numbers. ------------- Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Securities as a convenience to the Holders of the Securities. No representation is made as to the accuracy of such numbers as printed on the Securities and reliance may be placed only on the other identification numbers printed hereon. -10- 25. Indenture. --------- Each Holder, by accepting a Security, agrees to be bound by all of the terms and provisions of the Indenture, as the same may be amended from time to time. The Company will furnish to any Holder of a Security upon written request and without charge a copy of the Indenture which has the text of this Security in larger type. Requests may be made to: Pacer International, Inc., 3746 Mt. Diablo Blvd. Suite 110, Lafayette, CA 94549, Attn: Donald C. Orris. ASSIGNMENT FORM I or we assign and transfer this Security to ______________________________________________________________________________ ______________________________________________________________________________ (Print or type name, address and zip code of assignee or transferee) ______________________________________________________________________________ (Insert Social Security or other identifying number of assignee or transferee) and irrevocably appoint ______________________________________________________ agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. Dated: _________________ Signed: _________________________ (Sign exactly as name appears on the other side of this Security) Signature Guarantee: _______________________________________________ Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor program reasonably acceptable to the Trustee) In connection with any transfer of this Security occurring prior to the date which is the earlier of (i) the date of the declaration by the Commission of the effectiveness of a registration statement under the Securities Act of 1933, as amended (the "Securities Act") covering resales of this Security (which effectiveness shall not have been suspended or terminated at the date of the transfer) and (ii) May 28, 2001, the undersigned confirms that it has not utilized any general solicitation or general advertising in connection with the transfer and that this Security is being transferred: -2- [Check One] --------- (1) __ to the Company or a subsidiary thereof; or (2) __ pursuant to and in compliance with Rule 144A under the Securities Act; or (3) __ to an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) that has furnished to the Trustee a signed letter containing certain representations and agreements (the form of which letter can be obtained from the Trustee); or (4) __ outside the United States to a "foreign person" in compliance with Rule 904 of Regulation S under the Securities Act; or (5) __ pursuant to the exemption from registration provided by Rule 144 under the Securities Act; or (6) __ pursuant to an effective registration statement under the Securities Act; or (7) __ pursuant to another available exemption from the registration requirements of the Securities Act; and unless the box below is checked, the undersigned confirms that such Security is not being transferred to an "affiliate" of the Company as defined in Rule 144 under the Securities Act of 1933, as amended (an "Affiliate"): [_] The transferee is an Affiliate of the Company. Unless one of the items is checked, the Trustee will refuse to register any of the Securities evidenced by this certificate in the name of any person other than the registered Holder thereof; provided that if box (3), (4), -------- (5) or (7) is checked, the Company or the Trustee may require, prior to registering any such transfer of the Securities, in its sole discretion, such legal opinions, certifications (including an investment letter in the case of box (3) or (4)) and other information as the Trustee or the Company has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. -3- If none of the foregoing boxes is checked, the Trustee or Registrar shall not be obligated to register this Security in the name of any person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in Section 2.16 of the Indenture shall have been satisfied. Dated: __________________ Signed: ____________________________________ (Sign exactly as name appears on the other side of this Security) Signature Guarantee: _________________________________________ TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED The undersigned represents and warrants that it is purchasing this Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated: __________________ ________________________________ NOTICE: To be executed by an executive officer OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate box: Section 4.15 [ ] Section 4.16 [ ] If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the amount: $___________ Dated: _________________ Signed: _________________________ (Sign exactly as name appears on the other side of this Security) Signature Guarantee: ______________________________________ Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor program reasonably acceptable to the Trustee) EXHIBIT B --------- [FORM OF EXCHANGE NOTE] [FACE OF SECURITY] PACER INTERNATIONAL, INC. 11 3/4% Senior Subordinated Note due 2007 CUSIP No. No. $ PACER INTERNATIONAL, INC., a Tennessee corporation (the "Company", which term includes any successor corporation), for value received promises to pay to or registered assigns, the principal sum of $ Dollars, on June 1, 2007. Interest Payment Dates: June 1 and December 1, commencing December 1, 1999. Record Dates: May 15 and November 15. Reference is made to the further provisions of this Security contained herein, which will for all purposes have the same effect as if set forth at this place. IN WITNESS WHEREOF, the Company has caused this Security to be signed manually or by facsimile by its duly authorized officers. Dated: PACER INTERNATIONAL, INC. By: ______________________ Name: Title: By: ______________________ Name Title: -2- [FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This is one of the 11 3/4% Senior Subordinated Notes due 2007 described in the within-mentioned Indenture. WILMINGTON TRUST COMPANY, as Trustee By: __________________________ Authorized Signatory -3- [REVERSE OF SECURITY] PACER INTERNATIONAL, INC. 11 3/4% Senior Subordinated Note due 2007 1. Interest. -------- PACER INTERNATIONAL, INC., a Tennessee corporation (the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company will pay interest semi-annually on June 1 and December 1 of each year (the "Interest Payment Date"), commencing December 1, 1999. Interest on this Security will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from and including May 28, 1999. Interest on this Security will be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal from time to time on demand at the rate borne by this Security plus 2% and on overdue installments of interest (without regard to any applicable grace periods) to the extent lawful. 2. Method of Payment. ----------------- The Company shall pay interest on the Securities (except defaulted interest) to the persons who are the registered Holders at the close of business on the Record Date immediately preceding the Interest Payment Date even if the Securities are canceled on registration of transfer or registration of exchange after such Record Date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company shall pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts ("U.S. Legal Tender"). However, the Company may pay principal and interest by wire transfer of federal funds, or interest by check payable in such U.S. Legal Tender. The Company may deliver any such interest payment to the Paying Agent or to a Holder at the Holder's registered address. 3. Paying Agent and Registrar. -------------------------- Initially, Wilmington Trust Company (the "Trustee") will act as Paying Agent and Registrar. The Company may change -4- any paying Agent, Registrar or co-Registrar without notice to the Holders. The Company or any of its Subsidiaries may, subject to certain exceptions, act as Registrar or co-Registrar. 4. Indenture. --------- The Company issued the Securities under an Indenture, dated as of May 28, 1999 (the "Indenture"), among the Company, the Guarantors named therein and the Trustee. This Security is one of a duly authorized issue of Exchange Notes of the Company designated as its 11 3/4% Senior Subordinated Notes due 2007 (the "Exchange Notes"). Capitalized terms herein are used as defined in the Indenture unless otherwise defined herein. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture until such time as the Indenture is qualified under the TIA, and thereafter as in effect on the date on which the Indenture is qualified under the TIA. Notwithstanding anything to the contrary herein, the Securities are subject to all such terms, and Holders of Securities are referred to the Indenture and the TIA for a statement of them. The Securities are general obligations of the Company unlimited in amount, of which an aggregate principal amount of $150,000,000 are being issued on the Issue Date. 5. Subordination. ------------- The Securities are subordinated in right of payment, in the manner and to the extent set forth in the Indenture, to the prior payment in full in cash or Cash Equivalents of all Senior Debt of the Company, whether outstanding on the date of the Indenture or thereafter created, incurred, assumed or guaranteed. Each Holder by his acceptance hereof agrees to be bound by such provisions and authorizes and expressly directs the Trustee, on his behalf, to take such action as may be necessary or appropriate to effectuate the subordination provided for in the Indenture and appoints the Trustee his attorney-in-fact for such purposes. 6. Optional Redemption. ------------------- The Company may redeem the Securities, in whole at any time or in part from time to time, on and after June 1, 2003, upon not less than 30 nor more than 60 days' notice, at the following redemption prices (expressed as percentages of the principal amount thereof) if redeemed during the twelve-month period commencing on June 1 of the years set forth below, -5- plus, in each case, accrued and unpaid interest thereon, if any, to the date of redemption: Year Percentage ---- ---------- 2003....................................... 105.875% 2004....................................... 102.938% 2005 and thereafter........................ 100.000% In addition, at any time prior to June 1, 2003, upon the occurrence of a Change of Control, the Company may redeem the Securities, in whole but not in part, at a redemption price equal to the principal amount thereof plus the Applicable Premium plus accrued and unpaid interest, if any, to the date of redemption. Notice of redemption of the Securities pursuant to this paragraph shall be mailed to Holders of the Securities not more than 30 days following the occurrence of a Change of Control. The Company may not redeem Securities pursuant to this paragraph if it has made an offer to repurchase Securities with respect to such Change of Control. 7. Optional Redemption upon Equity Offerings. ----------------------------------------- At any time, or from time to time, on or prior to June 1, 2002, the Company may, at its option, use the net cash proceeds of one or more Equity Offerings to redeem up to 35% in aggregate principal amount of the Securities originally issued under the Indenture at a redemption price equal to 111.750% of the principal amount thereof plus accrued and unpaid interest thereon, if any, to the date of redemption; provided, however, that after any such redemption the -------- ------- aggregate principal amount of the Securities outstanding must equal at least 65% of the aggregate amount of the Securities originally issued under the Indenture. In order to effect the foregoing redemption with the net cash proceeds of any Equity Offering, the Company shall make such redemption not more than 120 days after the consummation of any such Equity Offering. As used in the preceding paragraph, "Equity Offering" means a public or private sale of Qualified Capital Stock (other than public offerings with respect to the Company's Common Stock on Form S-8) of the Company. 8. Notice of Redemption. -------------------- Notice of redemption shall be mailed by first-class mail at least 30 days but not more than 60 days before the Redemption Date to each Holder of Securities to be redeemed at -6- such Holder's registered address. Securities in denominations of $1,000 may be redeemed only in whole. The Trustee may select for redemption portions (equal to $1,000 or any integral multiple thereof) of the principal of Securities that have denominations larger than $1,000. If any Security is to be redeemed in part only, the notice of redemption that relates to such Security shall state the portion of the principal amount thereof to be redeemed. A new Security in a principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Security. On and after the Redemption Date, interest will cease to accrue on Securities or portions thereof called for redemption, subject to the provisions of the Indenture. 9. Change of Control Offer. ----------------------- Upon the occurrence of a Change of Control, the Company will be required to offer to purchase all of the outstanding Securities at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, thereon to the date of repurchase. 10. Limitation on Asset Sales. ------------------------- The Company is, subject to certain conditions, obligated to make an offer to purchase Securities at 100% of their principal amount, plus accrued and unpaid interest, if any, thereon to the date of repurchase with certain net cash proceeds of certain sales or other dispositions of assets in accordance with the Indenture. 11. Denominations; Transfer; Exchange. --------------------------------- The Securities are in registered form, without coupons, in denominations of $1,000 and integral multiples of $1,000. A Holder shall register the transfer of or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay certain transfer taxes or similar governmental charges payable in connection therewith as permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities or portions thereof selected for redemption, except the unredeemed portion of any security being redeemed in part. -7- 12. Persons Deemed Owners. --------------------- The registered Holder of a Security shall be treated as the owner of it for all purposes. 13. Unclaimed Funds. --------------- If funds for the payment of principal or interest remain unclaimed for one year, the Trustee and the Paying Agent will repay the funds to the Company at its request. After that, all liability of the Trustee and such Paying Agent with respect to such funds shall cease. 14. Discharge Prior to Redemption or Maturity. ----------------------------------------- The Company and the Guarantors may be discharged from their obligations under the Indenture, the Securities and the Guarantees except for certain provisions thereof, and may be discharged from obligations to comply with certain covenants contained in the Indenture, the Securities and the Guarantees, in each case upon satisfaction of certain conditions specified in the Indenture. 15. Amendment; Supplement; Waiver. ----------------------------- Subject to certain exceptions, the Indenture, the Securities and the Guarantees may be amended or supplemented with the written consent of the Holders of at least a majority in aggregate principal amount of the Securities then outstanding, and any existing Default or Event of Default or compliance with any provision may be waived with the consent of the Holders of a majority in aggregate principal amount of the Securities then outstanding. Without notice to or consent of any Holder, the parties thereto may amend or supplement the Indenture, the Securities and the Guarantees to, among other things, cure any ambiguity, defect or inconsistency, provide for uncertificated Securities in addition to or in place of certificated Securities or comply with any requirements of the Commission in connection with the qualification of the Indenture under the TIA, or make any other change that does not materially adversely affect the rights of any Holder of a Security. 16. Restrictive Covenants. --------------------- The Indenture contains certain covenants that, among other things, limit the ability of the Company and its Restricted Subsidiaries to make restricted payments, to incur indebtedness, to create liens, to sell assets, to permit restric- -8- tions on dividends and other payments by Restricted Subsidiaries of the Company to the Company, to consolidate, merge or sell all or substantially all of its assets or to engage in transactions with affiliates. The limitations are subject to a number of important qualifications and exceptions. The Company must annually report to the Trustee on compliance with such limitations. 17. Defaults and Remedies. --------------------- If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of Securities then outstanding may declare all the Securities to be due and payable immediately in the manner and with the effect provided in the Indenture. Holders of Securities may not enforce the Indenture, the Securities or the Guarantees except as provided in the Indenture. The Trustee is not obligated to enforce the Indenture, the Securities or the Guarantees unless it has received indemnity satisfactory to it. The Indenture permits, subject to certain limitations therein provided, Holders of a majority in aggregate principal amount of the Securities then outstanding to direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of Securities notice of certain continuing Defaults or Events of Default if it determines that withholding notice is in their interest. 18. Trustee Dealings with Company. ----------------------------- The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Company, its Subsidiaries or their respective Affiliates as if it were not the Trustee. 19. No Recourse Against Others. -------------------------- No stockholder, director, officer or employee, as such, of the Company shall have any liability for any obligation of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Holder of a Security by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Securities. -9- 20. Authentication. -------------- This Security shall not be valid until the Trustee or authenticating agent signs the certificate of authentication on this Security. 21. Abbreviations and Defined Terms. ------------------------------- Customary abbreviations may be used in the name of a Holder of a Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 22. Governing Law. ------------- This Security shall be governed by, and construed in accordance with, the laws of the State of New York without giving effect to applicable principles of conflicts of laws to the extent that the application of the laws of another jurisdiction would be required thereby. 23. CUSIP Numbers. ------------- Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Securities as a convenience to the Holders of the Securities. No representation is made as to the accuracy of such numbers as printed on the Securities and reliance may be placed only on the other identification numbers printed hereon. 24. Indenture. --------- Each Holder, by accepting a Security, agrees to be bound by all of the terms and provisions of the Indenture, as the same may be amended from time to time. The Company will furnish to any Holder of a Security upon written request and without charge a copy of the Indenture which has the text of this Security in larger type. Requests may be made to: Pacer International, Inc., 3746 Mt. Diablo Blvd. Suite 110, Lafayette, CA 94549, Attn: Donald C. Orris. ASSIGNMENT FORM I or we assign and transfer this Security to ________________________________________________________________________________ ________________________________________________________________________________ (Print or type name, address and zip code of assignee or transferee) ________________________________________________________________________________ (Insert Social Security or other identifying number of assignee or transferee) and irrevocably appoint _______________________________________ agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. Dated: _________________ Signed: ____________________________ (Sign exactly as name appears on the other side of this Security) Signature Guarantee: _________________________________________________ Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor program reasonably acceptable to the Trustee) OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate box: Section 4.15 [ ] Section 4.16 [ ] If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the amount: $___________ Dated: _________________ Signed: _________________________ (Sign exactly as name appears on the other side of this Security) Signature Guarantee: _______________________________________________ Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor program reasonably acceptable to the Trustee) EXHIBIT C --------- GUARANTEE --------- For value received, the undersigned hereby unconditionally guarantees, as principal obligor and not only as a surety, to the Holder of this Security the cash payments in United States dollars of principal of, premium, if any, and interest on this Security in the amounts and at the times when due and interest on the overdue principal, premium, if any, and interest, if any, of this Security, if lawful, and the payment or performance of all other obligations of the Company under the Indenture (as defined below) or the Securities, to the Holder of this Security and the Trustee, all in accordance with and subject to the terms and limitations of this Security, Article Eleven of the Indenture and this Guarantee. This Guarantee will become effective in accordance with Article Eleven of the Indenture and its terms shall be evidenced therein. The validity and enforceability of any Guarantee shall not be affected by the fact that it is not affixed to any particular Security. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Indenture dated as of May 28, 1999, among Pacer International, Inc., a Tennessee corporation, as issuer (the "Company"), the Guarantors named therein and Wilmington Trust Company, as trustee (the "Trustee"), as amended or supplemented (the "Indenture"). The obligations of the undersigned to the Holders of Securities and to the Trustee pursuant to this Guarantee and the Indenture are expressly set forth in Article Eleven of the Indenture and reference is hereby made to the Indenture for the precise terms of the Guarantee and all of the other provisions of the Indenture to which this Guarantee relates. THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW. The undersigned Guarantor hereby agrees to submit to the jurisdiction of the courts of the State of New York in any action or proceeding arising out of or relating to this Guarantee. This Guarantee is subject to release upon the terms set forth in the Indenture. IN WITNESS WHEREOF, each Guarantor has caused its Guarantee to be duly executed. GUARANTORS PACER LOGISTICS, INC., CROSS CON TRANSPORT, INC., CROSS CON TERMINALS, INC., PACER INTERNATIONAL RAIL SERVICES LLC, PACER INTERNATIONAL CONSULTING LLC, PACER RAIL SERVICES LLC, PACIFIC MOTOR TRANSPORT COMPANY, PACER EXPRESS, INC., PACER INTEGRATED LOGISTICS, INC., PLM ACQUISITION CORPORATION, MANUFACTURERS CONSOLIDATION SERVICE, INC., LEVCON, INC., MANUFACTURERS CONSOLIDATION SERVICE OF CANADA, INC., INTERSTATE CONSOLIDATION SERVICE, INC., INTERSTATE CONSOLIDATION, INC., INTERMODAL CONTAINER SERVICE, INC., KEYSTONE TERMINALS ACQUISITION CORP. By: ____________________________ Name: Title: By: ____________________________ Name: Title: Exhibit D --------- Form of Certificate To Be Delivered in Connection with Transfers to Non-QIB Accredited Investors ----------------------------------------- [Date] Attention: Re: Pacer International, Inc. 11 3/4% Senior Subordinated Notes due 2007 (the "Securities") ------------------------------------------ Ladies and Gentlemen: In connection with our proposed purchase of the Securities of Pacer International, Inc. (the "Company"), we confirm that: 1. We have received a copy of the Offering Memorandum (the "Offering Memorandum"), dated May 24, 1999 relating to the Securities and such other information as we deem necessary in order to make our investment decision. We acknowledge that we have read and agreed to the matters stated on pages (i)- (iii) of the Offering Memorandum and in the section entitled "Transfer Restrictions" of the Offering Memorandum, including the restrictions on duplication and circulation of the Offering Memorandum. 2. We understand that any subsequent transfer of the Securities is subject to certain restrictions and conditions set forth in the Indenture relating to the Securities (as described in the Offering Memorandum) and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Securities except in compliance with, such restrictions and conditions and the Securities Act of 1933, as amended (the "Securities Act"). -2- 3. We understand that the offer and sale of the Securities have not been registered under the Securities Act, and that the Securities may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell or otherwise transfer any Securities prior to the date which is two years after the original issuance of the Securities, we will do so only (i) to the Company or any of its subsidiaries, (ii) inside the United States in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act), (iii) inside the United States to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to the Trustee (as defined in the Indenture relating to the Securities), a signed letter containing certain representations and agreements relating to the restrictions on transfer of the Securities, (iv) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (v) pursuant to the exemption from registration provided by Rule 144 under the Securities Act (if available), or (vi) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any person purchasing any of the Securities from us a notice advising such purchaser that resales of the Securities are restricted as stated herein. 4. We are not acquiring the Securities for or on behalf of, and will not transfer the Securities to, any pension or welfare plan (as defined in Section 3 of the Employee Retirement Income Security Act of 1974), except as permitted in the section entitled "Transfer Restrictions" of the Offering Memorandum. 5. We understand that, on any proposed resale of any Securities, we will be required to furnish to the Trustee and the Company such certification, legal opinions and other information as the Trustee and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Securities purchased by us will bear a legend to the foregoing effect. 6. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Securities, and we and any accounts for which we are acting are -3- each able to bear the economic risk of our or their investment, as the case may be. 7. We are acquiring the Securities purchased by us for our account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby. Very truly yours, By: ____________________________ Name: Title: Exhibit E --------- Form of Certificate To Be Delivered in Connection with Transfers Pursuant to Regulation S ----------------------------------- [Date] Attention: Re: Pacer International, Inc. (the "Company") 11 3/4% Senior Subordinated Notes due 2007 (the "Securities") ------------------ Ladies and Gentlemen: In connection with our proposed sale of $ aggregate principal amount of the Securities, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we represent that: (1) the offer of the Securities was not made to a person in the United States; (2) either (a) at the time the buy offer was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States, or (b) the transaction was executed in, on or through the facilities of a designated off-shore securities market and neither we nor any person acting on our behalf knows that the transaction has been pre- arranged with a buyer in the United States; (3) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; -2- (4) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act; and (5) we have advised the transferee of the transfer restrictions applicable to the Securities. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Transferor] By:______________________________ Authorized Signature EX-4.4 6 STOCK PURCHASE AGREEMENT DATED MARCH 15, 1999 Exhibit 4.4 ----------- STOCK PURCHASE AGREEMENT by and between APL LIMITED and COYOTE ACQUISITION LLC Dated as of March 15, 1999 TABLE OF CONTENTS ARTICLE I Purchase and Sale 1 ----------------- I.1 Purchase and Sale 1 ----------------- I.2 Purchase Price 2 -------------- I.3 The Post-Closing Payment 2 ------------------------ I.4 Payment of Purchase Price 4 ------------------------- I.5 Closing 4 ------- I.6 Financing Fees; Capitalization 4 ------------------------------ ARTICLE II Representations and Warranties of APL 4 ------------------------------------- II.1 Organization and Authority 4 -------------------------- II.2 Noncontravention 5 ---------------- II.3 No Governmental Consent or Approval Required 6 -------------------------------------------- II.4 Organization and Authority of the Company 6 ----------------------------------------- II.5 Capitalization of the Company 7 ----------------------------- II.6 Financial Statements 7 -------------------- II.7 Books and Records 8 ----------------- II.8 Undisclosed Liabilities 9 ----------------------- II.9 Accounts and Notes Receivable 9 ----------------------------- II.10 Absence of Certain Developments 9 ------------------------------- II.11 Customers 10 --------- II.12 Title to Properties 11 ------------------- II.13 Assets 11 ------ II.14 Contracts 12 --------- II.15 Litigation 12 ---------- II.16 Compliance with Law; Permits 13 ---------------------------- II.17 Employee Benefit Plans 13 ---------------------- II.18 Certain Interests 16 ----------------- II.19 Insurance 16 --------- II.20 Consequences of Stock Purchase 17 ------------------------------ II.21 Intercompany Transactions 17 ------------------------- II.22 No Brokers or Finders 17 --------------------- II.23 Environmental Matters 17 --------------------- II.24 Intellectual Property 19 --------------------- II.25 Year 2000 Compliance. 20 -------------------- II.26 Disclosure 21 ---------- II.27 Labor Relations 21 --------------- II.28 Working Capital; Net Fixed Assets 21 --------------------------------- ARTICLE III Representations and Warranties of the Purchaser 21 ----------------------------------------------- III.1 Organization and Authority 22 -------------------------- III.2 Noncontravention 22 ---------------- III.3 No Governmental Consent or Approval Required 22 -------------------------------------------- III.4 Financial Capability 23 -------------------- III.5 Purchase for Investment 23 ----------------------- III.6 Pacer Acquisition 23 ----------------- III.7 Capitalization of the Company 24 ----------------------------- ARTICLE IV Covenants 24 ---------
IV.1 Cooperation and Access 25 ---------------------- IV.2 No Solicitation 26 --------------- IV.3 Conduct of Business Prior to the Closing 26 ---------------------------------------- IV.4 Commercially Reasonable Efforts; Government Approvals 30 ----------------------------------------------------- IV.5 Use of APL Name and Trademark 31 ----------------------------- IV.6 Confidentiality 32 --------------- IV.7 Employee Benefits; Employees 32 ---------------------------- IV.8 Insurance 33 --------- IV.9 Warn Act 34 -------- IV.10 Other Actions 34 ------------- IV.11 Advice of Changes 34 ----------------- IV.12 Financial Information 35 --------------------- IV.13 Accounts Payable, Accrued Expenses and Accounts Receivable 35 ---------------------------------------------------------- IV.14 Pacer Indemnification 35 --------------------- IV.15 Conduct of Business Following the Closing 36 ----------------------------------------- ARTICLE V Tax Matters 36 ----------- V.1 Definitions 36 ----------- V.2 Tax-Related Representations and Warranties 37 ------------------------------------------ V.3 Liability for Taxes and Related Matters 39 --------------------------------------- (a) Liability of APL for Taxes. APL shall indemnify, -------------------------- defend and hold the Purchaser, the Company and their respective officers, directors, employees, Affiliates and agents (each, a 40 (b) Liability of Purchaser for Taxes 40 -------------------------------- (c) Tax Periods 40 ----------- V.4 Adjustment to Purchase Price 40 ---------------------------- V.5 Tax Covenants 40 ------------- V.6 Transfer Taxes 43 -------------- V.7 Information to be Provided by the Purchaser 44 ------------------------------------------- V.8 Tax Proceedings 44 --------------- (a) Right to Control Proceedings 44 ---------------------------- (b) Notice; Reports 44 --------------- V.9 Assistance and Cooperation 45 -------------------------- V.10 Survival, Etc. 46 ------------- ARTICLE VI Conditions to Closing 46 --------------------- VI.1 Conditions to the Obligations of the Purchaser 46 ---------------------------------------------- (a) Approvals 46 --------- (b) Orders 47 ------ (c) Accuracy of Representations 47 ---------------------------
(d) Performance of Covenants 47 ------------------------ (e) Resignation of Directors 47 ------------------------ (f) Ancillary Agreements 47 -------------------- (g) Intercompany Accounts 47 --------------------- VI.2 Conditions to the Obligations of APL 49 ------------------------------------ (a) Approvals 49 --------- (b) Orders 49 ------ (c) Accuracy of Representations 49 --------------------------- (d) Performance of Covenants 49 ------------------------ (e) Ancillary Agreements 49 -------------------- (f) Shareholder Vote. The shareholders of NOL shall have approved the transactions contemplated hereby pursuant to an extraordinary general meeting. 50 VI.3 Pacer Extension 50 --------------- ARTICLE VII Termination 50 ----------- VII.1 Grounds for Termination 50 ----------------------- VII.2 Effect of Termination 52 --------------------- VII.3 Interest 53 -------- ARTICLE VIII Indemnification 54 --------------- VIII.1 Survival of Representations, Warranties, Covenants and ------------------------------------------------------ Agreements 54 ---------- VIII.2 Indemnification 54 --------------- VIII.3 Method of Asserting Claims, etc. 55 ------------------------------- VIII.4 Limitation on Damages 56 --------------------- VIII.5 Exclusive Remedy 57 ---------------- VIII.6 Insurance Proceeds; Interest 57 ---------------------------- VIII.7 Deductible; Maximum Liability 57 ----------------------------- VIII.8 Tax Losses 58 ---------- ARTICLE IX Certain Definitions 58 ------------------- IX.1 Certain Definitions 58 ------------------- ARTICLE X Miscellaneous 66 ------------- X.1 Amendments 66 ---------- X.2 Assignment 66 ---------- X.3 Notices 66 ------- X.4 Severability 68 ------------ X.5 Governing Law 68 -------------
X.6 Interpretation 68 -------------- X.7 Entire Agreement 68 ---------------- X.8 Publicity 69 --------- X.9 Expenses 69 -------- X.10 No Third Party Beneficiaries 69 ---------------------------- X.11 Jurisdiction 69 ------------ X.12 Counterparts 70 ------------
EXHIBITS A. Non-Competition Agreement B. Administrative Services Agreement C. Information Technology Access and License Agreement Terms D. Stacktrain Services Agreement E. TPI Chassis Sublet Agreement F. Equipment Supply Agreement G. Shareholders Agreement H-1. Financing Letter of Morgan Stanley & Co., Inc. H-2. Financing Letter of Bankers Trust Company I. Union Pacific Terms J. CSX Memorandum of Understanding K. Tax Sharing Agreement L. Working Capital Analysis SCHEDULES --------- 2.4 Directors and Executive Officers of the Company 2.6(c) Consolidated Accounts Payable, Accrued Expenses and Accounts Receivable 2.8 Undisclosed Liabilities 2.9 Accounts and Notes Receivable 2.10 Absence of Certain Developments 2.11 Customers 2.12(b) Real Property 2.14(a) Material Contracts 2.14(b) Noncontravention and Breaches of Material Contracts 2.15 Litigation 2.16 Compliance with the Law/Governmental Permits 2.17(a) Employee Benefit Plans 2.17(g) Employee Benefits Provided After Retirement 2.19 Insurance 2.21 Intercompany Transactions 2.23 Environmental Matters 2.24 Intellectual Property 4.5 APL Corporate Logo 4.7(b) Employees 5.2(b) Tax Returns STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT dated as March 15, 1999, is made by and between Coyote Acquisition LLC, a Delaware limited liability company (the "Purchaser"), and APL Limited, a Delaware corporation ("APL"). RECITALS A. APL owns 1,000 shares of Common Stock, no par value (the "Stock") of APL Land Transport Services, Inc., a Tennessee corporation (the "Company"), constituting all of the issued and outstanding capital stock of the Company. B. The Company is engaged in the Business (this and other capitalized terms shall have the meanings assigned to such terms in Article IX). C. The Purchaser desires to purchase the Stock, and APL desires to sell the Stock to the Purchaser, all on the terms and conditions set forth herein. D. The Purchaser and APL desire that this transaction be eligible for election under Section 338(h)(10) of the Internal Revenue Code with respect to the acquisition of the Company by the Purchaser. NOW THEREFORE, in consideration of the premises and of the respective representations, warranties, covenants and conditions contained herein, the parties hereto agree as follows: ARTICLE I Purchase and Sale ----------------- I.1 Purchase and Sale. Upon the terms and subject to the conditions ----------------- of this Agreement, APL shall sell to the Purchaser, and the Purchaser shall purchase from APL, shares of Stock (the "Shares") at the Closing and APL shall deliver at the Closing a certificate evidencing the Shares, properly endorsed, or accompanied by a duly executed stock power duly endorsed, in blank; provided that a portion of -1- the Shares may be purchased by the Company at the Closing with the proceeds of the debt financing contemplated by the Financing Letters. The numbers of shares retained by APL shall be calculated based on (i) the value of the number of shares of Stock of the Company not sold by APL pursuant to this Agreement divided by (ii) the value of each share of Stock of the Company based on the equity investment made by the Purchaser in the Company. I.2 Purchase Price. In consideration for the Shares and as payment -------------- in full therefor, the Purchaser shall pay to APL the Purchase Price. The "Purchase Price" is $300 million, of which (i) at least $292.5 million will be in cash payable on the Closing Date and (ii) up to $7.5 million will be in value of shares of Stock of the Company not sold by APL pursuant to this Agreement. In addition, the Purchaser shall pay to APL up to $15 million in cash (the "Post-Closing Payment") to be earned to the extent that net income before (plus) allocated corporate overhead charges, management fees payable to any Affiliate of the Purchaser, interest, taxes, depreciation, amortization, one-time charges related to the consummation of the transactions contemplated hereby and nonrecurring losses and after (less) one-time benefits related to the consummation of the transactions contemplated hereby and nonrecurring gains ("EBITDA") of the Company for the fiscal year ending December 31, 1999 ("Actual EBITDA") is equal to or greater than $57 million (the "EBITDA Target"). Nonrecurring gains and losses shall be calculated as reasonably agreed by Purchaser and APL, subject to the provisions of Section 1.3 relating to an Objection. The Post-Closing Payment will be reduced by an amount equal to the product of (x) 5.5 and (y) the amount that Actual EBITDA is below the EBITDA Target. I.3 The Post-Closing Payment. Within 90 days of the Company's 1999 ------------------------ fiscal year end, the Purchaser shall deliver or cause to be delivered to APL an income statement of the Company for the fiscal year ending December 31, 1999(the "Final Income Statement"). The Final Income Statement shall be prepared in accordance with GAAP, consistently applied with the Financial Statements, and shall not include the consolidated or unconsolidated information of any entity or business other than the Company or the Business. The Purchaser shall use commercially reasonable efforts to maintain its books and records such that the Final Income Statement can be so prepared and -2- verified. Not later than 30 days after receipt of the Final Income Statement, APL may deliver to the Purchaser a written notice ("Objection"), setting forth any items with which APL disagrees and a description of the bases for such disagreement. In the event that APL delivers an Objection to the Final Income Statement or the Purchaser's calculation of Actual EBITDA, the Purchaser hereby agrees to negotiate in good faith for a period of 30 days after receipt of such Objection, to seek to resolve the difference with respect to the Final Income Statement and calculation of Actual EBITDA. If APL and the Purchaser are unable to resolve all such disagreements within such 30 day period, then no later than seven days following such 30 day period they shall refer their remaining differences to any internationally recognized firm of independent public accountants as to which APL and the Purchaser agree (the "Independent Firm") who shall, acting as experts and not as arbitrators, determine, only with respect to the remaining differences so submitted, whether and to what extent, if any, the Final Income Statement or the calculation of Actual EBITDA requires adjustment. APL and the Purchaser shall instruct the Independent Firm to deliver its written determination to them no later than the twentieth day after the remaining differences underlying the Objections are referred to the Independent Firm. The Independent Firm's determination shall be conclusive and binding upon APL and the Purchaser absent manifest error. The fees and disbursements of the Independent Firm shall be shared equally by APL and the Purchaser. APL and the Purchaser shall make readily available to the Independent Firm all relevant books and records and any work papers (including those of the parties' respective accountants) relating to the Final Income Statement and all other items reasonably requested by the Independent Firm. The Post-Closing Payment shall be (i) $15 million if the Actual EBITDA is greater than or equal to $57 million; (ii) $0 if the Actual EBITDA is less than or equal to $54,272,728, and (iii) if the Actual EBITDA is greater than $54,272,728 and less than $57 million, calculated in accordance with the following formula: $15 million - (5.5 * (EBITDA Target - Actual EBITDA)) -3- The Post-Closing Payment shall be due and payable no later than two business days after resolving all Objections; provided that any portion of the Post-Closing Payment as to which there is no disagreement shall be due and payable no later than two business days after resolving all Objections with respect to such amount. I.4 Payment of Purchase Price. If the obligations of the parties to ------------------------- proceed with the Closing set forth in Article VI are satisfied or waived, at the Closing, the Purchaser shall pay APL the cash portion of the Purchase Price payable on the Closing Date by wire transfer of immediately available funds to a bank account designated by APL at least two business days prior to Closing. I.5 Closing. The closing (the "Closing") of the purchase and sale ------- of the Stock shall take place at the offices of Dewey Ballantine LLP, 1301 Avenue of the Americas, New York, New York 10019 as soon as practicable after the satisfaction or waiver of the conditions set forth in Article VI, or at such other time and place as the parties shall mutually agree. The date on which the Closing actually occurs is herein referred to as the "Closing." I.6 Financing Fees; Capitalization. The parties hereto agree that ------------------------------ commitment fees set forth in the Financing Letter attached as Exhibit I-1 shall be borne equally by APL and the Purchaser; provided, however, that if and to -------- ------- the extent any amounts are drawn under the bridge facility contemplated by such Financing Letter to consummate the transactions contemplated by this Agreement, APL shall pay all commitment fees and the Purchaser shall pay all funding fees related thereto. ARTICLE II Representations and Warranties of APL ------------------------------------- APL represents and warrants to the Purchaser that: II.1 Organization and Authority. APL is a corporation duly -------------------------- organized, validly existing and in good standing under the laws of the State of Delaware. APL has the requisite corporate power and authority to execute, deliver and perform this Agreement and such other documents -4- as are contemplated hereunder to be executed and delivered at or prior to the Closing. The execution, delivery and performance by APL of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on the part of APL and the Company. This Agreement constitutes a valid and, assuming due execution and delivery by the Purchaser, binding obligation of APL, enforceable against APL in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting creditors' rights generally, and to general equitable principles. Upon execution and delivery of the Ancillary Agreements by the parties thereto, such Ancillary Agreements will constitute valid and binding obligations of APL, enforceable against APL in accordance with their respective terms, subject to applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting creditors' rights generally, and to general equitable principles. II.2 Noncontravention. The execution, delivery and performance of ---------------- this Agreement by APL, the performance of this Agreement by APL and the consummation of the transactions contemplated hereby will not violate or conflict with, or constitute a breach or default (with or without notice or lapse of time, or both) under or give rise to any right of termination, amendment, cancellation or acceleration of any obligations contained in or the loss of any benefit under, (a) the certificate of incorporation or bylaws of APL (b) any law, regulation, order, judgment or decree applicable to APL or the Company or (c) except as disclosed in Schedule 2.14(b), any term, condition or provision of any loan or credit agreement, note, bond, mortgage, indenture, lease, sublease, material purchase order or other material agreement (including any Material Contract), commitment, instrument, permit, concession, franchise or license to which the Company is a party, or by which the Company or its assets may be bound, in each case in clauses (b) or (c) above, which conflict or violation would reasonably be expected to prevent or delay the consummation of the transactions contemplated by this Agreement or any of the Ancillary Agreements, result in a Lien on the Stock or give rise to any material claim against the Company. -5- II.3 No Governmental Consent or Approval Required. No authorization, -------------------------------------------- consent, Permit, approval or other order of, declaration to, or registration, qualification, designation or filing with, any Governmental Entity is required for or in connection with the execution, delivery and performance of this Agreement by APL, the performance of this Agreement by APL and the consummation of the transactions contemplated hereby, other than (a) the filing of notification under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("HSR Act") and the expiration or early termination of the waiting period thereunder, (b) the approval of the transactions contemplated hereby by the shareholders of Neptune Orient Lines Limited, a Singapore corporation("NOL"), pursuant to an extraordinary general meeting and (c) any consents, the failure to obtain would not prohibit the consummation of any of the transactions contemplated hereby or give rise to any material claim against the Company. II.4 Organization and Authority of the Company. The Company is a ----------------------------------------- corporation duly organized, validly existing and in good standing under the laws of the State of Tennessee and has the requisite corporate power and authority to carry on its business as presently conducted and to consummate the transactions contemplated hereby. The Company is qualified to do business as a foreign corporation in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary. Schedule 2.4 correctly lists the current directors and executive officers of the Company. True, correct and complete copies of the respective charter documents of the Company as in effect on the date hereof have been made available to the Purchaser. The Company has no subsidiaries. The Company is not in default or violation (and no event has occurred which with notice or the lapse of time or both would constitute a default or violation) of any term, condition or provision of its certificate of incorporation or by-laws. -6- II.5 Capitalization of the Company. The entire authorized capital ----------------------------- stock of the Company consists of 2,000 shares of Common Stock, no par value, of which 1,000 shares are issued and outstanding. All of the Stock has been duly authorized and validly issued and is fully paid and nonassessable. There are no outstanding bonds, debentures, notes or other obligations the holders of which have the right to vote (or which are convertible into or exercisable for securities having the right to vote) with the stockholders of the Company on any matter. There are no outstanding shares of capital stock of the Company or existing options, warrants, calls, subscriptions, convertible securities or other rights, agreements or commitments which obligate the Company to issue, transfer or sell any shares of capital stock of the Company. All securities issued by the Company have been issued in transactions exempt from registration under the Securities Act of 1933, as amended (the "Securities Act") and the rules and regulations promulgated thereunder and all applicable state securities or "blue sky" laws, and the Company has complied in all material respects with the Securities Act and all applicable state securities or "blue sky" laws in connection with the issuance of any such securities. APL has good and valid title to all of the Stock, free and clear of all Liens and, subject to applicable securities laws and competition laws, free of any restriction on its right to transfer or exercise any voting or other right with respect thereto. At the Closing, good and valid title to the Shares, free and clear of all Liens, encumbrances, equities or claims shall be transferred to the Purchaser. Except as contemplated by this Agreement, there are no contracts, commitments, arrangements, understandings or restrictions to which the Company or to the Knowledge of the Company any other Person is bound relating in any way to any shares of capital stock or other securities of the Company. II.6 Financial Statements. (a) APL has delivered to the Purchaser -------------------- the audited consolidated balance sheets of the Company as of December 25, 1998 (the "Balance Sheet") and the audited consolidated statements of operations and cash flows for fiscal 1996, 1997 and 1998 (together with the Balance Sheet, the "Financial Statements"). The Financial Statements have been prepared in accordance with GAAP, consistently applied, and fairly and accurately present the financial position of the Business as of the respective dates thereof and the results of operations, changes in financial position and cash flow -7- of the Business for the respective periods covered thereby. The Financial Statements were prepared in accordance with the books of account and other financial records of the Company and include all adjustments that are necessary for a fair presentation of the consolidated financial condition of the Company and the results of operations of the Company as of the dates thereof or for the periods covered thereby. The Company's operating leases in the Financial Statements have been appropriately classified as such pursuant to GAAP and Statement of Financial Accounting Standards No. 13. (b) The Company has no indebtedness for borrowed money ("Indebtedness") owed, as of the date of this Agreement, to any third party (determined in accordance with GAAP). (c) Schedule 2.6(c) sets forth a true, correct and complete summary of all consolidated accounts payable, accrued expenses and accounts receivable of the Company as of December 25, 1998 and February 5 and March 5, 1999, which schedule shall set forth the name of the account debtor (in the case of accounts receivable) or account creditor (in the case of accounts payable) and the amount owed by or owing to such account debtor or account creditor (identifying the portion of accounts receivables that are current, 30, 60, 90 and more than 90 days past due). (d) The consolidated balance sheet of NOL as of June 30, 1998(the "NOL Balance Sheet") was prepared in accordance with Singapore generally accepted accounting principles and fairly and accurately presents the financial position of NOL as of the date thereof. The NOL Balance Sheet was prepared in accordance with the books of account and other financial records of NOL and includes all adjustments that are necessary for a fair presentation of the financial position of NOL as of the date thereof. II.7 Books and Records. The books of account and other financial and ----------------- corporate records of the Company have been maintained in all material respects in accordance with good business and accounting practices consistently applied. The minute books and stock transfer books of the Company are correct, complete and current in all material respects. At the Closing, any documentary and stock transfer tax stamps required in connection with the transfer of the Shares pursuant to this Agreement will be duly affixed for transfer. -8- II.8 Undisclosed Liabilities. The Company has no material ----------------------- liabilities (whether known or unknown and whether absolute, accrued, fixed, contingent or otherwise) except for (a) liabilities or obligations reflected or reserved against on the Balance Sheet in accordance with GAAP, (b) liabilities incurred in the ordinary course of business since the date of the Balance Sheet, (c) liabilities set forth in Schedule 2.8 or any other Schedule or Exhibit hereto and (d) liabilities as to which a separate representation is made in this Agreement; provided that for purposes of this representation liabilities which may be immaterial individually, but are material in the aggregate, shall be deemed to be material. There are no loss contingencies (as such term is used in Statement of Financial Accounting Standards No. 5 issued by the Financial Accounting Standards Board in March 1975) of or affecting the Company which are not adequately provided for or disclosed on the Balance Sheet or in the notes thereto, in each case, to the extent required by GAAP. The Company is not a guarantor of or obligor on any material Liability of any other Person except as set forth in any Schedule or Exhibit hereto. II.9 Accounts and Notes Receivable. Except as set forth in Schedule ----------------------------- 2.9, all the accounts receivable and notes receivable owing to the Company as of the date hereof constitute valid and enforceable claims arising from bona fide transactions in the ordinary course of business. Except to the extent of the reserves on the consolidated books of the Company or set forth in Schedule 2.9, there are no known or asserted claims, refusals to pay or other rights of set- off against any such accounts or notes receivable. Except as set forth in Schedule 2.9, there is (i) no account debtor or note debtor that to the Knowledge of the Company, has refused or threatened to refuse to pay its currently outstanding obligations in excess of $25,000 to the Company for any reason, or has otherwise made a claim of set-off or similar claim and (ii) to the Knowledge of the Company (without investigation), no account debtor or note debtor that owes the Company amounts in excess of $25,000 in the aggregate is a debtor under applicable bankruptcy laws. II.10 Absence of Certain Developments. Since the date of the Balance ------------------------------- Sheet, except as set forth in Schedule 2.10 or as contemplated by this Agreement, the Company has operated the Business in the ordinary course consistent with past practice in all material respects and there has not -9- been (a) any change or event involving the Company or any of its Affiliates that has had or would reasonably be expected to have a Material Adverse Effect other than changes relating to or arising from general economic, market or financial conditions or generally affecting the industries, including the rail service industry, or markets in which the Company operates, (b) any delivery of a notice of non-renewal or any other failure to renew contracts or agreements which are material to the Company, (c) through the date of this Agreement any loss of any employee who earned more than $75,000 in the most recent fiscal year (in salary, bonus and other case compensation), (d) any acquisition or disposition of assets in a transaction or series of related transactions in excess of $100,000, other than in the ordinary course of Business, (e) any action taken by the Company of the type contemplated by Section 4.3(a)-(i), Section 4.3(k) (other than in connection with the auction of the Company by Morgan Stanley & Co. Incorporated prior to the date of this Agreement), and Section 4.3(l)-(s) hereof, (f) any failure to take any action by the Company of the type contemplated by Section 4.2(j) hereof or (g) any loss, destruction or damage to any owned, leased or licensed property of the Company, whether or not insured, that has had or would reasonably be expected to have a Material Adverse Effect. II.11 Customers. The relationships with the material customers of --------- the Company are satisfactory working commercial relationships. Schedule 2.11 sets forth a list of the amount of volume and revenue attributable to the twenty largest customers for fiscal 1997 and 1998. -10- II.12 Title to Properties. ------------------- (a) Personal Property. Except as disclosed in the Financial ----------------- Statements, the Company has, or prior to the Closing will have, good and marketable title to, or a valid leasehold interest in, all material personal properties and assets (whether tangible or intangible) that it purports to own, lease or license free and clear of all Liens other than (a) the lien of current taxes not yet due and payable, (b) Permitted Liens or (c) such other Liens which do not materially detract from the use of the property. Each lease with respect to any material personal property leased by the Company is valid and binding on the Company and in full force and effect, and no termination event or condition or uncured material default on the part of the Company or, to the Knowledge of the Company (without investigation), the lessor exists under any such lease. (b) Real Property. The Company does not own any real property. ------------- Schedule 2.12(b) lists all real properties currently leased or subleased by the Company (collectively, the "Real Property"). The Company has a valid leasehold interest in and quietly enjoys all Real Property shown as leased by it on Schedule 2.12(b), free and clear of all Liens other than Permitted Liens. Each lease of real property leased by the Company is valid and binding on the Company and in full force and effect, and no termination event or condition or uncured material default on the part of the Company or, to the Knowledge of the Company (without investigation), the landlord exists under any lease of real property. II.13 Assets. At the Closing, the assets owned, leased or licensed ------ by the Company or provided pursuant to an Exhibit to this Agreement together are all those assets necessary for the continued conduct of the Business after the Closing in the same manner as currently conducted. All assets of the Company are reflected in the Financial Statements in accordance with GAAP. The property and equipment reflected in the Financial Statements in the aggregate are well maintained and in good operating condition, and are free from all structural flaws and design and engineering deficiencies which would materially reduce the useful life of such assets in the aggregate, except for reasonable wear and tear and except for items which have been written down in the Financial Statements to a realizable market value or for which depreciation has been -11- taken or adequate reserves have been provided in the Financial Statements. II.14 Contracts. Attached as Schedule 2.14(a) is a true and complete --------- list of all of the following contracts and agreements to which the Company or any of its respective properties is subject or by which any thereof is bound (collectively the "Material Contracts")(a) contracts with any current officer, director or Affiliate of the Company; (b) contracts for the sale of any of the assets of the Company or for the grant to any person of any preferential rights to purchase any of its assets other than in the ordinary course of business; (c) contracts for the purchase of any of the assets or securities of another person other than in the ordinary course of business; (d) contracts containing covenants of the Company not to compete in any line of business or with any person in any geographical area or, covenants of any other person not to compete with the Company or in any line of business or in any geographical area; (e) indentures, credit agreements, mortgages, promissory notes, and other contracts relating to the borrowing of money; (f) contracts or obligations with all employees, consultants and independent contractors that are material to the Business; and (g) all other agreements, contracts or instruments which the aggregate value of conditional or unperformed services as of the date hereof exceeds $100,000 for any single contract or $1,000,000 in the aggregate for all such contracts. Except as disclosed in Schedule 2.14(b), each Material Contract is in full force and effect; and no breach or default or event which would (with the passage of time, notice or both) constitute a breach or default or result in the loss of any material benefit thereunder by the Company or, to the Knowledge of APL or the Company (without investigation), any other party or obligor with respect thereto, exists and is continuing which in each case would reasonably be expected to materially impair the benefits expected to be derived therefrom. II.15 Litigation. Except as disclosed in Schedule 2.15, as of the ---------- date of this Agreement, there is no written claim, filed complaint, arbitration, action, suit, proceeding or, to the Knowledge of APL or the Company, investigation pending or threatened, against or affecting (a) the Company or any of its properties or (b) any officer, director or employee of the Company in reference to actions taken by them in such capacities. Except for laws of -12- general application or as disclosed in Schedule 2.15, the Company is not subject to any outstanding subpoena that is material to the Business or any order, injunction, judgment, decree, ruling, writ or arbitration award of any court or Governmental Entity. II.16 Compliance with Law; Permits. Except as set forth in Schedule ---------------------------- 2.16, the Company is, and during the past two years has been, in material compliance with all laws, regulations, orders, judgements and decrees of any Governmental Entity which are applicable to the Company. The Company holds all Permits that are required by any Governmental Entity to permit it to conduct the Business as now conducted. Each Permit held by the Company is in full force and effect, and the transactions contemplated herein (including but not limited to the change of corporate name) will not affect the continuing validity of any such Permit. To the Knowledge of APL or the Company (without investigation), no suspension, cancellation or termination of any of such material Permits is threatened or imminent. Schedule 2.16 contains a list of all of the Permits which are material to the Company. Copies of such Permits have been provided to Purchaser or its counsel or will be so provided upon request. II.17 Employee Benefit Plans. (a) All benefit and compensation ---------------------- plans and contracts maintained by APL or the Company which cover current employees of the Company (the "Employees"), including, but not limited to, "employee benefit plans" within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and deferred compensation, stock option, stock purchase, stock appreciation rights, stock based, incentive and bonus plans, workers compensation benefits and employment agreements (the "Benefit Plans"), are listed in Schedule 2.17(a). True and complete copies of (i) all Benefit Plans and insurance contracts forming a part of any Benefit Plans, and all amendments thereto (ii) the three most recent Form 5500 Annual Reports, including related schedules and audited financial statements and opinions of independent certified public accountants, (iii) the most recent tax qualification determination letter, if any, received from or applications pending with the Internal Revenue Service, (iv) the most recent actuarial report, if any and (v) the most recent nondiscrimination testing results under Sections 401(a)(4), 401(k), 401(m) and 410(b) -13- of the Code have been provided or made available to Purchaser. (b) All Benefit Plans, to the extent subject to ERISA, have at all times been operated and administered in compliance in all material respects with its terms, the applicable requirements of ERISA, the Code and other applicable law. Each Plan which is an "employee pension benefit plan" within the meaning of Section 3(2) of ERISA ("Pension Plan") and which is intended to be qualified under Section 401(a) of the Code, has received a favorable determination letter from the Internal Revenue Service with respect to "TRA" (as defined in Section 1 of Rev. Proc. 93-39), and to the Knowledge of APL and the Company there are no circumstances likely to result in revocation of any such favorable determination letter. There is no material pending or, to the Knowledge of APL or the Company threatened, lawsuits, claims (other than routine claims for benefits), investigations or audits relating to the Plans. The Company has not engaged in a transaction with respect to any Plan that, assuming the taxable period of such transaction expired as of the date hereof, could subject the Company to a tax or penalty imposed by either Section 4975 of the Code or Section 502(i) of ERISA in an amount which would be material. (c) No liability, contingent or otherwise, under Subtitle C or D of Title IV of ERISA has been or is expected to be incurred by the Company with respect to any ongoing, frozen or terminated "single-employer plan", within the meaning of Section 4001(c)(15) of ERISA, currently or formerly maintained by any of them, or the single-employer plan of any entity which is considered one employer with the Company under Section 4001 of ERISA or Section 414 of the Code (an "ERISA Affiliate"). The Company has not maintained or contributed to at any time during the five-year period preceding the date of this Agreement any employee pension benefit plan which is a multi-employer plan, within the meaning of Section 3(37) of ERISA, which is subject to Title IV of ERISA. (d) Neither any Pension Plan nor any single-employer plan of an ERISA Affiliate has an "accumulated funding deficiency" (whether or not waived) within the meaning of Section 412 of the Code or Section 302 of ERISA and no ERISA Affiliate has an outstanding funding waiver. -14- (e) (i) All contributions or payments made or deemed to have been made with respect to each Benefit Plan that is a deferred compensation plan, including any pension plan, are presently, and have been during the years to which they relate, fully deductible pursuant to Section 404 of the Code and are not presently, and have never been during the years to which they relate, subject to any material excise tax under Section 4972 of the Code, (ii) as of the Effective Time, all payments of outstanding contributions, due on or prior to that date, including minimum contributions, premiums, and funding obligations imposed by the terms of a Benefit Plan or by any law or government agency, (including under Part 3 of ERISA) shall have been made in all material respects with respect to each Benefit Plan, (iii) all contributions to and payments with respect to or under the Benefit Plans that are required to be made with respect to periods ending on or before the Effective Time have been made or accrued before the Effective Time by the Company in all material respects in accordance with the appropriate plan documents, financial statement, actuarial report, collective bargaining agreements or insurance contracts or arrangements, and (iv) with respect to each Benefit Plan that is an "employee welfare benefit plan" under Section 3(1) of ERISA (a "Welfare Plan") that is partially or fully funded through a trust, all tax deductions claimed by the Company or any of its Subsidiaries relating to any such trust are allowable, and all tax returns and other governmental filings required to be filed with respect to any such trust, whether by the Company or any of its Subsidiaries or the trust, have, to the Knowledge of the Company, been made in a timely manner. (f) Except as provided under Section 4.7 hereof, the consummation of the transactions contemplated by this Agreement (either alone or together with the occurrence of any related event such as termination of employment) will not (i) entitle any employees of the Company to severance pay, (ii) accelerate the time of payment or vesting or trigger any payment or funding (through a grantor trust or otherwise) of compensation or benefits under, increase the amount payable or trigger any other material obligation pursuant to, any of the Benefit Plans or (iii) result in any breach or violation of, or a default under, any of the Benefit Plans. (g) Except as set forth in Schedule 2.17(g), no Benefit Plan providing medical or death benefits (whether or -15- not insured) with respect to current or former employees of the Company continues such coverage or provides such benefits beyond their date of retirement or other termination of service (other than coverage mandated by Section 601 of ERISA, the cost of which is fully paid by the former employee or his or her dependents). (h) No Parachute Payments. As a direct or indirect result of the --------------------- Purchaser's purchase of the Stock, neither the Company nor the Purchaser will be obligated to make a payment, or give a benefit or right, to an individual that would be a "parachute payment" to a "disqualified individual" as those terms are defined in Section 280G of the Code without regard to whether such payment is reasonable compensation for personal services performed or to be performed in the future. II.18 Certain Interests. (a) No officer or director of APL or the ----------------- Company is indebted or otherwise obligated to the Company, and the Company is not indebted or otherwise obligated to any such officer or director, except for amounts due under Benefit Plans or normal arrangements applicable to all employees generally as to salary or reimbursement of ordinary business expenses. (b) No director, officer or Affiliate of the Company owns any direct or indirect interest of any kind in, or is a director, officer, employee, partner, affiliate or associate of, or consultant or lender to, or borrower from, or has the right to participate in the management, operations or profits of, any person or entity (other than the Company or an entity which is a direct or indirect subsidiary or parent of the Company) which is (i) a competitor, customer, lessor, tenant, creditor or debtor of the Company, (ii) engaged in a business directly and materially related to the business of the Company or (iii) otherwise has a material financial interest in any transaction to which the Company is a party, except for the ownership of less than 5% of the outstanding capital stock of any publicly traded corporation. II.19 Insurance. Schedule 2.19 contains in all material respects a --------- complete and correct list of all effective insurance policies which cover the Business, properties and assets of the Company and all premiums due thereon have been paid. The insurance coverage provided by insurance policies listed in Schedule 2.19 is adequate and -16- suitable for the Business of the Company. No notice of cancellation or non- renewal has been received by the Company and the Company is not in default under any such policy. The Financial Statements do not reflect any reserves for any insurance programs. II.20 Consequences of Stock Purchase. Neither any Person who now has ------------------------------ material business dealings with the Company nor any officer of the Company has notified the Company or APL, and neither APL nor the Company has a reasonable basis to believe, that any such Person would or might cease business dealings or employment with the Company after the Closing. II.21 Intercompany Transactions. All material transactions between ------------------------- the Company and any Affiliate of the Company for fiscal 1996, 1997 and 1998 are reflected in the Financial Statements. A list and brief description of the material transactions between the Company and any Affiliate thereof transacted during fiscal 1998 are set forth on Schedule 2.21 hereto. Except for liabilities or obligations which are or were set forth in the Financial Statements or this Agreement, incurred in the ordinary course of business since the date of the Balance Sheet (and which are not, individually or in the aggregate, material to the Company) or that are contemplated by, or will be discharged or terminated pursuant to, this Agreement, there are no outstanding liabilities or obligations for amounts owing to or from, or leases, contracts or other commitments or arrangements between the Company and APL or any other Affiliate of APL (other than the Company). II.22 No Brokers or Finders. No agent, broker, finder, or investment --------------------- or commercial banker (other than Morgan Stanley & Co. Incorporated, as to whose fees and expenses APL has full responsibility and neither the Company nor the Purchaser shall have any responsibility) or other Person or firm engaged by or acting on behalf of APL or the Company or any of their respective Affiliates in connection with the negotiation, execution or performance of this Agreement or the transactions contemplated by this Agreement, is or will be entitled to any brokerage or finder's or similar fee or other commission as a result of this Agreement or such transaction. II.23 Environmental Matters. Except as disclosed on Schedule 2.23 or --------------------- as to matters as to which none of APL or -17- its Affiliates (including the Company) would be liable under applicable Environmental Law: (a) the Company complies and at all times has complied in all material respects with all applicable Environmental Laws; (b) the properties (including without limitation soils, groundwater, surface water, buildings and other structures) currently owned, leased, operated, managed or controlled by the Company are not contaminated with any Hazardous Substance and do not contain any underground storage tanks; (c) the properties formerly owned, leased, operated, managed or controlled by the Company were not contaminated in any material respect with any Hazardous Substance during such period of ownership, lease, operation, management or control; (d) the Company has not received any claim alleging liability and, to the Knowledge of the Company (without investigation), is not subject to liability, for any Hazardous Substance contamination at any location (including without limitation any location to which any Hazardous Substance has been generated, treated, stored or disposed by or on behalf of the Company); (e) neither APL nor the Company has received any claim, notice, demand letter or request for information alleging that the Company may be in violation of, or liable under, any Environmental Law; (f) the Company is not subject to any order, decree, injunction or directive from any Governmental Entity, or to any indemnity or other agreement with any third party, relating to liability under any Environmental Law or to Hazardous Substances; and (g) to the Knowledge of the Company (without investigation), there are no other circumstances or conditions involving any of the Company or APL that could reasonably be expected to result in any material claim, liability, investigation, cost or loss to the Company or any material restriction on the ownership, use or transfer of any property by the Company pursuant to any Environmental Law. -18- The parties agree that the property in Kearny, New Jersey subject to the Lease Agreement between Consolidated Rail Corporation, as lessor, and American President Intermodal Company, Ltd., shall be deemed to be a currently leased and formerly leased facility only for purposes of Section 2.23(b) and (c) above. II.24 Intellectual Property. (a) Except as set forth on Schedule --------------------- 2.24, (i) the Company is the sole owner, free of any lien or encumbrance, of, or has a valid license or otherwise the right to use, and at Closing will have a valid license or the right to use, without any obligation to make any royalty or other fixed or contingent payments, or otherwise on commercially reasonable terms, all U.S. and foreign patents, copyrights, Computer Software and databases, trademarks, service marks, trade names, logos and trade dress, whether or not registered, trade secrets, know-how, proprietary and intellectual property rights and information, including, without limitation, all grants, registrations and applications relating thereto (collectively, "Intellectual Property Rights") used in the conduct of the Business as now conducted (such Intellectual Property Rights owned by or licensed to the Company, or which the Company has the right to use, collectively, the "Company Rights"), and shall provide the Purchaser a list of such Company Rights prior to the Closing Date;(ii) the Company's rights in the Company Rights are valid and enforceable; (iii) the Company has received no written demand, claim, or notice from any Person in respect of the Company Rights which challenges or threatens to challenge the validity of, or the rights of the Company in, any such Company Rights, and the Company knows of no valid basis for any such challenge; (iv) (A) the Company is not in violation or infringement of, and (B) to the Knowledge of the Company (without investigation) has not violated or infringed, any Intellectual Property Rights of any other Person; (v) to the Knowledge of the Company (without investigation), no Person is infringing any Company Rights; and (vi) the Company has not granted any license with respect to any Company Rights to any Person. The Computer Software owned by the Company or licensed or otherwise made available to the Company through the Information Technology Access and License Agreement (the "Included Software") comprises all the Computer Software necessary for the conduct of the Business after the Closing in the same manner as currently conducted. -19- (b) Schedule 2.24 contains a complete and accurate list of material Company Rights and all license and other agreements relating thereto (excluding licenses for off-the-shelf software). (c) For purposes hereof, "Computer Software" means all programs or routines used to cause a computer to perform a task or a desired set of tasks, the documentation required to describe and maintain these programs and all related codes, including without limitation programs or routines for operating systems and computer applications. II.25 Year 2000 Compliance. The Computer Software included in the -------------------- Included Software that was developed by APL or the Company and related hardware are capable of providing, or are being adapted to provide pursuant to a Year 2000 ("Y2K") compliance program adopted and in the process of being implemented by APL (the "Y2K Program"), in all material respects uninterrupted millennium functionality to record, store, process and present calendar dates falling on or after January 1, 2000 and date-dependent data in substantially the same manner and with the same functionality as such software records, stores, processes and presents such calendar dates and date-dependent data as of the date hereof without error relating to date data and date-dependent data, specifically including any error relating to, or the product of, date data which represents or references different centuries or more than one century ("Y2K Compliant"). To the Knowledge of APL, the software and related hardware that are licensed by APL or the Company from third parties and are material to the Business are Y2K Compliant or are being adapted to become Y2K Compliant pursuant to the Y2K Program. Prior to the date of this Agreement, APL has discussed with the Purchaser and its advisors the material steps that it has taken to become Year 2000 compliant and the costs expected to incur in connection therewith. The Y2K Program has been designed to render the Included Software in all material respects Y2K Compliant. Between the date hereof and the Closing, APL and the Company will use their commercial reasonable efforts, and following the Closing APL will use its commercially reasonable efforts to implement the Y2K Program. If the Y2K Program is implemented in accordance with its terms, Y2K compliance will be in all material respects achieved prior to the year 2000. -20- II.26 Disclosure. (a) The information regarding the Company ---------- contained in the Financial Statements and this Agreement, taken together, does not contain any untrue statement of a material fact regarding the Company or omit to state a material fact regarding the Company necessary in order to make the statements and information contained therein, in light of the circumstances under which they were made, not misleading. II.27 Labor Relations. (a) There is no unfair labor practice, charge --------------- or complaint or other proceeding pending or, to the Knowledge of APL threatened, against the Company or directly affecting the Business before the National Labor Relations Board or any other Governmental Entity; (b) there is no labor strike, slowdown or stoppage pending or, to the Knowledge of APL, threatened, by the employees of the Company against the Company or directly affecting the Business, nor has there been any such activity within the past two years against the Company or directly affecting the Business; (c) there are no pending collective bargaining negotiations relating to the employees of the Company; and (d) (i) there are no agreements with, or pending petitions for recognition of, a labor union or association as the exclusive bargaining agent for any or all of the employees of the Company, (ii) no such petitions have been pending within the past five years and (iii) to the Knowledge of APL (without investigation), there has not been any general solicitation of representation cards by any union seeking to represent the employees of the Company as their exclusive bargaining agent at any time within the past five years. II.28 Working Capital; Net Fixed Assets. As of the date hereof and --------------------------------- as of the Closing Date, the Company's Working Capital will not be less than $(16,700,000) and the Company's Net Fixed Assets will not be less than $95,000,000. ARTICLE III Representations and Warranties of the Purchaser ----------------------------------------------- The Purchaser hereby represents and warrants to APL that: -21- III.1 Organization and Authority. The Purchaser is a limited -------------------------- liability company duly organized, validly existing and in good standing under the laws of Delaware. The Purchaser has full power and authority to execute, deliver and perform this Agreement. The execution, delivery and performance by the Purchaser of this Agreement and any Ancillary Agreement to which the Purchaser is to be a party and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Purchaser. This Agreement constitutes a valid and, assuming due execution by APL, binding obligation of the Purchaser, enforceable against the Purchaser in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting creditors' rights generally and to general equitable principles. Upon execution and delivery of the Ancillary Agreements to which the Purchaser is to be a party by the parties thereto, such Ancillary Agreements will constitute valid and binding obligations of the Purchaser, enforceable against the Purchaser in accordance with their respective terms, subject to applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting creditors' rights generally, and to general equitable principles. III.2 Noncontravention. The execution, delivery and performance of ---------------- this Agreement by the Purchaser and the consummation of the transactions contemplated hereby will not violate or conflict with, or constitute a breach or default (with or without notice or lapse of time, or both) under (a) the charter documents of the Purchaser, (b) any law, regulation, order, judgment, or decree applicable to the Purchaser or (c) any term, condition or provision of any loan or credit agreement, note, bond, mortgage, indenture, lease, sublease or other material agreement, commitment, instrument, permit, concession, franchise or license to which the Purchaser is a party or by which the Purchaser or its assets may be bound, in each case in clauses (b) or (c) above, which conflict or violation would reasonably be expected to prevent or delay the consummation of the transactions contemplated by this Agreement or any of the Ancillary Agreements. III.3 No Governmental Consent or Approval Required. No -------------------------------------------- authorization, consent, Permit, approval or other order of, declaration to, or registration, qualification, designation or filing with, any Governmental -22- Entity or any other Person is required for or in connection with the execution, delivery and performance of this Agreement by the Purchaser and the consummation of the transactions contemplated hereby, other than (a) the filing of notification under the HSR Act and the expiration or early termination of the waiting period thereunder and (b) any consents, the failure to obtain would not prohibit the consummation of the transactions contemplated hereby. III.4 Financial Capability. The Purchaser has delivered to APL -------------------- complete and correct executed copies of letters with respect to the debt financing (the "Financing Letters") required for the consummation of the transactions contemplated hereby, which are attached as Exhibits H-1 and H-2 hereto. The Financing Letters are in full force and effect and constitute the only understanding of the lenders and the Purchaser with respect to the lenders' obligations to fund such debt financing. Assuming satisfaction of all applicable conditions hereunder and as set forth in the term sheets and the commitment letter which constitutes the Financing Letters and full funding thereunder, such financing, together with the other funds available to the Purchaser, will provide sufficient funds to consummate the transactions contemplated hereby. III.5 Purchase for Investment. The Purchaser is purchasing the Stock ----------------------- for investment for its own account and not with a view to, or for sale in connection with, the distribution thereof. The Purchaser acknowledges that the Stock is not registered under the United States Securities Act of 1933, as amended, any applicable state securities laws or any applicable foreign securities laws, and that the Stock may not be transferred or sold except pursuant to the registration provisions of the United States Securities Act of 1933, as amended, or applicable foreign securities laws or pursuant to an applicable exemption therefrom and pursuant to state securities laws as applicable. III.6 Pacer Acquisition. The Agreement and Plan of Merger, dated ----------------- February 22, 1999, by and among Mile High Acquisition Corp. ("Mile High"), Pacer International, Inc. ("Pacer") and stockholders of Pacer (the "Pacer Merger Agreement"), has been duly authorized, executed and delivered by Mile High and is enforceable against Mile High in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting creditors' rights and to general -23- equitable principles. No Affiliate of Apollo Management, L.P. other than Mile High is an obligor under the Pacer Merger Agreement. Mile High is not in breach of its obligations under the Pacer Merger Agreement and, to the Knowledge of the Purchaser (without investigation), no other party is in breach of its obligations under the Pacer Merger Agreement. The Purchaser intends to close the transactions contemplated by the Pacer Merger Agreement (the "Pacer Transaction") immediately following the closing of the transaction contemplated by this Agreement. III.7 Capitalization of the Company. Immediately following the ----------------------------- closing of the transaction contemplated by this Agreement (but not the Pacer Transaction), the ownership of the shares of the Purchaser and APL in the Company will be based on the amount invested or retained by each such party in the Company, and the value of each share issued or retained by each shall be the same for purposes of such calculation. Immediately following the closing of the Pacer Transaction, the Company will own all the outstanding common stock of Pacer. Except as set forth in the shareholders agreement referred to in the Pacer Merger Agreement, financing documents relating to the transactions contemplated hereby, Company stock option plans and the charter and bylaws of the Company (a copy of each of which has been delivered to APL on or before the date of this Agreement), or as otherwise contemplated by this Agreement, as of the Closing Date there will be no contracts, commitments, arrangements, understandings or restrictions to which the Company or any other Person will be bound relating in any way to the shares of capital stock or other securities of the Company. ARTICLE IV Covenants --------- IV.1 Cooperation and Access. (i) From and after the date hereof, ---------------------- upon reasonable advance notice, APL shall cause the Company to permit the Purchaser and its attorneys, consultants, lenders, equity investors (other than an APL Competitor as defined in the Stacktrain Services Agreement), accountants and other representatives to access, during regular business hours, the assets, employees, books, contracts, commitments, personnel, lenders and advisors -24- (including, without limitation, Tax Returns filed and those in preparation, workpapers and other items relating to Taxes) of the Company and shall furnish, or cause to be furnished, to the Purchaser and its representatives such financial, tax and operating data and other available information with respect to the Business as the Purchaser shall from time to time reasonably request; provided, however, that no such access shall be undertaken in such a manner as - -------- ------- would reasonably be expected to interfere with in any material respect with the Company and its operation of the Business; provided further that all information -------- ------- received by the Purchaser and given by or on behalf of the Company in connection with this Agreement and the transactions contemplated hereby shall be held by the Purchaser and its Affiliates, agents and representatives confidential pursuant to the terms of the Confidentiality Agreement. Such investigation as provided for in this Section 4.1 shall include, among other things, the receipt of relevant financial information, the review of any relevant contractual obligations of the Company, the conducting of discussions with the Company's management and, with the Company's prior consent (such consent not to be unreasonably withheld or delayed), other employees and customers of the Company, environmental review (including, if reasonably necessary, environmental testing), review and valuation of all pension, health, retiree or other ERISA related liabilities and such other investigations and valuations as may be deemed reasonably necessary by the Purchaser. The cost of any such investigation shall be borne by the Purchaser and no such investigation shall be undertaken in a manner as would reasonably be expected to interfere in any material respect with the timing of the transactions contemplated by this Agreement. IV.2 No Solicitation. From the date hereof and through the Closing --------------- (the "Nonsolicitation Period"), each of the Company and APL shall, and shall cause their respective representatives, affiliates, agents, financial advisors and employees (collectively, "Representatives") to, refrain from soliciting, discussing, providing information to or negotiating, directly or indirectly, with any third party (other than Purchaser and its Representatives) any inquiries, proposals or offers with respect to the sale of the Common Stock or any portion of the Company's assets or securities (an "Acquisition Proposal") (other than sales and other dispositions of assets in the ordinary course of business which are not material to the Business); provided, -------- -25- however, that, subject to the provisions of Section 7.2, at any time prior to - ------- the earlier of (i) April 30, 1999 and (ii) the time the shareholders of NOL shall have voted to approve this Agreement, if NOL or APL shall receive from any third party an unsolicited Acquisition Proposal and determines in good faith upon the advice of its financial advisors that such unsolicited Acquisition Proposal is superior in its terms to the terms contemplated hereunder, NOL or APL may, and may authorize and permit its Representatives to, provide third parties with nonpublic information, otherwise facilitate any effort or attempt by any third party to implement such Acquisition Proposal, recommend or endorse such Acquisition Proposal with or by any third party, and participate in discussions and negotiations with any third party relating to such Acquisition Proposal. NOL or APL shall promptly advise the Purchaser following the receipt by NOL or APL of any Acquisition Proposal and the substance thereof (including the identity of the person making such Acquisition Proposal), and advise the Purchaser of any developments with respect to such Acquisition Proposal promptly upon the occurrence thereof. IV.3 Conduct of Business Prior to the Closing. From the date hereof ---------------------------------------- until the Closing, except as contemplated by this Agreement or the Purchaser shall otherwise consent in writing, which consent shall not be unreasonably withheld or delayed, APL agrees that it shall cause the Company, subject to the provisions of this Section 4.3, to conduct the Business in the ordinary and usual course consistent with past practice, and use its commercially reasonable efforts to preserve intact the Business and related relationships with customers, rail carriers and other third parties and keep available the services of its officers and employees. From the date hereof until the Closing, except as contemplated by this Agreement or as the Purchaser shall otherwise consent in writing, which consent shall not be unreasonably withheld or delayed, NOL and APL agree that they: (a) shall not permit the Company to issue or transfer any capital stock of the Company or any security convertible into or exchangeable for any such capital stock or any right to acquire any such capital stock or pledge or hypothecate shares of capital stock of the Company to secure existing credit facilities; -26- (b) shall not permit the Company to make any change in its certificate of incorporation or bylaws; (c) shall not permit the Company to incur or assume any indebtedness for borrowed money or guarantee any such indebtedness other than in the ordinary course of business consistent with past practice; (d) shall not permit the Company to liquidate, dissolve or otherwise reorganize or seek protection from creditors; (e) shall not permit the Company to adopt or amend in any material respect any Benefit Plan including, without limitation, any employment, severance, retention or similar agreements or arrangements; (f) shall not permit the Company to grant, confer or award any options, warrants, conversion rights or other rights, not existing on the date hereof, to acquire any shares of its capital stock or other securities of the Company or accelerate, amend or change the period of exercisability of options or restricted stock granted under any employee stock plan or authorize cash payments in exchange for any options granted under any of such plans; (g) shall not permit the Company to increase or agree to increase the compensation payable or to become payable, other than increases in accordance with past practice which are not material, to any of its officers or employees or enter into any collective bargaining agreement; (h) shall not permit the Company to (i) enter into any lease for real property, except renewals of existing leases in the ordinary course of business or (ii) enter into any operating lease without the prior written consent of the Purchaser, unless the annual payments under such lease and all other operating leases entered into by the Company since the date of the Agreement, in the aggregate, does not result in a net increase in payments under operating leases which exceeds $1 million per year; -27- (i) shall not permit the Company to enter into any contract or agreement or engage in any other type of transaction with APL or any of its Affiliates (other than the Company) other than in the ordinary course of business consistent with past practice or enter into any contract or agreement that provides for payments that exceed $10 million per year; (j) shall cause the Company to promptly notify the Purchaser of (i) any material adverse change in its condition (financial or otherwise), business, prospects, properties, assets, liabilities or the normal course of its business or of its properties, (ii) any material litigation or material governmental complaints, investigations or hearings (or communications indicating that the same may be contemplated), or (iii) the breach of any representation or warranty contained herein; (k) shall not permit the Company to authorize, propose or announce an intention to authorize or propose, or enter into an agreement with respect to, any merger, consolidation or business combination (other than the transactions contemplated in this Agreement), release or relinquishment of any material contract rights, or any acquisition or disposition of assets or securities other than in the ordinary course of business consistent with past practice; (l) shall not make with respect to the Company or permit the Company to (i) make, change or revoke any material Tax election other than the Section 338 Election, (ii) settle or compromise any dispute involving a material Tax liability or (iii) change any material practice with respect to Taxes; (m) shall not permit the Company to (i) directly or indirectly redeem, purchase or otherwise acquire any shares of its capital stock, or make any commitment for any such action or (ii) split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock; (n) shall not permit the Company to make or agree to make any capital expenditure or expenditures with respect to property, plant or equipment which, -28- individually or in a series of related transactions, is in excess of $100,000 or, in the aggregate, are in excess of $500,000 except as otherwise in the ordinary course of business consistent with past practice or in order to satisfy contractual commitments to customers; (o) shall not permit the Company to change any significant accounting principles or practices; (p) shall not permit the Company to enter into any agreements containing restrictive covenants that prohibit or materially limit the Business (including, but not limited to, any covenant not to compete, which shall be deemed to materially limit the Business) that would survive the Closing other than as contemplated by this Agreement; (q) shall not permit the Company to pay, discharge, settle or satisfy any material claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction, in the ordinary course of business or in accordance with their terms, of liabilities reflected or reserved against in the Financial Statements or incurred thereafter in the ordinary course of business, or waive any material benefits of, or agree to modify in any material respect, any confidentiality, standstill, nonsolicitation or similar agreement to which the Company is a party; (r) shall not permit the Company to take, or agree (in writing or otherwise) or resolve to take any action reasonably likely to result in a Material Adverse Effect; or (s) agree or commit itself (in writing or otherwise) or resolve to take any of the foregoing actions. Notwithstanding the foregoing, prior to Closing, APL shall be entitled, except as may be required to meet the conditions at Closing set forth in Section 6.1, to eliminate all intercompany loans, advances and other extensions of credit between the Company, on the one hand, and APL or an Affiliate of APL (other than the Company), on the other -29- hand, and transfer all cash and cash equivalents of the Company to APL. IV.4 Commercially Reasonable Efforts; Government Approvals. ----------------------------------------------------- (a) Upon the terms and subject to the conditions herein provided, each of the parties hereto agrees to use its commercially reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary for it to do to consummate and make effective the transactions contemplated by this Agreement, including, without limitation, (i) to comply promptly with all legal requirements which may be imposed on it with respect to this Agreement and the transactions contemplated hereby (which actions shall include, without limitation, furnishing all information required by applicable laws and regulations in connection with approvals of or filings with any Governmental Entity), (ii) to satisfy the conditions precedent to the obligations of the parties hereto (including using its best reasonable efforts to satisfy the conditions set forth in Sections 6.1(k) by April 30, 1998 and 6.1(l) by Closing) and (iii) (to use its best efforts, in the case of APL) to obtain any consent, authorization, order or approval of, or any exemption by, any Governmental Entity or other public or private third party required to be obtained or made by the Purchaser, APL or the Company in connection with the acquisition of the Shares or the taking of any action contemplated by this Agreement. In addition, following the Closing APL will ensure that LTS shall have access to the 48' expandible APL Chassis provided for in the Equipment Supply Agreement upon termination of the Stacktrain Services Agreement. (b) Subject to appropriate confidentiality protections, each of the parties hereto shall furnish to the other party such necessary information and reasonable assistance as such other party may reasonably request in connection with the foregoing and shall provide the other party with copies of all filings made by such party with any Governmental Entity and, upon request, any other information supplied by such party to a Governmental Entity in connection with this Agreement and the transactions contemplated hereby. (c) Without limiting the generality of the foregoing, the Purchaser and APL agree to take or cause to -30- be taken the following actions: (i) provide promptly to Governmental Entities with regulatory jurisdiction over enforcement of any applicable Competition Laws ("Governmental Antitrust Entity") information and documents requested by any Governmental Antitrust Entity or necessary, proper or advisable to permit consummation of the acquisition of the Stock and the transactions contemplated by this Agreement and (ii) without in any way limiting the other provisions of this Section 4.4, file any notification and report form and related material required under the HSR Act as soon as practicable and in any event not later than 10 Business Days after the date hereof, and thereafter use its reasonable best efforts to certify as soon as practicable its substantial compliance with any requests for additional information or documentary material that may be made under the HSR Act. Each party hereto shall provide to the other copies of all correspondence between it (or its advisor) and any Governmental Antitrust Entity relating to the acquisition of the Stock or any matters described in this Section 4.4. Each party hereto agrees that the other party shall have the right to participate in any meeting between the first party and any Governmental Antitrust Entity relating to the acquisition of the Stock or any matters described in this Section 4.4. IV.5 Use of APL Name and Trademark. The Purchaser acknowledges and ----------------------------- agrees that APL intends to cause the Company to change the corporate name of the Company to eliminate the name "APL" prior to the Closing. Purchaser agrees that, after the Closing, it will cause the Company to cease all use of the name "APL" and the corporate "eagle" logo, a representation of which is attached hereto as Schedule 4.5 (the "Logo"); provided, however, following the Closing, -------- ------- the Company (i) shall have the right to continue to use the name of "APL" and the Logo as affixed to products, labeling, packaging materials, Company stationary, business forms or promotional materials as of the Closing Date until the depletion of existing inventories but in no event after December 31, 1999 and (ii) shall not be obligated to eliminate the name "APL" or the Logo as affixed to railcars, containers and chassis as of the Closing until such time as the Purchaser shall decide to undertake the repainting, sale or decommissioning of such assets. APL hereby grants the Company a non-exclusive license to use the name "APL" and the Logo solely for the foregoing purposes and limited time periods. -31- IV.6 Confidentiality. Each party hereto, at all times prior to the --------------- Closing and after any termination of this Agreement, will hold all confidential information provided to such party by or on behalf of the other party hereto in confidence pursuant to the terms of the Confidentiality Agreement. Upon any termination of this Agreement, each party hereto will promptly return to the other party such information provided to the first party, including any copies of such information. Each party hereto acknowledges that the other party would be irreparably harmed by a breach of this Section 4.6 and that there would be no adequate remedy at law or in damages to compensate the other party for any such breach and agrees that, in addition to any other remedy, the other party shall be entitled to one or more injunctions requiring specific performance by the first party of this Section 4.6, and the first party consents to the entry thereof. IV.7 Employee Benefits; Employees. (a) Each employee benefit plan ---------------------------- provided to employees of the Company after the Closing shall give full credit for each participant's period of service with the Company or its Affiliates prior to the Closing for purposes of determining eligibility and vesting of benefits, but not accrual or amount of benefits, to the same extent such service was credited for comparable purposes under the Company's Benefit Plans prior to the Closing. Effective as of the Closing, APL shall take all actions necessary to cause Employees to become fully vested in their accrued benefits under each Pension Plan. Each employee welfare benefit plan provided to the employees of the Company from and after the Closing shall (i) give full credit for copayments, deductibles and out-of-pocket expenses under the Company's Benefit Plans with respect to the current plan year toward any deductibles for the remainder of the plan year during which the Closing occurs, and (ii) waive any pre-existing condition limitation for any employee covered under a Welfare Plan immediately prior to the Closing, unless such pre-existing condition was not covered under the applicable Welfare Plan. APL shall cause each Welfare Plan to remain solely responsible and to satisfy all liabilities for all claims incurred by Employees under such Welfare Plans prior to the Closing. (b) As of the Closing, the Employees of the Company shall be those persons listed on Schedule 4.7(b) hereto (unless an Employee voluntarily terminates his or her employment), as such Schedule may be amended prior to -32- Closing by mutual agreement of the parties hereto. Following the Closing, APL shall be solely liable for, and shall indemnify Purchaser and the Company against (i) any obligations to former employees of the Company or current or former employees of APL (who have performed services for the Company) in respect of their employment or termination of employment including, without limitation, obligations for severance or termination pay, COBRA benefits, workers compensation benefits and other Benefit Plan obligations and (ii) any obligations to Employees of the Company under any Benefit Plan, none of which will be assumed or continued by the Company or Purchaser following the Closing. IV.8 Insurance. --------- (a) APL shall use commercially reasonable efforts to ensure that any insurance coverage for any claims that arise out of or are related to occurrences prior to the Closing relating to the Company or the Business will continue with respect to such occurrences following the Closing, and APL agrees to pay promptly to the Company insurance proceeds (net of any expenses of APL incurred in defense of such claim) resulting from such coverage promptly after receipt thereof ("Insurance Proceeds"). The amount of Insurance Proceeds payable to the Company shall also include the amount of any deductible withheld from any such insurance proceeds. From and after the date hereof, APL shall diligently pursue for the benefit of the Purchaser, consistent with its past practice, insurance coverage for any claims filed with third party insurers prior to the Closing relating to the Company or the Business for periods on or prior to the Closing. Following the Closing, the Company shall be responsible for the control of all claims filed with third party insurers, subject to the control exercised by any insurers in accordance with the applicable insurance policies. APL shall also pay the Company for any uninsured cargo claims that arise out of or are related to occurrences prior to the Closing to the extent such claims are not recovered from a rail carrier. (b) Except as provided in Section 4.8(a), as of the Closing, the coverage under all insurance policies related to the Company shall continue in force only for the benefit of APL and its Affiliates and not for the benefit of the Purchaser. Purchaser agrees to use commercially reasonable efforts to arrange for its own insurance policies with respect to the Company. Purchaser also agrees not to -33- seek, through any means, to benefit from APL's or its Affiliates' insurance policies which may provide coverage for claims relating in any way to the Company on or prior to the Closing, except as provided in Section 4.8(a). IV.9 Warn Act. The Purchaser shall comply with The Worker -------- Adjustment Retraining Notification Act (the "Warn Act") and shall indemnify APL against liability thereunder with respect to Employees whose employment with the Company is terminated following the Closing. IV.10 Other Actions. Prior to the Closing, APL, the Company and the ------------- Purchaser shall not take or omit to take any action, the taking or omission of which would reasonably be expected to result in any of the representations and warranties of such party set forth in this Agreement becoming materially untrue or inaccurate. IV.11 Advice of Changes. Prior to the Closing, APL and the Purchaser ----------------- shall confer on a regular and frequent basis with respect to matters contemplated hereby as reasonably requested by APL or the Purchaser. In that regard, APL shall report on operational matters and promptly advise the Purchaser and, if requested by the Purchaser in writing, of any material change with respect to the Company, and the Purchaser, if requested by APL in writing, shall report on the status of the debt financing contemplated by the Financing Letters and the closing of the Pacer Transaction. -34- IV.12 Financial Information. Prior to the Closing, APL shall furnish --------------------- to the Purchaser (i) as soon as available but in any event within 15 days of each four week accounting period, the unaudited consolidated balance sheets and income statements of the Company (prepared in accordance with GAAP consistently applied), showing the Company's financial condition as of the close of such period and the results of operations during such period and for the then elapsed portion of the Company's fiscal year, in each case setting forth the comparative figures for the fiscal 1999 budget, (ii) as soon as available, but in any event within 30 days of the end of the first and second fiscal quarters of fiscal 1999, the unaudited consolidated balance sheets and income statements of the Company (prepared in accordance with GAAP consistently applied), showing the Company's financial condition as of the end of such fiscal quarter and the results of such operations during such quarter and for the then elapsed portion of the Company's fiscal year, setting forth the corresponding figures for the corresponding quarter in the prior fiscal year and the corresponding elapsed portion of the prior fiscal year and (iii) such other financial information as is reasonably requested by the Purchaser that is readily accessible from the Company's accounting records and does not impose any undue burden or cost to prepare. IV.13 Accounts Payable, Accrued Expenses and Accounts Receivable. At ---------------------------------------------------------- least two business days prior to the Closing, APL shall provide a true, correct and complete listing of all consolidated accounts payable, accrued expenses and accounts receivable of the Company as of the most reasonably practicable recent date, which schedule shall set forth the name of the account debtor (in the case of accounts receivable) or account creditor (in the case of accounts payable) and the amount owed by or owing to such account debtor or account creditor (identifying the portion of accounts receivable that is current, 30, 60, 90 and more than 90 days past due). IV.14 Pacer Indemnification. The Purchaser shall cause the --------------------- stockholders of Pacer (rather than the Purchaser itself) to pay promptly to APL a percentage (equal to the relative equity interests of APL and the Purchaser in the Company immediately following the closing of the transaction contemplated by this Agreement) of any amounts (if any) to which the Purchaser or any of its Affiliates are entitled and are to be paid directly from such stockholders pursuant -35- to the Pacer Merger Agreement, whether pursuant to the indemnification provisions thereof or otherwise, following the closing of the Pacer Transaction. IV.15 Conduct of Business Following the Closing. From the date of ----------------------------------------- the Closing until the end of fiscal 1999, except as APL shall otherwise consent in writing, which consent shall not be unreasonably withheld or delayed, the Purchaser agrees that the Company shall conduct the Business in good faith taking into account the conduct of the Business prior to Closing and the desire of both parties to achieve the EBITDA Target and shall not permit the Company to enter into any contract or agreement or engage in any other type of transaction with Pacer, Apollo Management, L.P. ("Apollo") or any of their Affiliates other than (i) on an arms' length basis or (ii) management fees and expense reimbursements payable to Apollo. ARTICLE V Tax Matters ----------- V.1 Definitions. For purposes of this Agreement, "Taxes" shall mean ----------- all federal, state, local and foreign taxes, including without limitation, income, property, sales and use, excise, withholding, franchise, environmental, transfer, gross receipt, capital stock, production, business and occupation, disability, employment, payroll, severance or similar taxes imposed on the income, properties or operations of the Purchased Entity or the Seller's Group, together with any penalties, additions or interest relating thereto and any interest in respect of such additions or penalties. For purposes of this Agreement, "Taxes" also includes any obligations under any agreements or arrangements with any person with respect to the liability for, or sharing of, Taxes (including, without limitation, pursuant to Treas. Reg. (S) 1.1502-6 or comparable provisions of state, local or foreign Tax law) and including, without limitation, any liability for Taxes as a transferee or successor, by contract or otherwise. "Taxable Period" means any taxable year or any other period that is treated as a taxable year (or other period, or portion thereof, in the case of a Tax imposed with respect to such period or portion thereof, e.g., a quarter or a portion of a Taxable Period, in the case of a Taxable Period that begins before and ends after the Closing) with respect to which any Tax may be -36- imposed under any applicable statute, rule or regulation. "Tax Reserve" shall have the meaning set forth in Section 5.2(d). "Tax Return" shall mean all reports, returns and other forms and documents (including, without limitation, all schedules, exhibits and other attachments thereto) filed or required to be filed with respect to Taxes including, without limitation, combined or consolidated returns for any group of the Seller's Group. V.2 Tax-Related Representations and Warranties. ------------------------------------------ (a) Tax Allocation Agreements. APL represents and warrants to the ------------------------- Purchaser that the Purchased Entity neither is a party to nor has any liability under any agreement, contract or understanding relating to any sharing by the Purchased Entity of any Tax liability of any Person. (b) Tax Returns and Reports. APL represents and warrants to the ----------------------- Purchaser that except as set forth in Schedule 5.2(b), (i) all material Tax Returns that are required to be filed by or with respect to the Company or any member of the Seller's Group have been or will be duly and timely filed, (ii) all Taxes shown to be due on the Tax Returns referred to in clause (i) have been or will be timely paid in full, (iii) all deficiencies asserted or assessments made as a result of any tax examinations have been settled or paid in full, (iv) no issues that have been raised in writing by the relevant taxing authority in connection with the examination of any of the Tax Returns referred to in clause (i) are currently pending, (v) no waivers of statutes of limitation have been given by or requested with respect to any Taxes or Tax Returns of the Company or any member of the Seller's Group, and (vi) no extension of time with respect to any date on which a Tax Return was or is to be filed is in force. Schedule 5.2(b) lists the date or dates through which the Internal Revenue Service have examined the United States federal income tax returns. All material Tax Returns referred to in clause (i) were prepared in the manner required by applicable law, are true, correct, and complete in all material respects, and accurately reflect the liability for Taxes of the Company and each of its Affiliates. True and complete copies of all federal, state, local and foreign Tax Returns of the Company or any member of the Seller's Group have been provided to the Purchaser prior to the date hereof. -37- (c) No FIRPTA Withholding. APL represents and warrants to the --------------------- Purchaser that no tax is required to be withheld pursuant to Section 1445 of the Code as a result of the transfer contemplated by this Agreement. (d) Payment of Taxes. The Company and each member of the Seller's ---------------- Group have paid, or caused to be paid, all material Taxes due, whether or not shown (or required to be shown) on a Tax Return, and have provided a sufficient reserve for the payment of all Taxes not yet due and payable (without regard to deferred Tax assets and liabilities) (the "Tax Reserve") on the Balance Sheet. (e) Claims by Certain Jurisdictions and Liens on Assets. No --------------------------------------------------- material claim has ever been made by any taxing authority with respect to the Company or any member of the Seller's Group in a jurisdiction where the Company or such member does not file Tax Returns that the Company or such member is or may be subject to taxation by that jurisdiction. There are no security interests on any of the assets of the Company that arose in connection with any failure (or alleged failure) to pay any Taxes and, except for liens for real and personal property Taxes that are not yet due and payable, there are no liens for any Tax upon any asset of the Company. (f) Affiliated Group. Neither the Company nor any of member of the ---------------- Seller's Group has been a member of an (i) affiliated group (within the meaning of Section 1504 of the Code) or (ii) affiliated, combined, consolidated, unitary, or similar group for state, local or foreign Tax purposes, other than the group of which APL is the common parent, which affiliated group within the meaning of Section 1504(a) of the Code includes the Company. (g) Section 338(h)(10) Election. APL represents and warrants that --------------------------- if the acquisition of the Shares is consummated pursuant to this Agreement, APL will be eligible to join with the Purchaser in making an election under Section 338(h)(10) of the Code with respect to such acquisition of the Shares. (h) Withholding and Backup Withholding Taxes. The Company and each ---------------------------------------- member of the Seller's Group have complied in all material respects with the provisions of the Code relating to the withholding and payment of Taxes, including, without limitation, the withholding and reporting -38- requirements under Sections 1441 through 1464, 3401 through 3406, and 6041 through 6049 of the Code, as well as similar provisions under any other laws, and have, within the time and in the manner prescribed by law, withheld from employee wages and paid over to the proper governmental authorities all amounts required. (i) Adjustments to Income. Neither the Company nor any member of --------------------- the Seller's Group has agreed to include, or is required to include, in income any adjustment under either Section 481(a) or Section 482 of the Code (or an analogous provision of state, local, or foreign law) by reason of a change in accounting method or otherwise. (j) Spin-Offs. Neither the Company nor any member of the Seller's --------- Group has distributed the stock of any corporation in a transaction satisfying the requirements of Section 355 of the Code since April 16, 1997. (k) Options Treated as Stock. There are no outstanding options, ------------------------ warrants, instruments, contracts or other rights that might be treated for U.S. federal income tax purposes as stock or another equity interest in the Company or any member of the Seller's Group. (l0 Partnership Interests. The Company is not a party to any joint --------------------- venture, partnership or other arrangement or contract that could be treated as a partnership for U.S. federal income tax purposes. V.3 Liability for Taxes and Related Matters. --------------------------------------- (a) Liability of APL for Taxes. APL shall indemnify, defend and -------------------------- hold harmless the Purchaser, the Company and their respective officers, directors, employees, Affiliates and agents (each, a "Tax Indemnitee") from and against, and shall reimburse each Tax Indemnitee for, any and all Taxes (including, without limitation, the reasonable expenses of investigation and reasonable attorney's and accountant's fees and expenses in connection with any action, suit or proceeding) actually incurred or suffered at any time by any Tax Indemnitee arising out of or attributable to (i) any misrepresentation, inaccuracy or breach of any representation, warranty, covenant, agreement or promise related to Taxes by APL and/or the Company contained in this Agreement (or in any certificate, document, list or schedule delivered to the Purchaser in -39- connection with this Agreement by APL or the Company), (ii) any and all Taxes for any Taxable Period ending on or before the Closing, (iii) any and all Taxes, whether determined on a separate, consolidated, combined, group or unitary basis, including any penalties and interest in respect thereof, of the Company or any member of the Seller's Group (A) pursuant to Treas. Reg. (S) 1.1502-6 or any comparable provision of state, local, or foreign law with respect to any Taxable Period beginning on or before the Closing or (B) pursuant to any guaranty, indemnification, Tax sharing, or similar agreement made on or before the Closing relating to the sharing of liability for, or payment of, Taxes or (iv) any and all Taxes resulting from the Section 338 Election. (b) Liability of Purchaser for Taxes. The Purchaser shall be liable -------------------------------- for and shall indemnify APL for the Taxes of the Purchased Entity for (i) any Taxable Period that begins after the Closing and, (ii) with respect to any Taxable Period beginning before and ending after the Closing, the portion of such Taxable Period beginning after the Closing (other than Taxes arising under Treas. Reg (S) 1.1502-6 (or a similar provision of state or local law) with respect to the Seller's Group). The Purchaser shall be entitled to any refund of Taxes of the Purchased Entity received for such periods. (c) Tax Periods. With respect to any Taxes for any Taxable Period ----------- that includes but does not end as of the Closing, the amount of Taxes subject to indemnification hereunder shall be calculated as if such Taxable Period ended on (and included) the Closing, except that property Taxes and exemptions, allowances or deductions that are calculated on an annual basis shall be prorated based on the number of days in the annual period elapsed through the Closing compared to the number of days in the annual period elapsing after the Closing. V.4 Adjustment to Purchase Price. Any payment by the Purchaser or ---------------------------- APL under this Article V will be an adjustment to the Purchase Price, except as prohibited by applicable law. V.5 Tax Covenants. ------------- (a) Certain Pre- and Post-Closing Tax Returns. APL shall prepare ----------------------------------------- and timely file, or shall cause to be -40- prepared and timely filed, in a manner consistent with past practice if changing such practice would adversely affect a Tax Indemnitee, all Tax Returns (whether separate or consolidated, combined, group or unitary Tax Returns that include or relate to the Company) that are required to be filed (with extensions) with respect to the Company on or before the Closing. APL shall timely pay or cause to be timely paid all Taxes shown as due, or required to be shown as due, on such Tax Returns. APL shall prepare and timely file, or shall cause to be prepared and timely filed, in a manner consistent with past practice if changing such practice would adversely affect a Tax Indemnitee, all Tax Returns (whether separate or consolidated, combined, group or unitary Tax Returns that include or relate to the Company) that are required to be filed (with extensions) with respect to the Company after the Closing for any Taxable Period that ends on or prior to the Closing. APL shall timely pay or cause to be timely paid all Taxes shown as due, or required to be shown as due, on such Tax Returns. In addition, APL shall prepare and timely file, or cause to be prepared and timely filed, in a manner consistent with past practice as to the Company and timely pay all Taxes with respect to, all consolidated, combined, group or unitary Tax Returns that are required to be filed (with extensions) after the Closing with respect to the Company for all other Taxable Periods that begin on or before and end after the Closing; provided, however, that APL shall deliver the portion of any -------- ------- such Tax Return that relates to the Company to the Purchaser at least 15 days prior to the due date thereof and the Purchaser shall have the right to comment on that portion of such Tax Return. At least 10 business days prior to the due date of any payment required to be made with respect to any Tax Return described in the preceding sentence, the Purchaser shall pay to APL any amount appropriately reflected on such Tax Return with respect to the Company that is attributable to any Taxable Period beginning after the Closing. (b) Other Tax Returns. The Purchaser shall prepare and timely file, ----------------- or shall cause to be prepared and timely filed, all Tax Returns that include or relate to the Company other than those described in Section 5.5(a); provided, -------- however, that with respect to any such Tax Returns, the Purchaser shall deliver - ------- to APL any Tax Return that relates to any Taxable Period ending on or prior to the Closing at least 15 days prior to the due date thereof and APL shall have the right to comment on such Tax Return. At -41- least 10 business days prior to the due date of any payment required to be made with respect to any Tax Return described in the preceding sentence, APL shall pay to the Purchaser any amount appropriately reflected on such Tax Return with respect to the Company that is attributable to any Taxable Period ending on or prior to the Closing. (c) FIRPTA Certificate. At the Closing, APL shall deliver to the ------------------ Purchaser, pursuant to Section 1445(b)(2) of the Code and Treas. Reg. (S) 1.1445-2(b)(2), a duly executed certification of non-foreign status. Such certification shall conform to the model certification provided in Treas. Reg. (S) 1.1445-2(b)(2)(iii)(B). (d) Section 338 Election. At the request of the Purchaser, APL will -------------------- join with the Purchaser in making an election under Section 338(h)(10) of the Code and Treasury Regulation (S) 1.338(h)(10)-1(d) (the "Section 338 Regulations") (and, to the extent requested by the Purchaser, any election comparable to Section 338(h)(10) of the Code under state, local or foreign Tax law) (collectively, the "Section 338 Election") with respect to the acquisition of the Shares by the Purchaser. APL and the Purchaser will cooperate with regard to the timely preparation and filing of a Section 338 Election and any and all forms with respect thereto under the laws of each appropriate jurisdiction for which such election is made. In particular, and without limiting the generality of the foregoing and subject to Section 5.5(e), APL shall deliver to the Purchaser a duly executed and completed Internal Revenue Service Form 8023 (or any successor form) and any similar state or local form to be filed, as well as any required attachments (collectively, the "Section 338 Forms") no later than ninety (90) calendar days after the Closing. In the event of any dispute with regard to the content of any Section 338 Form (including, without limitation, the Section 338 Determinations), APL and the Purchaser shall diligently attempt to resolve such dispute; but if APL and the Purchaser have been unable to resolve such dispute by the sixtieth day prior to the date any such form is to be filed, such dispute shall be resolved in accordance with the procedures contained in Section 5.5(e) for the resolution of disagreements regarding Section 338 Determinations. Each party shall promptly cause such Section 338 Forms to be executed by an authorized person, and (subject to the receipt of the other party's signature) the party -42- responsible for filing such forms with its Tax Returns will duly and timely do so, providing written evidence to the other party that it has done so. APL shall pay any Taxes attributable to its sale of the Shares and the making of any Section 338 Election, including, without limitation, any Tax imposed upon the Company. (e) Section 338 Determinations. APL and the Purchaser shall jointly -------------------------- determine the liabilities of the Company, and allocate the "modified aggregate deemed sale price" (or the "aggregate deemed sale price," if applicable, or any deemed sale price comparable to the "modified aggregate deemed sale price" or the "aggregate deemed sale price" required to be allocated under state, local or foreign Tax law), such liabilities and other relevant items among the Company's assets in accordance with Section 338 of the Code, the Treasury Regulations promulgated thereunder and analogous provisions of state, local and foreign Tax laws (such determination and allocation, the "Section 338 Determinations"). If APL and the Purchaser are unable to agree with respect to any Section 338 Determination, APL and the Purchaser shall select an independent third firm of accountants from among the "big five" accounting firms to which the parties shall not unreasonably object to submit such disagreement for a final determination. APL and the Purchaser agree to act in accordance with the Section 338 Determinations, as finally determined pursuant to this Section 5.5(e), in the preparation and filing of all Tax Returns (including, without limitation, any amended Tax Return and claim for refund) and in the course of any tax audit, appeal or litigation relating thereto, unless advised by counsel that it may not take such position without violating applicable law and without incurring penalties and except as may be required by a final determination with respect to any such issue. Upon payment of any indemnification obligations hereunder resulting in an adjustment of the "modified aggregate deemed sale price" (or the "aggregate deemed sale price," if applicable, or any deemed sale price comparable to the "modified aggregate deemed sale price" or the "aggregate deemed sale price" under state, local or foreign tax law), the Section 338 Determinations shall be appropriately adjusted in accordance with the procedures described in this Section 5.5(e). V.6 Transfer Taxes. Notwithstanding anything to the contrary in this -------------- Article V, the Purchaser and APL shall bear equally the responsibility for all transfer taxes -43- arising in connection with the transactions under this Agreement. V.7 Information to be Provided by the Purchaser. With respect to the ------------------------------------------- period in 1999 prior to the Closing, the Purchaser shall promptly cause the Purchased Entity to prepare and provide to APL, at APL'S expense, a package of tax information materials relating to any Taxable Period ending on or prior to the Closing Date computed as if the Closing Date were the last day of any such Taxable Period (the "Tax Package"), which Tax Package shall include the information, schedules and work papers and as to the method of computation of separate taxable income or other relevant measure of taxation of the Purchased Entity. The Purchaser shall cause the Tax Package for the portion of the Taxable Period ending on the Closing to be delivered to APL within one hundred twenty (120) days after the Closing. V.8 Tax Proceedings. --------------- (a) Right to Control Proceedings. APL shall have (i) the ---------------------------- responsibility for, and the right to control, at APL's expense, the audit (and disposition thereof) of any Tax Return relating to any Taxable Period ending on or prior to the Closing and (ii) the right to participate in the disposition of the audit of any Tax Return relating to any Taxable Period beginning before and ending after the Closing if such audit or disposition thereof could give rise to a claim for indemnification hereunder (any such audit or disposition, a "Tax Proceeding"); provided, however, that with respect to (i) and (ii) APL shall not -------- ------- initiate any claim, settle any issue, file any amended Tax Return, take or advocate any position or otherwise take any action that could adversely affect a Tax Indemnitee or any of its Affiliates without the written consent of the Tax Indemnitee, which consent shall not be unreasonably withheld or delayed. (b) Notice; Reports. APL's right to control a Tax Proceeding shall --------------- commence upon the receipt by the Purchaser or any of its Affiliates (including, after the Closing, the Purchased Entity) of a proposed adjustment to Tax for the period under audit or examination communicated in writing. The Purchaser shall promptly notify APL in writing upon their learning of the pendency of a Tax Proceeding and shall reasonably cooperate with APL in the conduct of such Tax Proceeding. Any notification given by the Purchaser within 15 Business Days of its learning of the -44- pendency of a Tax Proceeding shall constitute "prompt" notification for purposes of this Section 5.8. The failure on the part of the Purchaser to promptly notify APL of the pendency of a Tax Proceeding shall not in any way discharge APL's indemnity obligations hereunder, except that the Purchaser shall be liable for any increase in penalties, interest, other assessments or fees and expenses which are due solely to any delay in promptly notifying APL of the pendency of any Tax Proceeding and shall be responsible for any indemnity obligations to the extent that APL is prejudiced as a result of such delay. If APL does not assume the defense of a claim for a Tax made by a taxing authority with respect to which APL has indemnified a Tax Indemnitee under Section 5.3, the Tax Indemnitee may defend the same in such manner as it may deem appropriate, including, but not limited to, settling such audit or proceeding with the consent of APL, which consent shall not be unreasonably withheld. The Purchaser shall, and shall cause the Purchased Entity to, reasonably cooperate with APL including providing reasonable access to records, returns and supporting information, in connection with any Tax Proceeding or matter as to which the Purchaser may seek indemnity or other relief from APL under this Article V. The Purchaser promptly shall pay APL any refunds, rebates or other recoveries received by the Purchased Entity to which APL is entitled pursuant to Section 5.3(a). V.9 Assistance and Cooperation. After the Closing, each of APL and -------------------------- the Purchaser shall (i) assist (and cause their respective affiliates to assist) the other party in preparing any Tax Returns or reports which such other party is responsible for preparing and filing in accordance with this Article V, (ii) reasonably cooperate in preparing for any audits of, or disputes with taxing authorities regarding, any Tax Returns of or including the Purchased Entity, (iii) make available to the other and to any taxing authority as reasonably requested all information, records, and documents relating to Taxes of the Purchased Entity for any Taxable Period beginning before the Closing Date, (iv) provide timely notice to the other in writing of any pending or threatened tax audits, proposed adjustments or assessments of any Tax of or relating to the Purchased Entity for Taxable Periods for which the other may have a liability under this Article V and (v) furnish the other with copies of all correspondence received from any taxing authority in connection with any tax audit or information request with respect to any such Taxable Period. -45- V.10 Survival, Etc. Notwithstanding anything to the contrary ------------- contained in this Agreement, the representations and warranties, the covenants and agreements and the indemnification obligations set forth in Sections 5.2(a), 5.2(e), 5.2(g), 5.2(k) and 5.2(l) shall survive the Closing and shall remain in effect until 60 days after the expiration of the applicable statute of limitations (including any extension thereof) and the remaining representations and warranties set forth in Section 5.2 shall not survive the Closing. The indemnification obligations set forth in Section 5.3 and the covenants and agreements set forth in Section 5.5 shall survive the Closing and shall remain in effect until 60 days after the expiration of the applicable statute of limitations (including any extension thereof). ARTICLE VI Conditions to Closing --------------------- VI.1 Conditions to the Obligations of the Purchaser. The obligations ---------------------------------------------- of the Purchaser to consummate the transactions contemplated by this Agreement are subject to the satisfaction at or prior to the Closing of the conditions set forth in this Section 6.1, any one or more of which may be waived, in whole or in part, by the Purchaser: (a) Approvals. With respect to the HSR Act, the parties shall have --------- procured such approvals, if applicable, or there shall have occurred the expiration or early termination of the applicable waiting periods, if any, with respect thereto without there being any continuing objection thereto. All notices required to be given prior to Closing to, all filings required to be made prior to Closing with, and all consents, approvals, authorizations, waivers and amendments required to be obtained prior to the Closing from, any other Governmental Entity or any third party in connection with the consummation of the transactions contemplated herein and the financing thereof, have been made or obtained, except for the notices, filings, consents, approvals, authorizations, waivers and amendments, the failure to obtain would not have a Material Adverse Effect. -46- (b) Orders. No party hereto shall be subject to any order, decree or ------ injunction of a court or agency of competent jurisdiction which enjoins or prohibits the consummation of the sale of the Stock or the transactions contemplated by the Ancillary Agreements. In addition, no judgment, statute, rule, regulation, executive order, writ, decree, ruling or injunction shall have been enacted, entered, promulgated, made or enforced by any Governmental Entity or court of competent jurisdiction which would have a Material Adverse Effect. (c) Accuracy of Representations. The representations and warranties --------------------------- of APL in this Agreement shall be true and correct in all material respects at and as of the Closing as if made at and as of the Closing, and the Purchaser shall have received a certificate, dated the Closing, of an executive officer of APL to that effect. For the purposes of the foregoing condition, failures or breaches which may be immaterial individually, but are material in the aggregate, shall be deemed to be material. (d) Performance of Covenants. APL shall have performed and complied ------------------------ in all material respects (other than Sections 4.2 and 4.3 which it shall perform in all respects) with all covenants and agreements contained in this Agreement that are required to be performed or complied with by it at or prior to the Closing, and the Purchaser shall have received a certificate, dated the Closing, of an executive officer of APL to that effect. (e) Resignation of Directors. The directors of the Company shall ------------------------ have submitted their resignations in writing, effective as of the Closing, to the Company. (f) Ancillary Agreements. The Ancillary Agreements shall have been -------------------- executed and delivered by the parties thereto and be in full force and effect. (g) Intercompany Accounts. (i) All intercompany loans, advances and --------------------- other extensions of credit made between the Company, on the one hand, and APL or an Affiliate of APL (other than the Company), on the other hand, shall have been eliminated and (ii) all cash and cash equivalents of the Company shall have been transferred to APL. (h) Financing Letters. The funding contemplated by the Financing ----------------- Letters shall have been obtained on -47- substantially the terms set forth in the term sheets attached to the Financing Letters. (i) Material Adverse Effect. Notwithstanding the exception contained ----------------------- in Section 2.10(a), from the date of this Agreement until the Closing there shall not have occurred a Material Adverse Effect. Since the date of the NOL Balance Sheet, there shall not have occurred events, changes, facts or effects which, individually or in the aggregate, have had or are reasonably likely to have a material adverse effect on the assets or properties, business, results of operations or financial condition of NOL. (j) Working Capital and Net Fixed Assets. Working Capital of the ------------------------------------ Company shall, as of the Closing Date, be not less than $(16,700,000); and Net Fixed Assets of the Company shall, as of the Closing Date, be not less than $95,000,000. (k) Union Pacific Rail Agreement. The execution of a binding ---------------------------- agreement among the Union Pacific Railroad Company, APL and the Company consistent with the term sheet attached as Exhibit I and otherwise containing terms that are reasonably acceptable to Purchaser. (l) CSX Agreement. The execution of a binding document among CSX ------------- Corporation, APL and the Company consistent with the memorandum of understanding attached as Exhibit J and otherwise containing terms that are reasonably acceptable to Purchaser. (m) List of Company Rights. APL shall have delivered to the ---------------------- Purchaser a list of Company Rights as provided in Section 2.24 which shall not, individually or in the aggregate, have a Material Adverse Effect. (n) Assignment of Leases. APL shall have assigned the leases for -------------------- containers and chassis set forth on Attachment 1 to Schedule 2.14(a) to LTS, and determined the number of chassis and established the mechanism to be put in place to accomplish the objective set forth in the last sentence of Section 4.4(a), in each case that is reasonably acceptable to the Purchaser. (o) NOL Lines of Credit. NOL shall have provided evidence reasonably ------------------- acceptable to the Purchaser to the -48- effect that as of the Closing NOL will have greater than $500 million of availability under its credit facilities with the Development Bank of Singapore and that the proceeds of the sale of the Shares hereunder will be available to NOL for general working capital purposes and will not be required to prepay any monetary obligations before their stated maturity. (p) Hub Agreement. APL, the Company and Hub International, Inc. ------------- shall have entered into an agreement on terms reasonably acceptable to Purchaser. The Purchaser agrees to promptly notify APL in writing when it deems the conditions set forth in Sections 6.1(k), (l), (m), (n), (o) or (p) to be satisfied or waived. VI.2 Conditions to the Obligations of APL. The obligations of APL to ------------------------------------ consummate the transactions contemplated by this Agreement are subject to the satisfaction at or prior to the Closing of the conditions set forth in this Section 6.2, any one or more of which may be waived, in whole or in part, by APL. (a) Approvals. With respect to the HSR Act, the parties shall have --------- procured such approvals, if applicable, or there shall have occurred the expiration or early termination of the applicable waiting periods, if any, with respect thereto without there being any continuing objection thereto. (b) Orders. No party hereto shall be subject to any order, decree or ------ injunction of a court or agency of competent jurisdiction which enjoins or prohibits the consummation of the sale of the Stock or the transactions contemplated by the Ancillary Agreements. In addition, no judgment, statute, rule, regulation, executive order, writ, decree, ruling or injunction shall have been enacted, entered, promulgated, made or enforced by any Governmental Entity or court of competent jurisdiction which would prevent the performance of APL's obligations hereunder. (c) Accuracy of Representations. The representations and warranties --------------------------- of the Purchaser in this Agreement shall be true and correct in all material respects at and as of the Closing as if made at and as of the Closing, and APL shall have received a certificate, dated -49- the Closing, of an executive officer of the Purchaser to that effect. (d) Performance of Covenants. The Purchaser shall have performed ------------------------ and complied in all material respects with all covenants and agreements contained in this Agreement that are required to be performed or complied with by it at or prior to the Closing, and APL shall have received a certificate, dated the Closing, of an executive officer of the Purchaser to that effect. (e) Ancillary Agreements. The Ancillary Agreements shall have been -------------------- executed and delivered by the parties thereto and be in full force and effect. (f) Shareholder Vote. The shareholders of NOL shall have approved ---------------- the transactions contemplated hereby pursuant to an extraordinary general meeting. VI.3 Pacer Extension. If Mile High exercises its option to extend --------------- the Original Termination Date (as defined in the Pacer Merger Agreement) pursuant to the Extension Letter, it shall promptly deliver a copy of the Extension Notice (as defined in the Extension Letter) to APL. ARTICLE VII Termination ----------- VII.1 Grounds for Termination. This Agreement may be terminated at ----------------------- any time prior to Closing: (a) Mutual Agreement. by the mutual written agreement of APL and the ---------------- Purchaser; (b) Expiration. by APL or by the Purchaser if the Closing shall not ---------- have occurred on or before May 31, 1999; unless the failure to consummate the Closing by such date (i) shall be due to the failure of the party seeking to terminate this Agreement to have fulfilled any of its obligations under this Agreement or (ii) is due to the continuance of a waiting period or lack of an approval required under or an injunction or equivalent thereof entered based upon the HSR Act, in which event no party may rely upon this Section 7.1(b) to terminate this Agreement -50- until July 7, 1999; provided that Purchaser shall have 14 days after delivery by APL of an agreement that APL believes in good faith satisfies Section 6.1(k) to decide whether such agreement is reasonably acceptable to Purchaser, and if Purchaser decides that such agreement is reasonably acceptable to Purchaser, and notifies APL thereof in writing within such 14 day period, the expiration shall be extended to the 30th day after the date of such acceptance, but in no event earlier than May 31, 1999 or later than June 14, 1999, and if Purchaser does not notify APL of its acceptance in writing within such 14 day period, the Agreement may be terminated by APL or by the Purchaser; provided further that the expiration date may be extended on at least a day for day basis with the written consent of APL, which shall not be unreasonably withheld, but in no event later than June 30, 1999, upon the waiver by the Purchaser and APL of the conditions to Closing other than Section 6.1(h). (c) Contravention of Law. By APL or by the Purchaser if consummation -------------------- of the transactions contemplated hereby would violate any nonappealable final order, decree or judgment of any court or Governmental Entity having competent jurisdiction (other than as a result of the failure to obtain approval of the shareholders of NOL); provided, that, the party seeking to terminate this -------- Agreement pursuant to this clause (c) shall have used all commercially reasonable efforts to remove such final order, decree or judgment; (d) Breach. by APL or by the Purchaser if there has been a breach by ------ the other of any representation, warranty, covenant or agreement contained in this Agreement which would result in a condition set forth in Section 6.1(c) or (d) or Section 6.2(c) or (d) of this Agreement, as the case may be, not being satisfied, which breach cannot be or has not been cured within 30 days after the giving of written notice to the breaching party of such breach; (e) Shareholder Vote. By APL or by the Purchaser if the approval of ---------------- the shareholders of NOL required by Section 6.2(f) shall not have been obtained for any reason by May 14, 1999; and (f) Superior Unsolicited Acquisition Proposal. By APL at any time ----------------------------------------- prior to the earlier of (i) April 30, 1999 and (ii) the time the shareholders of NOL shall have -51- voted to approve this Agreement if NOL or APL receives an unsolicited Acquisition Proposal and determines in good faith upon the advice of its financial advisors that such unsolicited Acquisition Proposal is superior in its terms to the terms contemplated hereunder. VII.2 Effect of Termination. (a) In the event that (i) this --------------------- Agreement is terminated by either party pursuant to Section 7.1(b), (ii) the reason for such termination is that the condition set forth in Section 6.1(h) was not satisfied and (iii) the Purchaser is entitled to any amounts from the stockholders of Pacer under the Pacer Merger Agreement, whether pursuant to any termination provisions or otherwise, the Purchaser shall use commercially reasonable best efforts to cause such stockholders (and not the Purchaser) to be responsible for and include in any such amounts and pay to APL the reasonable out-of-pocket expenses incurred by APL in connection with the transactions contemplated by this Agreement; (b) In the event that this Agreement is terminated by either party hereto pursuant to Section 7.1(e) and Sections 7.2(c) and 7.2(d) do not apply, then APL shall pay the Purchaser a fee of $2,000,000 plus its reasonable out-of- pocket expenses. In the event that this Agreement is so terminated and NOL, APL or an Affiliate thereof consummates, or enters into an agreement which is subsequently consummated for, a transaction within 12 months of the date of such termination, then APL, upon consummation, shall pay the Purchaser an additional fee of $48,000,000; (c) In the event that this Agreement is terminated by either party hereto pursuant to Section 7.1(e) and (i) no meeting of shareholders of NOL was convened by May 14, 1999 or (ii) the board of directors of NOL did not recommend approval by the shareholders from the date of this Agreement though the date of the meeting, then APL shall pay the Purchaser a fee of $20,000,000 plus its reasonable out-of-pocket expenses. In the event that this Agreement is so terminated and NOL, APL or an Affiliate thereof consummates, or enters into an agreement which is subsequently consummated within 12 months of the date of such termination, then APL, upon consummation, shall pay the Purchaser an additional fee of $30,000,000; -52- (d) In the event that this Agreement is terminated by either party hereto pursuant to Section 7.1(e) and APL held discussions with a Person with respect to an Acquisition Proposal, then APL shall pay the Purchaser a fee of $20,000,000 plus its reasonable out-of-pocket expenses. In the event that this Agreement is so terminated and NOL, APL or an Affiliate thereof consummates, or enters into an agreement which is subsequently consummated within 12 months of the date of such termination, then APL, upon consummation, shall pay the Purchaser an additional fee of $30,000,000; (e) In the event that this Agreement is terminated by APL pursuant to Section 7.1(f), then APL shall pay the purchaser a fee of $50,000,000 plus its reasonable out-of-pocket expenses; and (f) In the event of any termination of this Agreement, all obligations of the parties hereto shall terminate, except the obligations of the parties set forth in Section 4.6 hereto or this Section 7.2; provided, that (i) -------- nothing in this Section 7.2 shall relieve any party from liability for willful breach of this Agreement and (ii) if this Agreement is terminated pursuant to Section 7.1(d) the terminating party shall be reimbursed by the other party for its reasonable out-of-pocket expenses. VII.3 Interest. Any monies owed by either party pursuant to Section -------- 1.3, Section 4.14 or Section 7.2 shall be payable by wire transfer of same day funds within two business days after such amount becomes due. Each party acknowledges that the agreements contained in Section 1.3, Section 4.14 and Section 7.2 are an integral part of the transactions contemplated in this Agreement, and that, without these agreements, the other party would not enter into this Agreement; accordingly, if a party fails to promptly pay the amount due pursuant to Section 1.2, Section 4.14 or Section 7.2, and, in order to obtain such payment, the other party commences a suit which results in a judgment for the fee, the liable party shall pay the claiming party its costs and expenses (including attorneys' fees) in connection with such suit, together with interest on the amount of the fee at the rate of 8% per annum from the date such fee was required to be paid. ARTICLE VIII -53- Indemnification --------------- VIII.1 Survival of Representations, Warranties, Covenants and ------------------------------------------------------ Agreements. Except as provided in Section 8.8, the representations and - ---------- warranties included or provided for herein shall survive the Closing until March 31, 2001 and the covenants and agreements provided for herein shall terminate on the Closing; provided, however, that (i) the covenants and agreements of the -------- ------- parties hereto shall survive the Closing unless or until they are otherwise terminated by their terms, (ii) the representations and warranties contained in Section 2.23 (Environmental Matters) shall survive to the Closing and shall remain in effect until March 31, 2004 and (iii) the representations and warranties contained in Section 2.17 (Employee Benefit Plans) shall survive the Closing and shall remain in effect until 60 days after the expiration of the applicable statute of limitations (including any extensions thereof) with respect to matters addressed in such Section. All statements contained in any Schedule hereto or in any certificate delivered by or on behalf of the parties pursuant to this Agreement shall be deemed representations and warranties by the parties hereunder. VIII.2 Indemnification. For a period commencing on the Closing and --------------- ending, as the case may be, upon the expiration of the applicable period specified in Section 8.1, APL, on the one hand, or the Purchaser, on the other hand (the "Indemnifying Party"), shall, subject to the limitations set forth in this Article VIII hereof, indemnify and hold harmless respectively the Purchaser and each of its Affiliates, officers, directors, employees and agents, on the one hand, or APL and each of its Affiliates and their respective officers, directors, employees and agents, on the other hand, as the case may be (each of such persons and entities, an "Indemnified Party"), against and in respect of all Losses resulting from (i) any misrepresentation or breach of warranty or the nonfulfillment of any agreement, covenant or obligation by the Indemnifying Party made in this Agreement, and (ii) the failure by the Indemnifying Party to perform any agreement, consent or obligation of the Indemnifying Party contained in this Agreement and (iii) any and all actions, suits, proceedings, claims, demands, assessments, judgments incidental to the foregoing or the enforcement of such indemnification. -54- VIII.3 Method of Asserting Claims, etc. All claims for ------------------------------- indemnification by any Indemnified Party hereunder shall be asserted and resolved as set forth in this Section 8.3. Any Indemnified Party seeking indemnity pursuant to Section 8.2 or Section 5.3 shall give prompt notice to the Indemnifying Party of the receipt by the Indemnified Party of a claim or demand in the case of a third party claim (a "Third Party Claim"), and the amount or the estimated amount thereof to the extent then feasible, and in the event that an Indemnified Party shall assert a claim for indemnity under this Article VIII not including a Third Party Claim, the Indemnified Party shall make such claim by giving prompt notice thereof to the Indemnifying Party within the period of time during which such representation or warranty survives the Closing pursuant to Section 8.1 hereof. Such written notice shall specify with reasonable detail the basis for such claim and the amount thereof. Following the timely giving of such notice in accordance with Section 8.1, the Indemnified Party shall be entitled to pursue its rights to be indemnified under this Article VIII for such claim notwithstanding the subsequent expiration of the survival period applicable to the representation or warranty upon which such claim is based; provided, however, that any failure to provide such notice shall not constitute - -------- ------- a waiver of the Indemnifying Party's indemnity obligations hereunder except to the extent the Indemnifying Party is actually materially prejudiced thereby. The Indemnifying Party shall have 30 days from the personal delivery or mailing of such notice (the "Notice Period") to notify the Indemnified Party (i) whether or not the Indemnifying Party disputes the liability of the Indemnifying Party to the Indemnified Party hereunder with respect to such claim or demand and (ii) whether or not it desires to defend the Indemnified Party against such claim or demand. With respect to a Third Party Claim, in the event that the Indemnifying Party notifies the Indemnified Party within the Notice Period that it desires to defend the Indemnified Party against such claim or demand, the Indemnifying Party shall have the right to defend the Indemnified Party at the Indemnifying Party's sole cost and expense and with counsel reasonably satisfactory to the Indemnified Party. If the Indemnifying Party's right to assume the defense is exercised, the Indemnifying Party shall be deemed to have waived all rights to contest its liability to the Indemnified Party in respect of such Third Party Claim. The Indemnifying Party shall not settle or compromise any Third Party Claim that it elects to defend -55- without the prior written consent of the Indemnified Party, which consent shall not be unreasonably withheld. If the right to assume and control the defense is exercised, the Indemnified Party shall have the right to participate in, but not control, such defense at its own expense and the Indemnifying Party's indemnity obligations shall be deemed not to include attorneys' fees and litigation expenses incurred in such participation by the Indemnified Party after the assumption of the defense by the Indemnifying Party. If the Indemnifying Party has not elected to assume the defense of a Third Party Claim, the Indemnified Party may defend and settle the claim for the account and cost of the Indemnifying Party; provided, that the Indemnified Party will not settle the -------- Third Party Claim without the prior written consent of the Indemnifying Party, which consent shall not be unreasonably withheld. The Indemnifying Party will promptly pay, or reimburse the Indemnified Party for payment of, costs and expenses (including reasonable fees and expenses of counsel) incurred in the defense thereof. The Indemnified Party shall cooperate with the Indemnifying Party and, subject to obtaining proper assurances of confidentiality and privilege, shall make available to the Indemnifying Party all pertinent information under the control of the Indemnified Party. Notwithstanding the foregoing, the Indemnifying Party shall not have the right to assume the defense of any Third Party Claim, if (i) the Indemnified Party shall have been advised in writing by counsel that there are one or more legal or equitable defenses available to them which are different from or in addition to those available to the Indemnifying Party, and, in the reasonable opinion of such counsel to the Indemnified Party, counsel for the Indemnifying Party could not adequately represent the interests of the Indemnified Party because such interests are in conflict with those of the Indemnified Party, (ii) such action or proceeding involves, or could have a material effect on, any material matter beyond the scope of the indemnification obligation of the Indemnifying Party or involves or could reasonably be expected to involve injunctive or other non-monetary relief or (iii) the Indemnifying Party shall not have assumed the defense of the Third Party Claim in a timely fashion that results in prejudicing the Indemnified Party. VIII.4 Limitation on Damages. In no event shall any Indemnifying --------------------- Party be liable to any Indemnified Party for special, incidental, consequential or punitive damages -56- other than such damages payable by any Indemnified Party as a result of a Third Party Claim. VIII.5 Exclusive Remedy. Each of APL and the Purchaser agrees that, ---------------- from and after the Closing, its sole and exclusive remedy with respect to any and all claims against the other party relating to the subject matter of this Agreement (other than the Ancillary Agreements) shall be pursuant to this Article VIII (except for claims relating to Tax matters, which shall be governed by Article V) and Section 7.2 hereof. In furtherance of the foregoing, each of APL and the Purchaser hereby waives, from and after the Closing, to the fullest extent permitted under applicable law, any and all rights, claims and causes of action it may have against the other party relating to the subject matter of this Agreement arising under or based upon any federal, state or local statute, law, ordinance, rule or regulation or otherwise; provided, however, that the -------- ------- parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof without the necessity of posting a bond or any security, this being in addition to any other remedy to which they are entitled at law or in equity. VIII.6 Insurance Proceeds; Interest. In determining the amount of ---------------------------- any Loss for which any party is entitled to indemnification under this Article VIII, the gross amount thereof (a) will be reduced by any insurance proceeds realized by such party from third party insurers less the amount that is equal to the present value of the aggregate future increased insurance policy premium amounts (if any) attributable to the claims made for such Loss discounted at the Company's weighted average cost of capital, (b) will be reduced by any Tax benefits realized by such party in connection with such Loss to the extent such Tax benefit results directly from the incurrence of such Loss and (c) will be increased by any Tax detriments suffered by such party in connection with such Loss to the extent such Tax detriments result directly from such indemnity payment hereunder. VIII.7 Deductible; Maximum Liability. ----------------------------- (a) No claim for indemnification shall be brought under this Article VIII for breaches of representations and warranties against an Indemnifying Party unless and until the aggregate amount of all claims for indemnification under -57- this Article VIII for breaches of representations and warranties against such Indemnifying Party exceeds $6,000,000, and then only for that portion of the aggregate amount of claims that exceeds such amount. (b) The indemnification obligations of either party under this Article VIII shall be limited to a maximum aggregate liability of $150,000,000. VIII.8 Tax Losses. Losses related to Tax matters are expressly ---------- excluded from this Article VIII and instead shall be governed by the provisions of Article V. ARTICLE IX Certain Definitions ------------------- IX.1 Certain Definitions. For all purposes of this Agreement, except ------------------- as otherwise expressly provided or unless the context otherwise requires: "Acquisition Proposal" has the meaning set forth in Section 4.2. "Actual EBITDA" has the meaning set forth in Section 1.2. "Affiliate" means a Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, a specified Person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any Person, means (a) the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise, or (b) the ownership of more than 25% of the voting securities of that Person. "Agreement" means this Agreement by and between APL and the Purchaser, as amended or supplemented together with all Exhibits and Schedules attached or incorporated by reference. -58- "Administrative Services Agreement" shall mean the Administrative Services Agreement substantially in the form attached hereto as Exhibit B. "Ancillary Agreements" shall mean the Non-Competition Agreement, the Administrative Services Agreement, the Information Technology Access and License Agreement, the Stacktrain Services Agreement, the TPI Chassis Sublet Agreement, the Equipment Supply Agreement, the Shareholders Agreement and the Tax Sharing Agreement. "APL" has the meaning set forth in Section 2.3. "Apollo" has the meaning set forth in Section 4.15. "Balance Sheet" has the meaning set forth in Section 2.6(a). "Benefit Plans" has the meaning set forth in Section 2.17(a). "Business" shall mean the businesses engaged in by the Company as of the date of this Agreement. "Business Days" shall mean any day other than a Saturday, a Sunday or a day on which banks in New York are authorized or obligated by law or executive order to close. "Closing" has the meaning set forth in Section 1.5. "Code" shall mean the United States Internal Revenue Code of 1986, as amended. All citations to provisions of the Code, or to the Treasury Regulations promulgated thereunder, shall include any amendments thereto and any substitute or successor provisions thereto. "Company Rights" has the meaning set forth in Section 2.24. "Confidentiality Agreement" shall mean the Confidentiality Agreement, dated September 23, 1998, between NOL and the Purchaser and the Confidentiality Agreement, dated October 7, 1998, between NOL and Pacer International, Inc. -59- "EBITDA" has the meaning set forth in Section 1.2. "EBITDA Target" has the meaning set forth in Section 1.2. "Employees" has the meaning set forth in Section 2.17(a). "Environmental Law" means any international, national, provincial, regional, federal, state, municipal or local law, rule, regulation, order, judgment, decree, permit, authorization, license or common law or decisional law (including without limitation principals of tort negligence, trespass, nuisance, strict liability, contribution and indemnification) which regulates, establishes standards or requirements or concerns liability with respect to the environment, protection of or damage to natural resources or safety or health of human beings or other living organisms as it relates to Hazardous Substance exposure, including without limitation the manufacture, distribution in commerce, transportation and use of Hazardous Substances. "Equipment Supply Agreement" shall mean the Equipment Supply Agreement substantially in the form attached hereto as Exhibit F. "ERISA" has the meaning set forth in Section 2.17(a). "ERISA Affiliate" has the meaning set forth in Section 2.17(c). "Extension Letter" has the meaning set forth in Section 4.14. "Final Income Statement" has the meaning set forth in Section 1.3. "Financial Statements" has the meaning set forth in Section 2.6(a). "Financing Letters" has the meaning set forth in Section 3.4. -60- "GAAP" shall mean generally accepted accounting principles in the United States as in effect from time to time. "Governmental Antitrust Entity" has the meaning set forth in Section 4.3(c). "Governmental Entity" shall mean any court, administrative agency or commission or other national, federal, state or local governmental authority or instrumentality. "Hazardous Substance" means any pollutant, contaminant, hazardous substance, hazardous waste, toxic substance, oil or petroleum or petroleum- derived substance, waste, asbestos, PCBs, radioactive material, or other compound, element, material or substance in any form whatsoever (including without limitation any product) that is regulated, restricted or designated as such or under any Environmental Law. "HSR Act" has the meaning set forth in Section 2.3. "Indebtedness" has the meaning set forth in Section 2.6(b). "Indemnified Party" has the meaning set forth in Section 8.2. "Independent Firm" has the meaning set forth in Section 1.3. "Information Technology Outsourcing and License Agreement" shall mean the Information Technology Outsourcing and License Agreement based on the terms attached hereto as Exhibit C. "Insurance Proceeds" has the meaning set forth in Section 4.8(a). "Intellectual Property Rights" has the meaning set forth in Section 2.24. "Knowledge" shall mean, with respect to any Person, the knowledge of any individual (except as otherwise indicated, upon reasonable investigation) who (a) is serving as a director or officer of such Person, (b) is employed in -61- the law department of such Person or (c) is currently employed by such Person with responsibility for the particular subject area or subject matter. "Law" shall mean applicable statutes, laws, codes, ordinances, regulations, rules, Permits (as defined below), judgements, decrees and orders of any Governmental Entity. "Liability" shall mean any liability or obligation, whether known or unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated or unliquidated and whether due or to become due, regardless of when asserted. "Lien" shall mean any mortgage, pledge, security interest, lien, charge, encumbrance, equity, claim, option, tenancy, right, community property interest, right of first refusal, or restriction of any nature whatsoever including any restriction on use, voting, transfer, receipt of income, or exercise of any other attribute of ownership. "Logo" has the meaning set forth in Section 4.5. "Losses" means any and all fines, liabilities, judgments, losses, costs, deficiencies, penalties, expenses (including, without limitation, the reasonable fees and expenses of investigation and counsel), or damages, including in each case, interest and penalties. "Material Adverse Effect" shall mean events, changes, facts or effects which, individually or in the aggregate, (i) have had or are reasonably likely to have a material adverse effect on the assets or properties, business, results of operations or financial condition of the Company or (ii) which would materially delay or prevent the performance of the obligations of any party hereunder. "Material Contracts" has the meaning set forth in Section 2.14. "Mile High" has the meaning set forth in Section 3.6. "Net Fixed Assets" shall mean as at any date of determination and determined without duplication, consolidated property, plant and equipment of the Company -62- net of accumulated depreciation, computed in accordance with GAAP consistently applied. "NOL" has the meaning set forth in Section 2.3. "Non-Competition Agreement" shall mean the Noncompetition Agreement substantially in the form attached hereto as Exhibit A. "Nonsolicitation Period" has the meaning set forth in Section 4.2 "Notice Period" has the meaning set forth in Section 8.3. "NS" has the meaning set forth in Section 6.1(k). "Objection" has the meaning set forth in Section 1.3. "Pacer" has the meanings set froth in Section 3.6. "Pacer Merger Agreement" has the meaning set forth in Section 3.6. "Pacer Transaction" has the meaning set forth in Section 3.6. "Pension Plan" has the meaning set forth in Section 2.17(b). "Permit" shall mean any license, permit, franchise, certificate of authority, order or other authorization, or any waiver of the foregoing, required to be issued by any Governmental Entity. "Permitted Liens" shall mean the following types of Liens: (a) statutory Liens of landlords, statutory Liens of banks and rights of set-off, statutory Liens of carriers, warehousemen, mechanics, repairmen, workmen and materialmen, and other Liens imposed by law, in each case incurred in the ordinary course of business (i) for amounts not yet overdue or (ii) for amounts that are overdue and that (in the case of such amounts overdue for a period in excess of 30 days) are being contested in good faith by appropriate proceedings, so long as such reserves or other appropriate provisions, if any, as shall be required by GAAP shall have -63- been made for any such contested amounts; (b) easements, rights-of-way, restrictions, encroachments, and other minor defects or irregularities in title, none of which is substantial in amount, materially detracts from the value or impairs the use of the property subject thereto, or impairs the operations of the Company and (c) any zoning or similar law or right reserved to or vested in any Governmental Entity to control or regulate the use of any real property that do not materially impair the present use of the property subject thereto. "Person" shall mean an individual, a partnership, a joint venture, a corporation, a limited liability company, a trust, an unincorporated organization, a Governmental Entity or any other entity. "Purchase Price" has the meaning set forth in Section 1.2. "Purchased Entity" shall mean the Company. "Real Property" has the meaning set forth in Section 2.9(b). "Registration Rights Agreement" shall mean the Registration Rights Agreement in substantially the form attached hereto as Exhibit G. "Representative" has the meanings set forth in Section 4.2. "Schedule" shall mean a disclosure schedule delivered by APL to the Purchaser on or prior to the date of this Agreement. "Section 338 Determinations" has the meaning set forth in Section 5.5(e). "Section 338 Election" has the meaning set forth in Section 5.5(d). "Section 338 Forms" has the meaning set forth in Section 5.5(d). "Section 338 Regulations" has the meaning set forth in Section 5.5(d). -64- "Seller's Group" shall mean any (i) "affiliated group" (as defined in Section 1504(a) of the Code without regard to the limitations contained in Section 1504(b) of the Code) or (ii) affiliated, combined, consolidated, unitary or similar group for state, local or foreign Tax purposes that includes or included APL or the Company or any predecessor of or successor to APL or the Company (or another such predecessor or successor). "Securities Act" has the meaning set forth in Section 2.5. "Shareholders Agreement" shall mean the Shareholders Agreement in substantially the form attached hereto as Exhibit G. "Shares" has the meaning set forth in Section 1.1. "Stacktrain Services Agreement" shall mean the Stacktrain Services Agreement substantially in the form attached hereto as Exhibit D. "Stock" has the meaning set forth in Recitals of this Agreement. "Taxes" has the meaning set forth in Section 5.1. "Tax Package" has the meaning set forth in Section 5.7. "Tax Proceeding" has the meaning set forth in Section 5.8(a). "Tax Reserve" has the meaning set forth in Section 5.2(e). "Tax Return" has the meaning set forth in Section 5.1. "Tax Sharing Agreement" shall mean the Tax Sharing Agreement in substantially the form attached hereto as Exhibit K. "Taxable Period" has the meaning set forth in Section 5.1. "Third Party Claim" has the meaning set forth in Section 8.3. -65- "TPI Chassis Sublet Agreement" shall mean the TPI Chassis Sublet Agreement substantially in the form attached hereto as Exhibit E. "Warn Act" has the meaning set forth in Section 4.9. "Welfare Plan" has the meaning set forth in Section 2.17(e). "Working Capital" shall mean, as at any date of determination and determined without duplication, the excess, if any, of (i) consolidated current assets, computed in accordance with GAAP consistently applied, over (ii) consolidated current liabilities, computed in accordance with GAAP consistently applied, excluding in each case intercompany receivables and payables from and to APL and its Affiliates (other than the Company) and third party payables related to such intercompany receivables. Working Capital at Closing will be prepared using the same types of management judgment, estimates, forecasts, policies, opinions and allocations that were used for the Working Capital calculation attached as Exhibit L hereto. ARTICLE X Miscellaneous ------------- X.1 Amendments. This Agreement may not be amended or modified except ---------- by the express written consent of the parties hereto. X.2 Assignment. Neither party may assign this Agreement or its ---------- rights or obligations hereunder, whether by operation of law or otherwise, to any third party without the prior written consent of the other party. X.3 Notices. All notices or communications hereunder shall be in ------- writing and shall be sent by personal service, by facsimile transmission or by overnight mail by courier of internationally recognized standing addressed as follows (or such other address as such party may designate in writing): -66- To APL: 1111 Broadway Oakland, CA 94607-5500 Attention: Timothy J. Windle Facsimile: (510) 272-8932 With a copy to: Sullivan & Cromwell 1888 Century Park East Los Angeles, California 90067 Attention: Steven B. Stokdyk, Esq. Telephone: (310) 712-6624 Facsimile: (310) 712-8800 To the Purchaser: Joshua Harris c/o Apollo Management, L.P. 1301 Avenue of the Americas New York, New York 10019 Telephone: (212) 261-4032 Facsimile: (212) 261-4102 and Bruce Spector c/o Apollo Management, L.P. 1999 Avenue of the Stars Suite 1910 Los Angeles, CA 90067 Telephone: (310) 201-4124 Facsimile: (310) 201-4199 With copies to: Morton A. Pierce, Esq. Douglas L. Getter, Esq. Dewey Ballantine LLP 1301 Avenue of the Americas New York, New York 10019 Telephone: (212) 259-6640 Telephone: (212) 259-6685 Facsimile: (212) 259-6333 Any notice hereunder shall be effective upon receipt by the intended recipient. -67- X.4 Severability. The provisions of this Agreement shall be deemed ------------ severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. If any provision of this Agreement, or the application thereof to any person or entity or any circumstance, is invalid or unenforceable, (a) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (b) the remainder of this Agreement and the application of such provision to other persons, entities or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application thereof, in any other jurisdiction. X.5 Governing Law. This Agreement shall be governed by and construed ------------- in accordance with the laws of the State of New York. X.6 Interpretation. When a reference is made in this Agreement to an -------------- Article, Section, Exhibit or Schedule, such reference is to an Article or Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include," "includes" and "including" are used in this Agreement, they are deemed to be followed by the words "without limitation." For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires, (a) the terms defined include the plural as well as the singular, (b) all accounting terms not otherwise defined herein have the meanings assigned under GAAP, and (c) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision. X.7 Entire Agreement. This Agreement, together with any agreement ---------------- executed and delivered by the parties concurrently herewith and the Schedules and Exhibits attached hereto and together with the Confidentiality Agreement, constitutes the entire agreement between the Purchaser and APL with respect to the subject matter hereof. There are no representations, warranties, covenants or -68- undertakings with respect to the subject matter hereof other than those expressly set forth herein. This Agreement supersedes all prior agreements between the parties with respect to the Stock purchased hereunder and the subject matter hereof, other than the Confidentiality Agreement. X.8 Publicity. The parties jointly will prepare a news release or --------- other announcement regarding this Agreement and, subject to their respective legal obligations or stock exchange requirements, thereafter will consult with each other regarding the text of any press release or other public statement relating to the transaction contemplated by this Agreement prior to any release or filing thereof. X.9 Expenses. Subject to Article V and Article VIII, APL and the -------- Purchaser each shall pay their own expenses incident to the negotiation, preparation and performance of this Agreement and the transactions contemplated hereby, including but not limited to the fees, expenses and disbursements of their respective investment bankers, accountants and counsel. X.10 No Third Party Beneficiaries. Nothing in this Agreement, ---------------------------- expressed or implied, is intended to confer upon any person, other than the parties hereto or their respective successors, any rights, remedies, obligations or liabilities under or by reason of this Agreement. X.11 Jurisdiction. Each of the parties hereto hereby irrevocably ------------ submits in any legal action or proceeding relating to or arising out of this Agreement, any of the Ancillary Agreements or any other document relating hereto or delivered in connection with the transactions contemplated hereby, or for recognition and enforcement of any judgment in respect thereof, to the exclusive jurisdiction of the United States District Court for the Southern District of New York and appellate courts thereof. Each of the parties hereto further (a) consents that any such action or proceeding may be brought in such court and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (b) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar -69- form of mail), postage prepaid, to such party at its address set forth in Section 10.3 or at such other address of which such party shall have given notice pursuant thereto; and (c) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law. X.12 Counterparts. This Agreement may be executed in counterparts, ------------ each of which shall be deemed an original and all of which together shall constitute one and the same instrument. -70- IN WITNESS WHEREOF, this Agreement has been executed and delivered as of the date first above written, by the duly authorized representatives of the parties hereto. COYOTE ACQUISITION LLC By: /s/ Josh Harris ________________________________ Name: Josh Harris Title: Vice President APL LIMITED By: /s/ Timothy J. Rhein ________________________________ Name: Timothy J. Rhein Title: President and Chief Executive Officer -71- EX-4.5 7 NON-COMPETITION AGREEMENT DATED MAY 28, 1999 EXHIBIT 4.5 ----------- NON-COMPETITION AGREEMENT This NON-COMPETITION AGREEMENT (this "Agreement"), dated as of May 28, 1999, among Neptune Orient Lines Limited, a Singapore corporation ("NOL"), APL Limited, a Delaware corporation ("APL"), APL Land Transport Services, Inc., a Tennessee corporation (the "Company") and Coyote Acquisition LLC (the "Purchaser"). RECITALS WHEREAS, APL and the Purchaser have entered a Stock Purchase Agreement, dated as of March 15, 1999 (the "Stock Purchase Agreement"), pursuant to which APL has agreed to sell to the Purchaser, and the Purchaser has agreed to purchase from APL, shares of common stock of the Company. WHEREAS, in connection with, and in order to induce Purchaser to consummate, the transactions contemplated by the Stock Purchase Agreement, NOL and APL are willing to enter into certain covenants, on behalf of themselves and their Affiliates, to the Company and the Purchaser regarding their activities, all as set forth herein. NOW, THEREFORE, in consideration of the premises and agreements contained herein, the parties hereto agree as follows: 1. Defined Terms. ------------- 1.1 For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: "APLAL" means APL Automotive Logistics, a wholly owned subsidiary of APL. "Automotive Logistics Business" means the provision of retail shipping coordination, shipping management, shipping consolidation, product shipment, parts inspections, loading and unloading of shipments, tracking of shipments, warehousing of shipments, parts labeling, inbound sorting, truck load and milk run management, kitting, sub-assembly, repackaging of shipments, bin management performance, critical parts expediting and all other shipping and logistics services related to or derived from the businesses of automotive manufacturers, including the subsidiaries of those manufacturers who produce engines and other products which are not used in automobiles. "Confidential Information" shall have the meaning specified in Section 6. "IMS" means Intermodal Management Services, a division of American Consolidation Services of North America, Ltd., a subsidiary of APL. "Long-Haul Trucking Companies" means providers of transportation services via trucks in the United States and Canada for distances in excess of 750 miles per shipment. "Non-compete Period" means the period from and after the Closing to the tenth anniversary of the Closing. "Non-Stacktrain Business" shall mean arranging retail intermodal transportation services, including but not limited to, such services as are arranged by IMS. "Offer" shall have the meaning set forth in Section 3. "Stacktrain Business" shall have the meaning set forth in Section 2.1. "Third Party" means, with respect to NOL, APL, the Company or the Purchaser, any Person that is not an Affiliate of NOL, APL, the Company or the Purchaser, as the case may be. "Transferee" means, with respect to the Stacktrain Business, the Non- Stacktrain Business or the Automotive Logistics Business, any Third Party to whom the Purchaser, the Company, NOL or APL, as the case may be, transfers all or substantially all of the assets and liabilities of such Stacktrain Business, Non-Stacktrain Business or Automotive Logistics Business. 1.2 Unless otherwise defined herein, each capitalized term used herein shall have the meaning given to it in the Stock Purchase Agreement. 2. Non-competition by NOL, APL and their Affiliates. ------------------------------------------------ 2.1 During the Non-compete Period, NOL and APL shall not, and shall not permit any of their Affiliates to, engage, by ownership of debt or equity interests in any business (other than the Company), by participation in the management or operations of any business (other than the Company) or by lending their respective names (or any part or variant thereof) to any business (other than the Company) in the business being conducted on the date of this Agreement by the Company (the "Stacktrain Business"). 2.2 Subject to Section 3, the restrictions set forth in Section 2.1 shall not prevent NOL, APL or any of their Affiliates from engaging in the Automotive Logistics Business or the Non-Stacktrain Business; provided, however, that none of NOL, APL or any of their Affiliates may market any domestic (United States or Canada) retail intermodal services to any present or future customer to whom it does not provide international transportation services. 2.3 NOL and APL acknowledge that the foregoing covenants by NOL and APL are essential elements of the transactions contemplated by this Agreement and by the Stock Purchase Agreement and that, but for NOL's and APL's agreement to comply with such covenants, the Purchaser would not have agreed to enter into such transactions. NOL and APL have consulted with their counsel and have been advised in all respects concerning the reasonableness and propriety of such covenants, including, without limitation, with respect to the area and duration of the covenants herein; and that good and valuable consideration exists for their agreeing to be bound by such covenants. 3. Non-solicitation. ---------------- 3.1 Except as provided in the Information Technology Outsourcing and License Agreement, during the Non-compete Period, NOL and APL shall not, and shall cause each of its Affiliates not to, (i) directly or indirectly recruit or solicit any person then employed by the Company for employment with NOL, APL or any of their Affiliates or (ii) hire any person then employed by the Company who had been an employee of the Business as of the Closing Date; provided, however, that such restrictions shall not apply to any solicitation directed at the public or the transportation industry in general nor to solicitation or hiring of any employee if employment discussions are initiated by such employee. 3.2 During the Non-compete Period, Purchaser shall not, and shall cause each of its Affiliates not to, (i) directly or indirectly recruit or solicit any person then employed by NOL, APL or their Affiliates (other than the Company) for employment with Purchaser or any of its Affiliates or (ii) hire any person then employed by NOL, APL or their Affiliates who had been an employee of NOL, APL or their Affiliates as of the Closing Date; provided, however, that such restrictions shall not apply to any solicitation directed at the public or the transportation industry in general nor to the solicitation or hiring of any employee if employment discussions are initiated by such employee. 4. Assignment. ---------- 4.1 Except as expressly set forth herein, no party may assign its rights or obligations under this Agreement, whether by operation of law or otherwise, without the prior written consent of the other parties. 4.2 NOL and APL may assign their rights and obligations hereunder to one or more Transferees in connection with the sale of NOL or APL or all or substantially all of the assets of NOL or APL provided that (a) the Transferee shall be bound by the terms -3- and conditions of this Agreement as though it were a party hereto; and (b) notwithstanding anything herein to the contrary, the Transferee shall not be prevented from engaging in or conducting any business which it was engaging in or conducting prior to such acquisition; and provided further that any such assignment shall not release NOL or APL from their obligations hereunder. 4.3 The Purchaser may assign its rights hereunder to one or more Transferees in connection with the sale of the Company or all or substantially all of the assets of the Stacktrain Business, provided that the Transferee shall be bound by the terms and conditions of this Agreement as though it were a party hereto. 4.4 Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties and their respective successors and assigns. 5. Non-Disclosure. --------------- The parties hereto acknowledge and agree that any proprietary financial, marketing, customer or other information pertaining to the business or operations of the Company are confidential ("Confidential Information"). The term "Confidential Information" does not include information which (i) is or becomes publicly available other than as a result of a disclosure by NOL, APL or their Affiliates or Representatives or (ii) is or becomes available to NOL or APL on a nonconfidential basis from a source (other than the Company and its representatives) which, to NOL's or APL's knowledge after due inquiry, is not prohibited from disclosing such information to NOL or APL by a legal, contractual or fiduciary obligation to the Company. The term "Representatives" means financial advisors, counsel and accountants. NOL and APL shall not, and shall cause their Affiliates not to, disclose any Confidential Information without the prior written consent of the Company; provided, however, NOL and APL may reveal Confidential Information to its Representatives (i) who need to know the Confidential Information for purposes of their work, (ii) who are informed of the confidential nature of the Confidential Information and (iii) who agree to act in accordance with this Section 5. NOL and APL will cause their representatives to observe the terms of this Section 5, and will be responsible for any breach of this Section 5 by any of their Representatives. In the event that NOL, APL or any of their Affiliates or Representatives are requested pursuant to, or required by, applicable law, regulation or legal process to disclose any of the Confidential Information, NOL or APL will notify the Company promptly so the Company may seek a protective order or other appropriate remedy or, in its sole discretion, waive compliance with the terms of this Section 5. In the event that no such protective order or other remedy is obtained, or that the Company does not waive -4- compliance with the terms of this Section 5, NOL or APL will furnish only that portion of the Confidential Information that it is advised by counsel is legally required and will exercise all reasonable efforts to obtain reliable assurance that confidential treatment will be accorded the Confidential Information. -5- 6. Miscellaneous. ------------- 6.1 The parties hereto recognize that, because of the nature of the subject matter of this Agreement, money damages or other remedies at law may not be sufficient or adequate remedies in the event of a breach of or violation of, or default under, this Agreement and that any such breach, violation or default or threatened breach, violation or default would cause irreparable injury to the Company, the Purchaser, NOL, APL and their respective Affiliates. Accordingly, NOL, APL, the Company or the Purchaser and their respective Affiliates shall have the right, in addition to all other remedies available to them, to have the provisions of this Agreement specifically enforced by any court of competent jurisdiction, it being acknowledged and agreed by the Purchaser, the Company, NOL and APL that an injunction may be issued without the posting of a bond or other security interest being required against the Purchaser, the Company, NOL, APL or any of their respective Affiliates to stop or prevent any such breach, violation or default or threatened breach, violation or default. 6.2 This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws. 6.3 If any covenant or agreement contained herein, or any part hereof, is held to be invalid, illegal or unenforceable for any reason, the remainder of this Agreement shall be construed as if such provision or part thereof was not included herein; provided, that if the unenforceability of any such covenant or -------- ---- agreement is because of the breadth of its scope, the duration of such provision or the geographical area covered thereby, the parties agree that the court making such determination shall have the power to reduce the breadth of the scope or the duration and/or geographical area of such provision such that, in its reduced form, said provision shall then be enforceable; provided further, ----------------- however, that any such modification shall apply only with respect to the - ------- operation of such provision in the particular jurisdiction in which such determination is made. 6.4 This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof, and supersedes all prior agreements between the parties with respect to the subject matter hereof. There are no representations, warranties, covenants or undertakings with respect to the subject matter hereof other than those expressly set forth herein. 6.5 This Agreement may not be amended or modified except by the express written consent of the parties hereto. Any waiver by the parties of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach thereof or of any other provision. -6- 6.6 All notices or other communications hereunder shall be in writing and shall be made in accordance with Section 10.3 of the Stock Purchase Agreement. 6.7 Except as expressly provided in this Agreement, the parties hereto intend that this Agreement shall not benefit or create any right or cause of action in or on behalf of any person other than the parties hereto. 6.8 This Agreement may be executed in multiple counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. -7- IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and each of the undersigned hereby represents and warrants that he or she has been and is, on the date of this Agreement, duly authorized by all necessary and appropriate action to execute this Agreement. NEPTUNE ORIENT LINES LIMITED By: /s/ Timothy J. Rhein __________________________ Name: Timothy J. Rhein Title: Director APL LIMITED By: /s/ Timothy J. Windle __________________________ Name: Timothy J. Windle Title: Assistant Secretary APL LAND TRANSPORT SERVICES, INC. By: /s/ Ann Fingarette-Hasse __________________________ Name: Ann Fingarette-Hasse Title: Assistant Secretary COYOTE ACQUISITION LLC By: /s/ Marc E. Becker ___________________________ Name: Marc E. Becker Title: Vice President -8- EX-4.6 8 ADMIN. SERVICES AGREEMENT DATED MAY 28, 1999 Exhibit 4.6 ----------- ADMINISTRATIVE SERVICES AGREEMENT This ADMINISTRATIVE SERVICES AGREEMENT (this "Agreement"), dated as of May 28, 1999, between APL Limited, a Delaware corporation ("APL" or the "Provider"), and APL Land Transport Services, Inc., a Tennessee corporation ("LTS"). RECITALS WHEREAS, APL and Coyote Acquisition LLC, a Delaware limited liability company (the "Purchaser"), have entered into a Stock Purchase Agreement, dated as of March 15, 1999 (the "Stock Purchase Agreement"), pursuant to which APL has agreed to sell to the Purchaser, and the Purchaser has agreed to purchase from APL, shares of common stock of LTS. WHEREAS, LTS desires to receive from the Provider and the Provider is willing to provide to LTS certain administrative and support services as described hereunder pursuant to the terms and conditions of this Agreement. NOW, THEREFORE, in consideration of the premises and agreements contained herein, the parties hereto agree as follows: 1. Administrative Services. ----------------------- (a) APL shall make available and provide to LTS, in accordance with the terms and conditions of this Agreement, certain administrative services as set forth in Schedule A (the "Services"). (b) From time to time, LTS may request and APL may make available and provide to LTS, as the parties may mutually agree, administrative and support services in addition to those set forth in Section 1(a) above ("Additional Services"). Such Additional Services shall be reflected in separate service memoranda executed by both parties hereto and attached hereto as addenda, and the terms of this Agreement shall govern all such addenda. (c) APL shall perform and provide the Services and any Additional Services for LTS in substantially the same manner with the same degree of care, skill and prudence exercised by APL for its own operations. Subject to the provisions of Section 6, APL shall be deemed to have satisfied its obligation to provide the Services and Additional Services hereunder to the extent it has provided such Services and Additional Services in accordance with APL's past practices in connection with the provision of the same or similar procedures, facilities, equipment, contractors and personnel that provided the Services or Additional Services prior to the Closing (as defined in the Stock Purchase Agreement). (d) Subject to the provisions of Section 5, (i) LTS shall afford to APL, its employees and authorized agents and representatives reasonable access to the properties, books, records, contracts, documents, files and other information of LTS to the extent necessary to enable APL to perform and provide the Services and the Additional Services, and (ii) APL shall afford to LTS, its employees and authorized agents and representatives reasonable access to all information related to the Services or the Additional Services produced or generated by APL in the course of providing the same, including without limitation, technical, economic and business data, computer information data bases and the like. (e) If during the term of this Agreement LTS desires to segregate its operations from the operations of APL at any joint facilities shared by APL and LTS, APL shall provide for physical segregation of LTS employees as long as the costs required to achieve such segregation are reasonable and do not exceed $50,000 in the aggregate; provided that if the actual costs are materially higher than such amount the parties will negotiate in good faith the allocation of such costs. The parties agree to use their best efforts to obtain leases or subleases for the space occupied by LTS employees during the term of this Agreement. 2. Fees. ---- (a) For Services and Additional Services for which APL shall be compensated on a per transaction basis, LTS shall compensate APL in accordance with the fee schedule set forth on Schedule A or as subsequently agreed to by both parties in the case of Additional Services. For office space and associated office services and front line office accounting and information resource support, LTS shall compensate APL based on headcount or as subsequently agreed to by both parties. For all other Services or Additional Services, LTS shall compensate APL in an amount equal to the total amount of U.S. dollars expended by APL in performing the Services or Additional Services for LTS including, but not limited to, (i) the pro rata share of APL's costs, based on the number of hours that APL employees spend performing Services or Additional Services for LTS in relation to the total number of hours that APL employees spend performing Services or Additional Services for APL and LTS combined, (ii) all travel costs incurred by APL reasonably documented in performing the Services or Additional Services for LTS, and (iii) any other out of pocket expenditures incurred by APL in the course of performance of Services or Additional Services (Section 2(a)(i), (ii) and (iii) shall be the "Total Expenditures"). LTS shall pay to APL the fees owned under this Agreement on a monthly basis, in arrears, commencing on June 30, 1999 for as long as this Agreement remains in effect. (b) APL represents and warrants to LTS that the transaction fees described in Schedule A, when applied to the actual number of 1998 transactions, would not differ adversely from the amounts reflected in the audited financial results for the fiscal year ended December 25, 1998. In addition, APL represents and warrants that the method for allocating costs associated with office space and associated office services and front line office accounting and information resource support do not differ adversely from the method for allocating such costs reflected in the audited financial results for the fiscal year ended December 25, 1998. In the event of any inaccuracy of this representation, the parties agree to make such adjustments in good faith to amounts payable under this Agreement as are necessary (i) to correct such inaccuracy and (ii) to compensate the party prejudiced by such inaccuracy. (c) During the term of this Agreement, LTS shall have the right to audit, at its expense, appropriate documents or information of APL to verify the Total Expenditures; provided, however, that no more than two such audits may be conducted within any twelve-month period . If the audit determines that the Total Expenditures as presented by APL is more than 10% higher than actual Total Expenditures, APL shall reimburse LTS for the reasonable expense of audit and any overpayment of fees under this Agreement. 3. Term and Termination. -------------------- (a) APL shall provide the Services and Additional Services to LTS hereunder for the period beginning from the date of the Closing, and ending on one year from the date of the Closing or, with respect to each particular Service or Additional Service, (i) on the date specified in a notice of termination delivered pursuant to Section 3(b) below with respect to such Service or Additional Service or (ii) on such other date as is mutually agreed to by both parties. (b) LTS may terminate any portion of the Services or Additional Services by giving 90 days' prior written notice to APL. If either party shall default in the performance of any of its material obligations under this Agreement and shall fail or refuse to remedy such default to the reasonable satisfaction of the other party within 30 days after receipt of written notice, the non- breaching party may terminate this Agreement. If the default in performance relates only to a specific Service or Additional Service and such default is not a default in the performing of a material obligation under this Agreement, termination will be limited to termination of that Service or Additional Service on the same terms as set forth in the immediately preceding sentence. If any party shall become insolvent, be placed in receivership, make an assignment for the benefit of creditors or seek relief or have a petition filed against it under federal bankruptcy law, the other party may terminate this Agreement immediately upon written notice. (c) If action by a federal, state or other governmental regulatory agency materially affects a party's rights or obligations hereunder, such party may terminate any portion of the Services or Additional Services or this Agreement by giving 90 days' prior written notice to the other, or such shorter period as may be required by such agency or by law. -3- (d) Expiration or termination of all or a portion of this Agreement for any reason shall not terminate the obligations described in Sections 5 and 6 which shall survive any such termination. (e) Expiration or termination of this Agreement for any reason shall not terminate either party's obligations or rights arising out of any act or omission of such party occurring prior to such termination or expiration. 4. Relationship. ------------ (a) Nothing in this Agreement shall be deemed to create a partnership, joint venture, agency relationship or relationship of employer and employee between the parties. In performing the Services and Additional Services, APL will at all times be an independent contractor and neither party is to be considered the agent or legal representative of the other for any purpose whatsoever. (b) APL, in providing the Services and the Additional Services, will be solely responsible for (i) determining the terms and conditions of employment between itself and its employees, agents and representatives, including without limitation, hiring, termination, hours of work, rates and payment of compensation, and (ii) the payment, reporting, collection and withholding of taxes and similar contributions. 5. Confidential Information. ------------------------ (a) The parties hereto agree on behalf of themselves and their directors, officers, employees and agents: (i) to hold in trust and maintain confidential, (ii) not to disclose to others without prior written approval from the disclosing party, (iii) not to use for any purpose, other than in connection with this Agreement, and (iv) to prevent duplication of and disclosure to any other party, any Information (as hereinafter defined) received from the disclosing party or developed, presently held or continued to be held, or otherwise obtained by the receiving party, under this Agreement. (b) "Information" shall include all results of the Services and Additional Services, information disclosed by either party orally, visually, in writing, or in other tangible form in the course of providing or receiving Services or Additional Services, and shall include, without limitation and as applicable, technical, economic and business data, know-how, flow sheets, drawings, business plans, computer information data bases, and the like. (c) The foregoing obligations of confidentiality, non-disclosure and non- use shall not apply to any Information to the extent that the obligated party demonstrates that: -4- (i) such Information is or becomes knowledge generally available to the public other than through the acts or omissions of the obligated party which constitute a breach of this Agreement; (ii) such Information is subsequently received by the obligated party on a non-confidential basis from a third party who did not receive it directly or indirectly from the disclosing party; or (iii) disclosure of such Information is required under applicable law or regulations or in connection with a lawsuit, claim, litigation or other proceeding or in connection with tax or regulatory matters. (d) The terms and conditions of this Section shall survive any termination of this Agreement. 6. Limitation of Liability. (a) APL shall have no liability under this ----------------------- Agreement for damage or loss of any type suffered by LTS or any third party as a result of the performance of Services or Additional Services provided hereunder by APL except in the case of gross negligence or willful misconduct of APL and (b) IN NO EVENT SHALL APL BE LIABLE FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES. 7. Excusable Delay or Failure in Performance. APL shall not be liable ----------------------------------------- for failure to perform any of its obligations under this Agreement during any time APL is unable to perform due to any act of God, sabotage, military operation, national emergency, civil commotion, labor disturbance, utility or computer failure, or the order, requisition, request or recommendation of any government agency or acting government authority, or APL's compliance therewith, or government proration, regulation, or priority, or any change in laws or regulations which prevent APL from providing services required by this Agreement, in each case beyond APL's reasonable control. 8. Notices. All notices or communications hereunder shall be sent by ------- personal service, by facsimile transmission or by overnight mail by courier of internationally recognized standing addressed as follows (or such other address as such party may designate in writing): To LTS: c/o Josh Harris Apollo Management, L.P. 1301 Avenue of the Americas -5- 38th Floor New York, NY 10019 Facsimile: (212) 261-4102 To APL: 1111 Broadway Oakland, California 94607-5500 Attention: Timothy J. Windle Facsimile: (510) 272-8932 Any notice hereunder shall be effective upon receipt by the intended recipient. 9. Governing Law. This Agreement shall be governed by and construed in ------------- accordance with the laws of the State of New York without regard to principles of conflicts of laws. 10. Arbitration. Any dispute, controversy or claim between APL and LTS ----------- arising out of or relating to this Agreement, the Services or any Additional Services, will be resolved by arbitration conducted in Oakland, California under the auspices and according to the Commercial Arbitration Rules of the American Arbitration Association. The arbitration shall be conducted in accordance with the United States Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law provision in this Agreement. 11. Entire Agreement. This Agreement constitutes the entire agreement, ---------------- between the parties with respect to the subject matter hereof, and supersedes all prior agreements between the parties with respect to the subject matter hereof. There are no representations, warranties, covenants or undertakings with respect to the subject matter hereof other than those expressly set forth herein. 12. Severability. Any provision of this Agreement that is held by a court ------------ of competent jurisdiction to violate applicable law shall be limited or nullified only to the extent necessary to bring the Agreement within the requirements of such law. 13. No Assignment. Neither of the parties hereto may assign or transfer ------------- any of its rights or delegate any of its obligations hereunder, whether by operation of law or otherwise, to any other person or entity without the prior written consent of the other party hereto. Any purported assignment or delegation that is made other than in accordance with this Section 13 shall be void and of no effect. Subject to the foregoing provisions of this Section 13, this Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties and their respective successors and assigns. -6- 14. Waiver. This Agreement may not be amended or modified except by the ------ express written consent of the parties hereto. Any waiver by the parties of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach thereof or of any other provision. 15. Third Party Beneficiaries. Except as expressly provided in this ------------------------- Agreement, the parties hereto intend that this Agreement shall not benefit or create any right or cause of action in or on behalf of any person other than the parties hereto. 16. Counterparts. This Agreement may be executed in counterparts, each of ------------ which shall be deemed an original and all of which together shall constitute one and the same instrument. -7- IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and each of the undersigned hereby warrants and represents that he or she has been and is, on the date of this Agreement, duly authorized by all necessary and appropriate action to execute this Agreement. APL LIMITED By: /s/ Timothy J. Rhein ___________________________________ Name: Timothy J. Rhein Title: President and Chief Executive Officer APL LAND TRANSPORT SERVICES, INC. By: /s/ Ann Fingarette-Hasse ___________________________________ Name: Ann Fingarette-Hasse Title: Assistant Secretary -8- SCHEDULE A Services provided under this Agreement by APL to LTS on a per transaction fee basis shall include:
- --------------------------------------------------------------------------------------------- Service Per Transaction Fee ------- ------------------- - --------------------------------------------------------------------------------------------- Accounts Payable - --------------------------------------------------------------------------------------------- . Per paper invoice (vendor and employee expense report) $ 2.75 - --------------------------------------------------------------------------------------------- . Per EDI/ERS transaction $ 1.15 - --------------------------------------------------------------------------------------------- . Per employee paycheck (for payroll processing only) $ 10.00 - --------------------------------------------------------------------------------------------- . Per manual voucher/check request $ 30.00 - --------------------------------------------------------------------------------------------- . Per ACH/wire transfer (excluding direct bank charges) $ 3.20 - --------------------------------------------------------------------------------------------- Cargo Claims - --------------------------------------------------------------------------------------------- . Per claim handled $ 46.00 - --------------------------------------------------------------------------------------------- Walker Administration - --------------------------------------------------------------------------------------------- . Per cost center account setup $ 30.00 - ---------------------------------------------------------------------------------------------
Other Services provided under this Agreement by APL to LTS shall include: . office space and associated office services, inclusive of stationary and supplies . training (other than training relating to information systems) ordinarily offered to applicable employees . front line office accounting and information resource support . for a period of up to 30 days after the Closing, (i) equipment dispatch services at the Chicago and Houston terminal facilities and (ii) EDI clean- up services at the Kearny terminal facility and such other locations as the parties mutually agree upon -9- EX-4.8 9 STACKTRAIN SERVICE AGREEMENT DATED MAY 28, 1999 Exhibit 4.8 ----------- STACKTRAIN SERVICES AGREEMENT This Stacktrain Services Agreement (this "Agreement") is made as of this 28th day of May, 1999 by and among AMERICAN PRESIDENT LINES, LTD ("Lines"), a Delaware corporation, APL Co. Pte Ltd. ("APL Co"), a Singapore corporation, and APL LIMITED, a Delaware corporation ("APL LTD") (collectively "APL"), and APL LAND TRANSPORT SERVICES, INC., a Tennessee corporation ("LTS"). RECITALS WHEREAS, LTS has been acting as agent for Lines under various rail contracts, letters of intent and rail circulars for inland intermodal rail transportation of Lines' International Shipments. The railroad contracts in effect between LTS, Lines and the rail carriers as of the date of this Agreement are referred to herein as "Current Agreements" and are identified on Schedule A. WHEREAS, Lines and LTS desire to continue their relationship subsequent to LTS' change in ownership and to have LTS arrange and administer inland intermodal rail transportation for APL's International Shipments and empty containers. In addition, APL LTD desires to have LTS arrange and administer inland intermodal rail transportation for the volume of APL Automotive Logistics, a division of APL LTD ("APL Automotive Logistics"). NOW THEREFORE, in consideration of the premises and the agreements contained herein, the parties hereto agree as follows: AGREEMENT SECTION 1. EFFECTIVE DATE, TERM AND RENEWAL. The term of this Agreement shall commence on the Closing pursuant to the Stock Purchase Agreement and shall be for a term of twenty (20) years ("Term") unless terminated earlier pursuant to the provisions of Section 13. In the event that the Current Agreement with the Union Pacific Railroad Company ("UP") or any successor railroad to UP ("Successor Railroad") is extended beyond the Term or a New Agreement is entered into with UP or a Successor Railroad which extends beyond the Term, the Term of this Agreement shall be extended to be co- terminous with the term of the UP or Successor Railroad Current or New Agreement. Upon the parties' mutual consent, the Agreement may be extended for an additional period. A New Agreement is defined as any new rail contract which is subsequently executed during the term of this Agreement. Upon the failure of the parties to agree upon renewal of this Agreement or upon giving by either party of notice of intent to terminate this Agreement pursuant to the terms of the Agreement, the parties will use their best efforts to establish a reasonable schedule and reasonable procedures for cessation of transportation and related terminal and other activities in a way that will cause the least disruption reasonably possible to the parties and their customers. Transportation and related terminal and other activities during this transition will be governed by the terms of this Agreement. SECTION 2. DEFINITIONS. Capitalized terms used in this Agreement which are not defined in the Agreement itself shall have the meanings set forth in Schedule B to this Agreement. SECTION3. OBLIGATIONS OF LTS. a. Other than as set forth in Section 5 below, LTS shall arrange for intermodal rail transportation and shall administer the ongoing movement of such rail transportation from rail origin to rail destination of APL's International Shipments and its empty containers between points in the United States, between points in Canada and between points in the United States on the one hand and Canada on the other hand. APL shall submit shipping instructions to LTS, and LTS shall submit those shipping instructions to the appropriate carrier. LTS's management obligations shall include managing the direct interchange of containers between Eastern rail carriers and Western rail carriers and arranging for the cross-town drayage of containers between Eastern rail carriers' rail terminals and Western rail carriers' rail terminals where required. LTS shall perform the same services for the volume tendered by General Motors to APL Automotive Logistics for transportation between the United States, Canada and Mexico ("APL Automotive Shipments") and for any other volume tendered by APL Automotive Logistics or APL Intermodal Management Services, a division of American Consolidation Services of North America, Ltd. ("IMS"), pursuant to Section 4.c. The administrative services provided by LTS to APL for the implementation of the services described in this Section 3.a during the Term of this Agreement shall be at no less than the same level which APL received prior to the execution of this Agreement. b. In the event that LTS tenders untimely or incorrect movement billing to the rail carrier or takes any other action such that (a) a container may fail to meet its scheduled ship departure or (b) a container may not meet its required delivery time to the ultimate consignee (collectively, the "Service Failure"), and APL requests LTS to arrange alternative transportation where such alternative transportation is operationally feasible, LTS shall arrange that alternative transportation as long as such requests are not unreasonable or are in response to specific customer requests. "Unreasonable" shall be defined as being inconsistent with the process used by APL prior to the execution of this Agreement to make decisions regarding the need for alternative transportation. APL shall pay the applicable railroad rate for that container to LTS while LTS shall pay the alternative carrier for the charge actually incurred for the alternative transportation. However, LTS shall not be responsible for alternative carrier charges when the Service Failure is due to the failure of APL to perform its obligations hereunder or the failure of LTS' underlying rail carrier. In that event, at the request of APL, LTS shall arrange for alternative service on behalf of APL but APL shall bear the costs of that alternative service. In the event that APL incurs additional costs due to a rail carrier's service failure, LTS and APL shall use their best efforts to recover from the responsible railroad(s) on APL's behalf the difference between the applicable rail rate and the alternative carrier rate which APL paid. c. For Current or New Agreements to which APL and LTS are both parties, LTS and APL both agree that they shall not terminate such agreements without the prior written consent of the other party. d. LTS agrees that it shall continue to offer intermodal rail transportation to IMS on terms and conditions similar to those which LTS offers to its other intermodal marketing company ("IMC") customers during the term of this Agreement. e. LTS shall tender the percentage of LTS and International Shipments to each rail carrier which is required under Current Agreements or under any New Agreements. f. APL shall pay LTS, and LTS shall pay each rail carrier, for the rail charges incurred by APL under any Current or New Agreement. LTS shall pay each rail carrier for the rail charges incurred by it under any Current or New Agreement. g. LTS shall follow the instructions of APL as to the routing of non- committed volume, that is, volume that is not committed under any Current or New Agreement. APL shall be responsible for paying the line haul charges of non- committed volumes. h. The parties agree to use their commercially reasonable efforts to co- mingle all current and new Stacktrain Business as defined in the Non-Competition Agreement which LTS or any of its affiliates or 2 subsidiaries receives in those traffic lanes in which APL tenders International Shipments in order to achieve the most cost effective economics for both parties. If LTS would receive any economic or other benefits, and APL would receive similar benefits, from using any other traffic lane, LTS shall use its commercially reasonable efforts to move APL International Shipments in such lane to the extent it would benefit APL. i. In the event that LTS terminates the Current UP Agreement pursuant to Section 24 thereof, LTS has the option of negotiating a separate agreement with UP or transitioning APL's business to a new carrier along with LTS, in each case on terms which maintain APL in no worse economic position than APL enjoys under the Current UP Agreement. SECTION 4. OBLIGATIONS OF APL. a. Either Lines or APL LTD shall be a party to any Current Agreement or New Agreement involving the transportation of International Shipments. b. APL Co and Lines shall tender all of their shipments as described in Section 3.a to LTS and shall appoint LTS as their agent for the tender and administration of rail transportation. APL agrees further that it shall tender to LTS under this Agreement any containerized freight tendered for U.S. or Canadian rail movement under the name of APL or NOL or tendered by any of their affiliates or subsidiaries or successors or assigns for rail transportation except as provided in subsection (e) of this Section 4. c. APL agrees that, if all other things are equal, including rates, service and the approval of the beneficial owner, IMS and APL Automotive Logistics shall use their best efforts to deliver their business to LTS for handling. d. APL shall pay LTS a management fee of $6.6 million annually during the term of the Stacktrain Services Agreement. e. APL shall use its best efforts to assure maximum stack car slot utilization. f. In the event that APL acquires or merges with, or is acquired by, any other ocean carrier or transportation provider, the parties agree that the volume of such acquired ocean carrier or transportation provider shall not be subject to this Agreement unless agreed to by APL. However, in the event that APL consolidates with or mergers with or into, or conveys, transfers or leases, in one transaction or a series of transactions all or substantially all of its assets to another ocean carrier or transportation provider, the acquiring entity shall be obligated to tender to LTS on an annual basis for the remainder of the Term at least the actual number of containers which APL tendered to LTS during the twelve (12) months prior to the acquisition. SECTION 5. JOINT OBLIGATIONS. The parties shall jointly be obligated to the following: a. LTS and APL shall jointly negotiate New Agreements or those modifications to Current Agreements which apply to both LTS Domestic Shipments utilizing APL Available Containers and/or APL International Shipments. b. LTS and APL shall jointly discuss and negotiate with the underlying rail carriers any ongoing service failures or the failure of a rail carrier to meet Service Performance Standards which apply to both LTS Domestic Shipments utilizing APL Available Containers and/or APL International Shipments. 3 c. LTS and APL shall jointly discuss with a rail carrier any proposed change in train schedules which negatively impacts International Shipments. d. LTS and APL shall jointly negotiate any issues resulting from a change or changes in operations which could result in a cost increase to APL. e. LTS and APL shall make a good faith effort to structure a process to handle billing and payment to minimize administrative expenses for both parties. f. Each party shall be responsible for any shortfall penalties which arise out of its failure to meet its volume commitment to the underlying rail carriers. As an example, if APL tenders only 75% of its shipments for rail carrier movement in a specific traffic lane when its Volume Commitment under the applicable rail contract requires 95% of its shipments, and if, at the same time, LTS tendered 95% of its shipments as required in that traffic lane, then APL would be obligated to pay any shortfall penalties that may be assessed by that carrier based on its portion of the combined LTS/APL volume in that traffic lane. However, when either party has excess volume, the parties agree to cooperate with each other to determine if that excess can be used to offset the shortfall incurred by the other party in a manner consistent with the underlying rail contract. Using the example above, if LTS tendered 100% of its shipments, then the 5% excess over its 95% commitment could be used by APL as an offset to its shortfall. g. Neither party shall take any action regarding tender of volumes of business to the railroads or payment of charges to the railroads which would cause termination of any rail agreement. h. In the event that the parties are unable to reach agreement on subsections (a)-(g) above, the dispute resolution of Section 6 shall apply. SECTION 6. DISPUTE RESOLUTION. In addition to the matters specified in Section 5, the parties recognize that there may be occasions where they are not in agreement concerning contract negotiations, contract interpretation, service or train schedule issues, or any other matter related to this Agreement. In such an event, the parties agree to abide by the following dispute resolution process: A. The parties will make a good faith effort to resolve any disputes at the level of management within each company that would normally handle rail contract negotiations, rail operating matters or other similar matters involving any rail carrier. In the event that the parties cannot reach agreement at this level of management, then the issue(s) will be submitted for senior management consideration as provided in sub-paragraph (2) of this section. Either party can submit the issue(s) to senior management at any stage of the negotiations at which point the other party must similarly submit the issue(s) to its senior management. B. The parties agree that any issue that cannot be resolved under the provisions of sub-section (1) above will first be submitted to the executive or senior vice president ("SVP") level within each company. Those SVPs shall be the individuals within each company to whom the persons in sub-section (1) report. The SVPs for each company will make a good faith effort to resolve the dispute in an expeditious manner. In the event that they cannot resolve the dispute, and at any time during the negotiations, either party can submit the issue(s) to their chief executive officer ("CEO") for resolution at which point the other party must similarly submit the issue(s) to its CEO. The CEOs for each company will then make a good faith effort to resolve the dispute in an expeditious manner. In the event the CEOs cannot resolve the dispute within ninety (90) days from the time that the dispute first arises, either party may request that binding mediation be employed. C. The mediation process shall be as follows: the mediation must be completed within ninety (90) days after the request for mediation is made ("Ninety Day Mediation Period"). The parties will each select one person experienced in transportation industry to act as mediators, and the two mediators shall jointly 4 select the third. Each party will pay the expenses of the mediator which that party selects, and the parties will share equally the expenses of the third mediator. The mediators will first meet together with the parties. They shall then meet separately with each party. The mediators will then conduct a joint session to see if the issue(s) can be resolved. If there is no resolution, the mediators shall issue a binding decision within the Ninety Day Mediation Period. SECTION 7. RATES AND RATE ADJUSTMENTS. a. APL shall pay to LTS the per container rate assessed against LTS under the Current or New Agreements by its underlying rail carriers for the movement of its containers. In addition, APL shall pay LTS the charges assessed against LTS by those motor carriers performing cross-town drayage of APL's containers. Any cost, most favored nations or market adjustment which LTS receives under Current Agreements or any New Agreement or any motor carrier cross-town agreements with LTS in effect at the date of the Closing shall be passed through on a dollar for dollar basis to APL. LTS shall not assess any administrative fee against APL. b. LTS and APL agree to work together on (1) deciding whether to terminate the Conrail Current Agreement after expiration of the 180 day period prescribed by the Surface Transportation Board and (2) finding a satisfactory solution to the handling of the Northeast business which recognizes APL's investment in and reliance on the Kearny terminal. SECTION 8. SERVICE PERFORMANCE. (a) In the event that LTS receives a monetary service penalty payment under any Current or New Agreement that involves a failure to provide service for International Shipments or for a combination of International and LTS Shipments, LTS shall pay a portion of that payment to APL based on the percentage of APL's volume as part of the combined APL/ LTS' overall volume of business in the affected traffic lane(s). Thus, if APL's containers represent thirty percent (30%) of the combined APL/LTS' volume to a rail carrier in the affected traffic lane(s) for the last twelve (12) month period, APL shall be entitled to thirty percent of the service penalty payment. (b) LTS shall furnish APL with a monthly written report on the rail carriers' performance under any Current or New Agreements. SECTION 9. TERMINAL SERVICES AND OFFICE SPACE TO BE PROVIDED BY APL. a. South Kearny, N.J. APL shall provide terminal services for its own ------------------ International Shipments, Domestic Shipments and Third Party International Shipments at no cost to LTS at the South Kearny terminal to the extent that the volumes do not exceed the volumes handled at APL's South Kearny terminal during calendar year 1998 ("Base Volume") plus a five percent (5%) annual increase of that Base Volume. To the extent that the volume exceeds the Base Volume plus the annual five percent (5%) increase, LTS shall be charged at APL's actual direct cost (excluding corporate overhead or other indirect costs). Such services shall include loading and unloading of containers, and the storage of containers and chassis as provided in the Equipment Lease and Chassis Sublet Agreements. In the event that CSX Transportation, Inc. or CSX Intermodal, Inc. becomes the operator of the South Kearny terminal, APL shall refund to LTS a per unit charge for each LTS Shipment of an amount equal to the amount paid by LTS for the handling of such shipment. Such refund will be applicable only to the volumes of LTS that do not exceed the LTS Shipments handled by APL at the South Kearny terminal during the calendar year 1998 ("LTS Base Volume"), plus five percent (5%) annual increase in that LTS Base Volume. In the event that APL loses its lease for the South Kearny terminal, then APL shall have no further obligation to provide terminal services for International Shipments or LTS Shipments at South Kearny. 5 b. Los Angeles, CA and Seattle, WA. At the request of LTS, APL shall -------------------------------- offer loading and unloading services to LTS at Los Angeles and Seattle for LTS shipments which originate or terminate at APL's on-dock facilities at Los Angeles or Seattle. LTS shall pay $78 per lift at Los Angeles and $75 per lift at Seattle. These amounts shall be cost adjusted annually for APL's out of pocket costs, including wage benefits and related employee costs required by any union agreements. c. Office Space; Permitted Personnel. APL shall allow a designated number ---------------------------------- of LTS employees as set forth in Schedule C access to the South Kearny, Los Angeles and Seattle terminals and shall provide office facilities in APL's own office space for those employees on the terms set forth in the Administrative Services Agreement. APL shall provide for physical segregation of LTS employees as long as the costs required to achieve such segregation are reasonable and as agreed upon in the Administrative Services Agreement executed on this same date. d. Trains. In order for LTS to utilize the terminal services set forth in ------- subsection (b) above, the LTS shipments must be on trains moving to or from APL's on-dock facilities at Los Angeles and Seattle. e. On-Dock Shipments. APL will designate certain containers for loading ------------------ or unloading at its on-dock rail facilities at Los Angeles and Seattle ("On-Dock Facilities"). LTS will arrange for transportation of those designated containers under rail rates applying from or to such On-Dock Facilities as provided in the Current or New Agreements. APL shall load or unload the containers at the Facilities at no cost to LTS. Designated containers shall include (1) loaded export containers; (2) empty containers and (3) loaded import containers. Designation of categories (1) and (2) shall be made at the time that APL tenders the containers to LTS. Designation of category (3) shall be in advance of arrival at the On-Dock Facilities. f. On-Dock Shipments from/to Tacoma, WA. In the future, APL may elect to ------------------------------------- route certain International Shipments to an on-dock rail facility at Tacoma, WA. LTS and APL shall jointly negotiate rail rates for APL from and to the Tacoma on-dock facility. g. LTS Personnel. LTS agrees to maintain personnel at those rail -------------- facilities which LTS had staffed prior to the date of this Agreement at a level sufficient to ensure timely and efficient handling of APL's shipments consistent with past practice. h. To the extent that the Ports of Los Angeles and Long Beach assess a charge for use of the "Alameda Corridor", the parties agree to pay such charge to the Ports or to the rail carrier, as the case may be, for their own volumes moving in the Alameda Corridor. SECTION 10. EQUIPMENT STORAGE. Under the Current Agreements and potentially under the New Agreements, LTS and Lines jointly are entitled to storage of containers and chassis at certain railroad locations. Except as provided in Exhibit D, LTS and Lines agree to divide the railroad allocated parking spaces as well as spaces at shared container yard locations based on the relative proportion of International Shipments to all other LTS shipments in 1998. The number of parking spaces initially allocated to LTS and to APL are shown by location on Schedule D; this number shall be adjusted annually based on the percentage of volume which APL and LTS had at each location during the prior year, except as otherwise provided in Exhibit D. SECTION 11. REPOSITIONING OF AVAILABLE CONTAINERS; CHASSIS SUPPLY. APL shall make available to LTS all containers carrying Transpacific International Shipments eastbound to interior U.S. points (a) after they are made empty at their eastbound destination and (b) which APL does not need for export loading or for empty repositioning for subsequent export ("Available Containers"). APL will make such containers available at the points set forth in Appendix 1 of the Equipment Supply Agreement. LTS shall advise APL within 48 hours whether it can load an Available 6 Container. IF LTS advises that it cannot load an Available Container within 48 hours, then APL shall direct LTS as to the disposition of that Available Container. APL shall pay LTS the per container rates shown on the first and second columns of Schedule E for the first 66,000 Available Containers which LTS loads with Domestic Shipments for West Coast destinations in each calendar year. APL shall pay LTS the per container rates shown on the third column (designated as "secondary rates") on Schedule E for each Available Container loaded in excess of 66,000 in each calendar year. If LTS cannot load the Available Containers at the location where they are made available ("Available Location") but can load them at an alternate intermediate location on the normal transportation route between the Available Container's original location and the West Coast ("Alternate Location"), APL shall pay for the empty movement between the Available Location and the Alternate Location. If, however, LTS desires to move an Available Container from the Available Location to a location which is not on the normal route of movement between the original location and the West Coast, LTS shall pay for the empty movement. APL and LTS agree that they may make additional agreements to allow LTS to load Available Containers to points other than West Coast points. Such agreements may be oral or in writing. SECTION 12. CLAIMS FOR CARGO LOSS AND DAMAGE; EQUIPMENT DAMAGE. a. LTS shall be responsible to APL for all freight loss or damage proximately resulting from LTS' intentional or negligent acts or omissions. LTS shall not be liable for freight loss or damage proximately resulting from (i) an act of God, (ii) the act of an enemy, (iii) the acts of governmental agencies/entities, (iv) negligent or intentional acts of APL or its customers or (v) the negligent or intentional acts of any motor or rail carrier. In the absence of LTS's negligence, APL's (and its customers') sole remedy for freight loss or damage shall be against the underlying rail and/or motor carriers pursuant to the terms and conditions of the Current or New Agreements, or when the Current or New Agreements are inapplicable, those carriers' relevant tariffs, circulars, or other publications relating to liability for loss of or damage to freight. Whether or not LTS would otherwise have liability, in any case where LTS determines that APL or its customer has misdeclared or misdescribed freight, LTS shall have no liability for any loss or damage to that freight. With or without fault on its part, LTS will provide reasonable assistance and cooperation to APL and its customers to investigate and process any freight loss or damage claims against the underlying rail carriers; provided, however, that LTS shall not be obligated to mediate resolution of claims between (a) APL and the underlying rail carrier, (b) APL's customer and the underlying rail carrier, or (c) between APL and its customer. Any claim against LTS for freight loss or damage shall be made in writing within twelve (12) months of the shipment date. Any arbitration action against LTS for freight loss or damage shall be instituted within two (2) years of the shipment date. Any claims or actions against underlying carrier(s) shall be made in accordance with the time requirements set forth in the rail carrier's Current or New Agreement, its intermodal circulars or other such publications, whichever is applicable. In any claim or arbitration action or legal proceeding against LTS under this section, the value of the lost or damaged freight shall be based on the invoice price of the lost or damaged freight, freight transportation and customs charges, and the claimant shall not be entitled to recover special, consequential or punitive damages, including damages for delay. The claimant shall be under a duty to take all reasonable steps to mitigate its damages, including using salvage procedures. 7 b. LTS shall be liable to APL for any loss or damage to APL owned, leased or controlled Equipment or for any injury to any employee, agent or subcontractor of APL to the extent caused by LTS' intentional or negligent acts or omissions. If LTS is found liable for such loss, damage or injury, LTS shall also be liable for any expenses, including attorneys' fees, reasonably incurred by APL in resolving such claims. APL shall be liable to LTS for any loss or damage to LTS owned, leased or controlled Equipment or for any injury to any employee, agent or subcontractor of LTS to the extent caused by APL's intentional or negligent acts or omissions. If APL is found liable for such loss, damage or injury, APL shall also be liable for any expenses, including attorneys' fees, incurred by LTS in resolving such claims. c. In the event that a claim is made by any underlying carrier against either party as the result of loss or damage caused by or arising out of the negligence of APL or its beneficial owner shipper, APL shall indemnify LTS and hold LTS harmless against all liability, loss, damage and expense, including reasonable attorneys' fees, as to that claim. In the event that a claim is made by any underlying carrier against either party as the result of loss or damage caused by or arising out of the negligence of LTS or one of its domestic or third party international customers, LTS shall indemnify APL and hold APL harmless against all liability, loss, damage and expense, including reasonable attorneys' fees, as to that claim. SECTION 13. MATERIAL ADVERSE EFFECT; RENEGOTIATION; TERMINATION. A. Material Adverse Effect. If any party is or will be adversely and ------------------------ materially affected by any of the following events beyond the party's control, that party may request in writing that any or all of the provisions of this Agreement be renegotiated: (1) Serious inequity as a result of the application of, compliance with, or performance of obligations under the terms and conditions of this Agreement, change in material circumstances or conditions from those prevailing on the Effective Date, or other events beyond the control of a party which are of such a nature as to directly have a material adverse effect on the operational (as opposed to financial) ability of that party to perform its obligations under this Agreement; provided that any renegotiation pursuant to this clause shall be consistent with the economic arrangements embodied in this Agreement as of the date hereof; (2) The acquisition by LTS of an ocean carrier or of LTS by an ocean carrier which ranks within the top ten carriers based on then current market share as measured and reported by PIERS or another similar industry analysis in the United States market ("APL Competitor"); (3) LTS enters into a substantial new joint venture, partnership, or similar financial arrangement with an APL Competitor where such arrangement is not limited to providing wholesale stacktrain services to an APL Competitor and the result of such arrangement is effectively equivalent to the transaction contemplated by A(2) above; or (4) The acquisition of APL by a railroad or an intermodal marketing company which ranks within the top ten based on then current market share in the United States market. Competitive transportation proposals, offerings, or services made to APL by other rail carriers, as well as proposals, offerings or services made by LTS to other customers and changes in the financial condition or liquidity of a party shall not be grounds for a request for renegotiation under this Section 13. Upon receiving written notice of a request to renegotiate, the parties shall begin good faith negotiations pursuant to Section 6. A and B with the intent of eliminating the adverse effect. 8 Any provision which is renegotiated pursuant to this Section will take effect upon the execution of an amendment or supplement to this Agreement or upon execution of a new agreement. B. Dispute Resolution. If after ninety (90) days of the written notice of ------------------- a valid request for renegotiation pursuant to Section 13.A(1), the parties are unable to agree upon a renegotiated provision or provisions, then the parties shall engage in the mediation process set forth in Section 6.C. C. Termination. If after ninety (90) days of the written notice of a -------------- valid request for renegotiation pursuant to Section 13.A(2) or 13.A(3), the parties are unable to agree upon a renegotiated provision or provisions, APL may terminate this Agreement and all other related agreements upon one hundred eighty (180) days written notice to LTS. If after ninety (90) days of the written notice of a valid request for renegotiation pursuant to Section 13.A(4), the parties are unable to agree upon a renegotiated provision or provisions, LTS may terminate this Agreement and all other material agreements upon one hundred eighty (180) days written notice to APL. Upon termination of this Agreement, all parties shall complete their performance and fulfill all obligations which accrued prior to the date of termination, including but not limited to APL's obligation to pay all accrued charges and LTS' obligation to arrange for Transportation for all containers previously tendered by APL and to return to APL, at an interchange point or other location or locations mutually agreed upon, all containers, and chassis owned or provided by APL. SECTION 14. CONFIDENTIALITY. The parties agree that the commercial terms of this Agreement and its appendices are confidential and proprietary, and that unauthorized disclosure could be damaging from a commercial or competitive standpoint under many circumstances. Therefore, except as otherwise provided in this Agreement and except to the extent required by law, the contents of this Agreement shall not be disclosed or released by any party to any person other than (a) a party's employees, agents and legal advisors on a "need to know basis" and (b) information relating to commodity, number of containers and origin or destination to LTS' railroad partners on a "need to know" basis. In any required disclosure of any portion of this Agreement, each party will cooperate with the other party to minimize the disclosure of any confidential information and to implement protective procedures relating to any information required to be disclosed. Any employee having access to any part of this Agreement or to any information contained within the Agreement or related to this Agreement must agree to abide by the terms of this Section 14. This Section 14 includes, without limitation, rate information of any kind, customer identities, traffic volumes and commodities moving via APL, train schedules and/or performances, and any other information learned by one party about the other's business during the course of their dealings hereunder. SECTION 15. HAZARDOUS MATERIALS; RESTRICTED COMMODITIES; PROHIBITED COMMODITIES. A. Except as otherwise stated in this Section 15, for each hazardous commodity in a container tendered for Transportation, APL will complete and submit to LTS the hazardous materials section of LTS' intermodal shipping instructions. For each hazardous commodity in a container, APL will comply with all applicable international, federal, state, and local regulations, including but not limited to 49 CFR and the IMDG Code. APL will be required to provide accurate and complete information for each hazardous load tendered to LTS in the form of an EDI shipping order. LTS must in turn provide complete accurate shipping information to the underlying carrier. B. APL shall have the obligation to advise LTS as to any restricted commodities which it or its customer wishes to ship. In the event that APL properly and timely advises LTS of such restricted commodities and the underlying rail carrier agrees to transport such restricted commodities, LTS shall have the obligation to make all necessary arrangements with the underlying rail carriers for the transportation of such restricted commodities. 9 C. APL shall not tender to LTS any commodity that has been prohibited by the rail carrier to be utilized by LTS or any commodity which LTS has itself embargoed from movement on its rail network and LTS has given APL written notice of the embargo. As of the effective date of this Agreement, all shipments of coiled metal of any type have been embargoed by LTS. SECTION 16. PAYMENT OF CHARGES. APL will pay LTS within sufficient time to allow LTS to pay the rail carriers as required under the Current or New Agreements. LTS will pay within thirty (30) days all payments arising under this Agreement or the Schedules. Consistent with Section 5.e, the parties shall work together to develop a payment process which minimizes administrative expenses and attempts to keep the parties cash neutral. APL may elect to pay the rail carriers as required under the Current or New Agreements so long as LTS is not adversely affected. If APL does not so elect, in order to secure APL's obligations to LTS for payments made to rail carriers under Section 3(f) hereof, APL agrees to deliver to LTS (and cause to remain outstanding) a standby evergreen letter of credit in form and substance, and issued by a bank, reasonably acceptable to LTS and APL. Such letter of credit shall be in a face amount equal to 110% of the average of the four highest monthly accounts receivable balances to LTS from APL and its Affiliates during the prior fiscal year; provided that in the event that the aggregate amount of rail charges incurred by APL but not paid under any Current Agreement or New Agreement exceeds 85% of such face amount, APL shall deliver to LTS an additional letter of credit (or a replacement therefor) with a face amount equal to 120% of such excess amount. Conditions to drawings under such letter of credit shall include (i) APL's failure to pay LTS for any shipment within 45 days of LTS mailing an invoice therefor, (ii) LTS' receipt of notice from the issuer of the letter of credit that the stated termination date shall not be extended and (iii) APL's failure to replace the letter of credit within 60 days of the credit rating of the issuer falling below investment grade. Records of APL and LTS related to rates, charges, liquidated damages, payments, and billing will be available for inspection by the other party during normal business hours at locations agreed upon by the parties, subject to the limitations of Section 14. SECTION 17. MUTUAL INDEMNITY. Except with respect to cargo claims, and except where remedies are specified in this Agreement, each party to this Agreement shall indemnify and hold the other party harmless against all liability, loss, damage, and expense, including attorneys' fees (collectively, "Costs"), reasonably incurred by the other party to the extent that such liability, loss or damage is caused by the negligent or intentional act or by any default under this Agreement by the indemnifying party or any of its employees. In addition, APL shall hold LTS harmless against all Costs reasonably incurred by LTS as the result of APL's customer's failure to comply with all federal, state and local regulations applicable to the shipment of a hazardous commodity. SECTION 18. FEDERAL CONTRACTOR REQUIREMENTS. A. To the extent applicable, APL and LTS will comply with and give all representations and assurances required by any law or regulation applicable to federal contracts and subcontracts including but not limited to the following: 1. To the extent applicable, the Renegotiation Act of 1951, as amended (50 U.S.C. (S)(S) 35, 45), and the Contract Work Hours and Safety Standards Acts, as amended (40 U.S.C. (S)(S) 327, 333); 10 2. To the extent applicable, Executive Order No. 11246, dated September 14, 1965, as amended, concerning equal employment opportunity and affirmative action in employment of persons without regard to race, religion, sex, or national origin, Executive Order No. 11701, dated January 24, 1973, concerning affirmative action in employment of certain veterans, Executive Order No. 11758, dated January 15, 1974, concerning affirmative action in employment of handicapped individuals, Executive Order No. 11625, dated October 13, 1971, concerning assistance to minority business enterprises, Executive Order No. 12138, dated May 18, 1979, concerning assistance to women's business enterprises, the Age Discrimination Act of 1975, all applicable regulations of the Secretary of Labor, including but not limited to 41 C.F.R. (S) 60-1.4 et seq., 41 C.F.R. (S) 60-250 et seq., and 41 C.F.R. (S) 60-741 et seq., and all applicable Federal Procurement Regulations, including but not limited to 41 C.F.R. (S) 1- 1.13 et seq.; and 3. To the extent applicable, Defense Acquisition Regulations 7-104.14, concerning use of small business and minority business concerns, and 7.104.20, concerning use of labor surplus area concerns. B. To the extent applicable and required, APL and LTS each hereby certify to the other that it does not and will not maintain any facilities for employees that are unlawfully segregated or permit employees to perform services at any location under its control or that of its subcontractors where unlawfully segregated facilities are maintained and that it will require its nonexempt subcontractors to furnish a similar certification prior to the award of any nonexempt subcontract. SECTION 19. FORCE MAJEURE. In the event that any party is unable to meet its obligations under this Agreement as a result of any cause beyond its reasonable control, including but not limited to, strikes or lockouts, labor shortages or disturbances, derailments or other casualties, acts of God, severe weather, acts of governmental authority and acts or omissions of third parties (collectively, "force majeure conditions"), the performance obligations of the party affected by a force majeure condition shall be suspended to that extent for the duration of such event; provided, however, that the parties shall make all reasonable efforts to continue to meet their obligations during the duration of the force majeure condition; and provided, further, that the party declaring a force majeure condition shall notify the other party by facsimile when the force majeure condition exists, the nature of the force majeure and when the condition is terminated. The suspension of any obligations owing to a force majeure condition shall neither cause the term of this Agreement to be extended nor affect any rights accrued under this Agreement prior to the force majeure condition. To the extent that LTS ' underlying rail carrier declares a force majeure condition, LTS' and APL's obligations under this Agreement shall be suspended for the duration of that force majeure condition. LTS shall use its best efforts to arrange alternative transportation for APL International Shipments during the force majeure condition. SECTION 20. ASSIGNMENT. Except as expressly allowed by this Section, no party to this Agreement may assign this Agreement, in whole or in part, or assign any rights granted by this Agreement, or delegate to any person not a party to this Agreement any of its obligations under this Agreement without the prior written consent of the other party. Subject to this Section, this Agreement will be binding upon and inure to the benefit of the parties hereto and to their permitted successors and assigns. SECTION 21. NOTICES. Except as otherwise stated in this Agreement, all notices required by or given under this Agreement will be sufficient in all respects if in writing and delivered personally, by first class, registered, 11 or certified U. S. mail, by telecopier, by electronic transmission, or by commercial overnight delivery service, postage or delivery fees prepaid, addressed as follows: To: APL 1111 Broadway Oakland, CA 94607 Attn: Timothy J. Windle Facsimile: (510) 272-8932 With a copy to: Sullivan & Cromwell 1888 Century Park East Los Angeles, California 90067 Attention: Steven B. Stokdyk, Esq. Telephone: (310) 712-6624 Facsimile: (310) 712-8800 To: APL Land Transport Services, Ltd.: Joshua Harris c/o Apollo Management, L.P. 1301 Avenue of the Americas New York, New York 10019 Telephone: (212) 261-4032 Facsimile: (212) 261-4102 and Bruce Spector c/o Apollo Management, L.P. 1999 Avenue of the Stars Suite 1910 Los Angeles, CA 90067 Telephone: (310) 201-4124 Facsimile: (310) 201-4199 With a copy to: Morton A. Pierce, Esq. Douglas L. Getter, Esq. Dewey Ballantine LLP 1301 Avenue of the Americas New York, New York 10019 Telephone: (212) 259-6640 Telephone: (212) 259-6685 Facsimile: (212) 259-6333 SECTION 22. NONWAIVER. Any waiver at any time of a breach of any provision, condition, obligation, or requirement of this Agreement will extend only to the particular breach so waived and will not impair or affect the existence of any provision, condition, obligation, or requirement of this Agreement or the right of any party thereafter to avail itself of any breach, subject to such waiver. 12 SECTION 23. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. SECTION 24. ENTIRE AGREEMENT. This Agreement, together with any agreement executed and delivered by the parties concurrently herewith and the Schedules attached hereto and together with the Confidentiality Agreement, constitutes the entire agreement between LTS and APL with respect to the subject matter hereof. There are no representations, warranties, covenants or undertakings with respect to the subject matter hereof other than those expressly set forth herein. This Agreement supersedes all prior agreements between the parties with respect to the subject matter hereof, other than the Confidentiality Agreement. SECTION 25. NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement, expressed or implied, is intended to confer upon any person, other than the parties hereto or their respective successors, any rights, remedies, obligations or liabilities under or by reason of this Agreement. SECTION 26. NO AMENDMENTS WITHOUT WRITTEN CONSENT. This Agreement may not be amended or modified except by the express written consent of the parties hereto. SECTION 27. COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. SECTION 28. REPRESENTATIONS. APL represents and warrants to LTS that, with regard to revenues associated with repositioning, had the initial rates in Schedule E been in effect during the fiscal year ended December 25, 1998, the audited operating results of LTS for such period would not have been negatively affected. In the event of any inaccuracy of this representation, the parties agree to make such adjustments in good faith to amounts payable under this Agreement as are necessary (i) to correct such inaccuracy and (ii) to compensate the party prejudiced by such inaccuracy. 13 IN WITNESS WHEREOF, this Agreement has been executed and delivered as of the date first above written, by the duly authorized representatives of the parties hereto. APL LIMITED By:/s/ Timothy J. Rhein _________________________________ Name: Timothy J. Rhein Title: President and Chief Executive Officer AMERICAN PRESIDENT LINES, LTD. By: /s/ Timothy J. Windle __________________________________ Name: Timothy J. Windle Title: Assistant Secretary APL LAND TRANSPORT SERVICES, INC. By: /s/ Ann Fingarette Hasse __________________________________ Name: Ann Fingarette Hasse Title: Assistant Secretary APL CO. PTE LTD. By /s/ Frederick M. Sevekow, Jr. __________________________________ Name: Frederick M. Sevekow, Jr. Title: Authorized Signature 14 SCHEDULE A CURRENT AGREEMENTS Union Pacific Railroad Company, Transportation Service Agreement, dated September 1, 1985, Memorandum of Understanding, dated December 15, 1995, and related agreements. Consolidated Rail Corporation, Transportation Service Agreement, dated June 1, 1988 and related agreements. Canadian National Railway, Letter of Intent dated June 22, 1998. Norfork Southern Corporation, Rail Transportation Agreement, dated January 10, 1996. 15 SCHEDULE B DEFINITIONS "Affiliate" shall have the meaning set forth in the Stock Purchase Agreement "Agreement" means this Agreement by and between APL and LTS, as amended or supplemented together with all Schedules attached hereto. "APL Automotive Logistics" shall have the meaning set forth in the Recitals to this Agreement. "APL Automotive Shipments" shall have the meaning set forth in Section 3. "APL Competitor" shall have the meaning set forth in Section 13. "Available Containers" shall have the meaning set forth in Section 11. "Current Agreements" shall have the meaning set forth in the Recitals of this Agreement. "IMC" shall have the meaning set forth in Section 3. "IMS" shall have the meaning set forth in Section 3. "International Shipments" shall mean APL's containers with a prior or subsequent water movement. "LTS Shipments" shall mean all shipments other than International Shipments. "On-Dock Facility" shall have the meaning set forth in Section 9. "New Agreement" shall have the meaning set forth in Section 1. "Service Failure" shall have the meaning set forth in Section 3. "Service Performance Standards" shall mean those service standards defined in the Current Agreements. "Stock Purchase Agreement" shall mean the Stock Purchase Agreement, dated as of March 15, 1999, between APL and Purchaser. "Train Schedule" shall mean a train schedule set forth in the Current Agreements. "Transpacific International Shipments" shall mean International Shipments between Asia and the Americas. "Volume Commitment" shall have the meaning set forth in Section 5. 16 SCHEDULE C LTS EMPLOYEES AT APL LOCATIONS Los Angeles - ----------- None Seattle - ------- Jeff Hall Mike Hill Rich Lund South Kearny - ------------ Bill Vossen Gary Biggs 17 SCHEDULE D PART 1 RAIL TERMINAL ALLOCATION OF PARKING SPACES
POINT SPOTS % APL % LTS # APL # LTS - ---------------------- -------------- -------------- -------------- -------------- ------------- Atlanta 400 44 56 176 224 Baltimore 175/(1)/ 43 57 75 100 Boston 100 59 41 59 41 Buffalo 100 44 56 44 56 Charlotte 100/(2)/ 63 37 63 37 Charleston 50 73 27 37 13 Chicago 59th St. 100 51 49 51 49 Chicago Global 1 250/(3)/ - - 20 230 Cincinnati 50/(4)/ 37 63 19 31 Cleveland 25/(5)/ 54 46 14 11 Columbus 50 73 27 37 13 Houston 250/(9)/ 54 46 50 200 Jacksonville 60 69 31 41 19 Kearny (CSXI) 760/(6)/ 63 37 479 281 Memphis (CSXI) 20 87 13 17 3 Norfolk/Portsmouth 20 62 38 12 8 Philadelphia 125/(7)/ 43 57 54 71 Portland 35 24 76 8 27 Savannah 50 79 21 40 10 Springfield 25 33 67 8 17 Syracuse 75/(8)/ 44 56 33 42 Worcester 25 17 83 4 21
/(1)/ Includes chassis and container spots. Also includes 100 chassis/container spaces for Harrisburg Volumes. /(2)/ Includes 40 spaces representing Greensboro Volumes. /(3)/ Exception to the Volume split methodology as stated in Section 10 of the Stracktrain Services Agreement. Historic use of Global 1 space is for empty high cube domestic containers. /(4)/ Includes Georgetown, KY Volumes. /(5)/ Includes Pittsburgh, PA Volumes. /(6)/ Includes both chassis and container spots. /(7)/ Includes both chassis and container spots. Includes current Morrisville Volumes which will convert to the CSXI Philadelphia Terminal effective 12/1/99. /(8)/ Include 50 spaces for Albany Volume. /(9)/ Space allocated based on historical use. 18 SCHEDULE D, PART 2 CY PARKING ALLOCATION Western Region -------------- Location Capacity/(Decking) APL LTS -------- ------------------ --- --- Los Angeles Cal Cartage 80 Container Care 300+ Fastlane 500+ Harbor Rail 100 R.C.C. 50-100 Total Intermodal 500+ Container Works 100 Martin Container 200 Oakland Hawk 100 Stockton Hawk 125 Portland P.C.R. 200-300 Seattle Container Care 300 PCH 15 19 Central Region -------------- Chicago Paulina 450 TLI near G1 750 TLI near Dolton 750 Cincinnati 325 Cleveland 600 Columbus CIC 625 Detroit Tri Modal 450 Grand Rapids 60 Indianapolis 350 Kansas City 700 Louisville 250 Minneapolis Trimodal 1500 Milwaukee 40 Omaha 300 Pittsburgh 100 St. Louis SAUGET 2000 St. Louis Dupo 800 Toledo 50 20 Eastern Region -------------- Allentown 20 Baltimore 310 Boston 350 Harrisburg 75 Morrisville 260 Norfolk 125 Rochester 60 Worcester 100 Domestic Empty Lot 21 Southern Region --------------- Atlanta (APL) 575 Transus 100 Charlotte East West 300 Bomar 150 Charleston 200 Savannah 150 Tampa 200 Orlando 100 Miami 250 Jacksonville --- Use NSRR Nashville 200 Huntsville 600 Memphis Delta 800 ATS 300 Under Development New Orleans 600 Houston ATS 650 Transporter 400 Sail Marine 200 UPRR 300 5 ac Lease Laredo 300 San Antonio 450 El Paso 200 Dallas 1200 SCHEDULE E INITIAL RATES
EQUIPMENT TO CALIF. POINTS TO PNW POINTS SECONDARY RATE SUPPLY POINT (SEE NOTE 1) (SEE NOTE 2) (SEE NOTE 3) - --------------------- ---------------- ------------- -------------- ATLANTA, GA 250 350 250 BALTIMORE, MD 350 450 250 BOSTON, MA 350 450 250 CHARLESTON, SC 250 350 250 CHARLOTTE, NC 250 350 250 CHICAGO, IL 250 350 250 CINCINNATI, OH 250 350 250 CLEVELAND, OH 250 350 250 COLUMBUS, OH 250 350 250 DALLAS, TX 250 N/A 250 DENVER, CO 250 250 250 DETROIT, MI 250 350 250 HARRISBURG, PA 350 450 250 HOUSTON, TX 250 N/A 250 INDIANAPOLIS, IN 250 350 250 JACKSONVILLE, FL 250 350 250 KANSAS CITY, MO 250 350 250 LOUISVILLE, KY 250 350 250 MEMPHIS, TN 250 350 250 MIAMI, FL 250 350 250 MINNEAPOLIS, MN 250 350 250 NASHVILLE, TN 250 350 250 NEW ORLEANS, LA 250 350 250 NEW YORK, NY 350 450 250 NEWARK, NJ 250 450 250 NORFORK, VA 350 450 250 OMAHA, NE 250 350 250 ST LOUIS, MO 250 350 250 TAMPA, FL 250 350 250 MONTREAL, CANADA N/A N/A N/A TORONTO, CANADA N/A N/A N/A
NOTE 1: APPLIES TO ANY SIZE CONTAINER WHEN LOADED WITH DOMESTIC CARGO TO POINTS IN CALIFORNIA. APPLIES TO CONTAINERS THAT COMPRISE THE FIRST 66,000 CONTAINERS LOADED TO ALL WEST COAST POINTS ANNUALLY. NOTE 2: APPLIES TO ANY SIZE CONTAINER WHEN LOADED WITH DOMESTIC CARGO TO POINTS IN WASHINGTON AND OREGON. APPLIES TO CONTAINERS THAT COMPRISE THE FIRST 66,000 CONTAINERS LOADED TO ALL WEST COAST POINTS ANNUALLY. NOTE 3: APPLIES TO ANY SIZE CONTAINERS WHEN LOADED WITH DOMESTIC CARGO TO ANY WEST COAST POINT. APPLIES TO CONTAINERS THAT EXCEED 66,000 LOADED ANNUALLY TO WEST COAST POINTS. 23 EX-4.9 10 TPI CHASSIS SUBLET AGREEMENT DATED MAY 28, 1999 Exhibit 4.9 ----------- TPI CHASSIS SUBLET AGREEMENT THIS CHASSIS SUBLET AGREEMENT (as originally executed and as amended from time to time in accordance with its terms, "Chassis Sublet") is made as of May 28, 1999, by and among APL Land Transport Services, Inc., a Tennessee corporation ("LTS"), APL Co. Pte Ltd., a Singapore corporation, APL Limited and American President Lines, Ltd., a Delaware corporation (collectively, "APL"). RECITALS WHEREAS, the parties to this Chassis Sublet recognize that there is a need for twenty foot (C20) chassis, forty foot (C40) and forty-five foot (C45) chassis to support the business needs of LTS specifically relating to the ocean containers of LTS' third party international customers ("TPI Containers") which require chassis for their transportation. WHEREAS, APL has a supply of chassis which are currently used to fulfill TPI requirements at various locations, terminals and depots in the United States. WHEREAS, LTS and APL are desirous of entering into this Chassis Sublet whereby APL agrees to provide, on a daily basis, the use of an agreed number of APL's chassis which provision also includes the maintenance and repair and licensing of these chassis. NOW, THEREFORE, in consideration of the premises and the agreements contained herein, the parties hereto agree as follows: ARTICLE I - DEFINITIONS As employed in this Chassis Sublet, the term: 1. "Chassis" means a licensed skeletal chassis designed for the carriage of 20', 40' and 45' ISO ocean shipping containers in compliance with applicable FHWA and DOT regulations. 2. "Day" means any calendar daily twenty-four hour period commencing at 00:01 hours and ending at 24:00. 3. "Force Majeure events" shall include Acts of God (other than ordinary storms or inclement weather conditions), earthquakes, floods or landslides, act of governments, riots, insurrections, embargoes, and labor disputes or strikes or other occurrences which are beyond the reasonable control of the Parties and which make it impossible for either Party to perform. 4. "Use" means the provision of a Chassis which is available for interchange in accordance with this Chassis Sublet. It is understood that APL is providing such Use out of its total fleet of Chassis on a revolving basis and is not supplying LTS with a specific group of identifiable Chassis. 5. "Per Diem Rate" means the charge assessed by APL for making available to LTS the number of chassis set forth in Article II below. 6. "User" shall mean the person having responsibility for the Chassis. 7. Interchange[d], "when used with respect to a chassis means an APL supplied chassis which has been removed from APL's terminal or depot by LTS, LTS' designee or a motor carrier having a valid interchange with LTS but not redelivered to APL's terminal or depot or a chassis which had been removed and redelivered to APL's terminal or depot. ARTICLE II - NUMBER OF CHASSIS REQUIRED AND ADJUSTMENT; RETURN PROVISION During each year of this Agreement, APL agrees to provide to LTS on a daily basis the chassis requirements set forth in LTS's TPI Market Plan which shall be supplied to APL on an annual basis no later than September 30/th/ of the prior year ("TPI Market Plan Requirement"). If LTS fails to supply its TPI Market Plan Requirement to APL by September 30/th/, APL shall not be obligated to meet the proposed TPI Market Plan Requirement for the following year but shall only be required to continue to provide the Chassis requirements set forth in the then current year's TPI Market Plan Requirement unless otherwise agreed between APL and LTS. The "Initial Allocation" of Chassis for the first year of the Agreement is 2,091 C20 Chassis and 3,367 C40 (or equivalent units). The "Current Allocation" shall be the fleet of C20 Chassis and C40 Chassis for each subsequent year of the Agreement based on the TPI Market Plan Requirement. In the event that the Current Allocation is less than the prior year's allocation, and APL incurs early termination penalties on Chassis which LTS and APL mutually agree were required to be leased to fulfill previous TPI Market Plan Requirements, LTS shall bear the cost of those early termination penalties. At APL's sole option, to the extent that APL can absorb any Chassis into its own fleet, it will do so. When the Current Allocation results in an increase in the fleet size, and if, due to market conditions and non-availability of Chassis, APL is unable to supply all Chassis in excess of the prior year's allocation, APL shall work with LTS to obtain as many Chassis as practically and economically possible. In the event that LTS requests more Chassis in an APL accounting period (as those periods are established in Appendix 5 to the Equipment Supply Agreement) than are in the Current Allocation as measured by available Chassis Days, APL shall supply those Chassis as long as such Chassis are available for use by LTS. Chassis Days are the number of Chassis in the Current Allocation multiplied by 365 averaged over the twelve (12) APL accounting periods. If LTS' use exceeds the Current Allocation of Chassis during one APL accounting period, APL shall so advise LTS. If LTS' use exceeds the Current Allocation for a consecutive second APL accounting period, then the parties shall discuss remedies to address the excess use within five (5) days after the receipt of data by LTS for that APL accounting period. If LTS chooses to increase the Chassis fleet, then APL shall charge LTS for the supplemental Chassis which APL and LTS agree to add to the Chassis fleet. If APL supplies less than the Current Allocation of Chassis during one APL accounting period, LTS shall so advise APL. If APL supplies less than the Current Allocation for a consecutive second APL accounting period, the parties shall discuss remedies to address the shortage within five (5) days after the receipt of data by LTS for that APL accounting period. The number of Chassis provided at each location covered under this Chassis Sublet shall be managed on a day to day basis by APL and LTS, in accordance with the Procedures Manual on Equipment Issues (the "Manual") which APL and LTS shall jointly develop and implement. The Manual shall address procedures for, among other things, LTS communicating its anticipated Chassis needs at each location to APL and APL making such equipment available and communicating such availability to LTS. LTS shall have the right to periodically audit APL's records, and APL shall have the right to audit LTS' records, to the extent necessary to determine compliance by APL with its Chassis supply obligations under this Chassis Sublet. The parties acknowledge that any such calculation of available Chassis will entail the extrapolation of certain data from APL's ETC system. LTS must return a Chassis utilized under this Agreement to the same rail ramp from which it was taken. 2 During each year, LTS may notify APL of its request in writing for additional Chassis beyond the Current Allocation for that year and APL shall have the option, but not the obligation, to supply such additional Chassis under this Chassis Sublet. If APL does not respond to LTS within five (5) working days, then no additional Chassis will be made available from APL. All incremental direct costs involved in increasing the fleet, whether pursuant to the paragraph immediately above or pursuant to an increase in a Future Allocation, shall be paid by LTS. Such costs are not limited to the pickup and survey of equipment but also include any increase in daily per diem due to market conditions which may affect the terms and length of any lease requirements. APL shall use its best efforts when increasing the fleet pursuant to LTS' needs to do so in the most economical manner possible consistent with obtaining equipment of adequate quality. APL represents and warrants that it has obtained all consents, approvals, authorizations, waivers and amendments required to be obtained from any third party under its existing lease agreements and/or other obligations prior to entering into this Chassis Sublet and the consummation of the transactions contemplated herein. ARTICLE III - PER DIEM RENTAL RATE The per diem rental rate for the provision of maintained and licensed Chassis under this Agreement shall be according to Schedule 1. APL shall invoice LTS each APL accounting period for the number of Chassis provided in the Current Allocation pursuant to Article II by multiplying each unit times the applicable rate times the number of days that unit is in the TPI chassis fleet in the accounting period. Payment shall be due within thirty (30) days of receipt of an invoice. APL represents and warrants to LTS that the per diem rental rate of $4.85 for units in the 1999 Plan represents the actual daily chassis cost allocated to LTS by APL during the fiscal year ended December 25, 1998 and that the number and mix of chassis contained in the Initial Allocation would allow LTS to appropriately service TPI volumes of approximately 110,000 shipments in 1999 based on actual 1998 chassis turn times. In the event of any inaccuracy of this representation, the parties agree to make such adjustments in good faith as are necessary (i) to correct such inaccuracy and (ii) to compensate the party prejudiced by such inaccuracy. ARTICLE IV - INTERCHANGE AND CUSTODY; INSURANCE APL represents that it is an "Equipment Provider" which is a Party to that standard Uniform Intermodal Interchange and Facilities Access Agreement administered by the Intermodal Association of North America ("UIIA Agreement"). In accepting the provision of Chassis under this Chassis Sublet, LTS agrees that LTS is the User of the Chassis upon interchange of the Chassis to LTS until the Chassis' return to the custody of APL. Therefore, simultaneously with the execution of this Chassis Sublet, LTS shall furnish APL with certificates from insurance companies reasonably acceptable to APL evidencing liability for bodily injury and property damage with a combined single limit of not less than $1 million. LTS agrees to defend, hold harmless, and fully indemnify APL against any and all loss, damage, liability, cost or expense (including reasonable attorney's fees) suffered or incurred by APL, arising out of or connected with injuries to or death of any persons or loss of or damage to any property (including equipment and cargo) arising out of 3 the use, operation, maintenance performed by or at the direction of LTS, possession or control of Chassis provided to LTS under this Chassis Sublet while it is the User of the Chassis. LTS further agrees to defend, indemnify, and hold APL harmless against any and all loss, damage, liability, cost or expenses (including reasonable attorney's fees and trip permit dues) arising out of LTS' failure to comply with any federal or state law or regulation when that failure arises out of the use, operation, maintenance performed by or at the direction of LTS, possession or control of Chassis provided to LTS under this Chassis Sublet while it is the User of the Chassis. ARTICLE V - DAMAGE AND REPAIRS; CITATIONS The costs of damage to Chassis while in the possession of LTS are included in the daily per diem rate charged pursuant to this Agreement, and LTS shall not be billed for individual repairs. If a Chassis is a Total Loss LTS shall pay the Casualty Value computed for the Chassis in question in accordance with Appendix 1. A Chassis shall be considered a "Total Loss" in the event it is lost, stolen, destroyed, or surveyed and found to be more costly to repair than its Casualty Value. The parties agree that the condition of an APL Chassis shall be established at interchange by the use of an Equipment Interchange Receipt (EIR) setting forth the physical condition of the equipment. Both APL and LTS shall agree on the use of a non-standard interchange where an EIR is not prepared; alternatively the parties shall agree on what constitutes presumptive interchange information when that is an issue. In the event that a citation for any kind of traffic violation, including parking citations, is issued while the Chassis is under LTS' control, it shall be LTS' obligation to pay for the citation and to seek reimbursement from the underlying motor carrier. ARTICLE VI - USE TAX In the event there is any use tax in any applicable jurisdiction levied as a result of this Chassis Sublet, LTS agrees that it will pay such use tax in addition to the per diem rental due under Article III. ARTICLE VII - REVIEW This Chassis Sublet shall be reviewed every three (3) months by the Parties in consultation with one another. Issues such as per diem rental rates, adequacy of the provision, and condition of the Chassis will automatically be reviewed. In the event either party proposes any changes in this Chassis Sublet in connection with such review, the other Party shall consider the proposal in good faith. In the event the Parties cannot agree, they shall utilize the Dispute Resolution process set forth in Section 6 of the Stacktrain Services Agreement. ARTICLE VIII - TERM AND TERMINATION The term of this Chassis Sublet shall have the same term as the Stacktrain Services Agreement. If this Agreement is terminated prior to twenty-years from the date hereof, LTS may request APL to assign the leases for all the Chassis covered under this agreement to LTS and, in such event, APL shall be obligated to so assign such leases to LTS. In the event that, at the end of the term of this Chassis Sublet, Chassis interchanged by APL to LTS have not been returned to APL and the Casualty Values thereof have not been paid to APL, LTS shall be 4 charged the applicable per diem charge for each such Chassis until the earlier of either (a) 180 days from the termination of this Chassis Sublet or (b) written notification by LTS to APL that such Chassis are lost, stolen or destroyed. If LTS does not return such Chassis to APL within 180 days from the termination of this Chassis Sublet or LTS notifies APL that such Chassis is or are lost, stolen or destroyed, then LTS shall be liable for the Casualty Value of such Chassis in accordance with Article V and Appendix 1 hereof. 5 ARTICLE IX - FORCE MAJEURE If any Party suffers a Force Majeure event, it shall promptly notify all other Parties of that event, specifying the nature and date of occurrence thereof. The obligation of each Party to perform hereunder shall be suspended during the Force Majeure event to the extent such event prevents performance. The Party suffering the Force Majeure event shall notify the other Parties in writing when that condition has been eliminated. If a Force Majeure event has been declared, no per diem rental charges shall be assessed for the days identified in the written notice of the Force Majeure event. APL shall inform LTS of the number of Chassis which are per diem rental free upon either its receipt of the notice of an event of Force Majeure, or its having given notice to LTS that it is declaring an event of Force Majeure. ARTICLE X - THIRD PARTY MANAGER The parties hereby agree that a third party manager or managers may be appointed by APL at any time within the duration of this Agreement to oversee Chassis management at any or all locations within North America. ARTICLE XI - CHASSIS LEASES LTS may, during the first year of this Agreement, request APL to assign the leases for all the Chassis covered under this Agreement to LTS and, in such event, APL shall be obligated to so assign such leases to LTS. ARTICLE XII - MISCELLANEOUS A. All notices, demands, requests, and other communications required or permitted by or provided for in this Chassis Sublet ("Communications") shall be given in writing to the parties at their respective addressees set forth below, or at such other address as a party shall designate for itself in writing in accordance with this Section: To: APL: 1111 Broadway Oakland, California 94607 Attn: Timothy J. Windle Facsimile: (510)272-8932 With a copy to: Sullivan & Cromwell 1888 Century Park East Los Angeles, California 90067 Attention: Steven B. Stokdyk, Esq. Facsimile: (310) 712-8800 6 To: APL Land Transport Services, Ltd. Joshua Harris c/o Apollo Management, L.P. 1301 Avenue of the Americas New York, New York 10019 Facsimile: (212)261-4102 and Bruce Spector c/o Apollo Management, L.P. 1999 Avenue of the Stars, Suite 1910 Los Angeles, California 90067 Facsimile (310)201-4199 With a copy to: Morton A. Pierce, Esq. Douglas L. Getter, Esq. Dewey Ballantine LLP 1301 Avenue of the Americas New York, New York 10019 Facsimile: (212) 259-6333 B. Communications may be transmitted by (i) personal delivery, (ii) delivery by messenger, express, or air courier or similar courier, (iii) delivery by United States first class certified or registered mail, postage prepaid, and (iv) delivery by facsimile. Except as otherwise provided in this Chassis Sublet, delivery or service of any Communication shall be deemed effective only upon receipt; provided, that any Communication received after 5:00 p.m. local time at place of receipt, or on a day other than a Business Day, shall be deemed received on the next succeeding Business Day. C. Except as is otherwise expressly provided in this Chassis Sublet, all periods of time shall be computed by including Saturdays, Sundays, and holidays. D. The captions in this Chassis Sublet are for convenience of reference only. They do not define or limit any of the terms or provisions, or otherwise affect the construction, of this Chassis Sublet. E. References in this Chassis Sublet to Articles, Sections, and Appendices are references to Articles, Sections, and Appendices of this Chassis Sublet, except as expressly otherwise indicated. F. This Chassis Sublet shall be binding upon, inure to the benefit of, and be enforceable by the parties hereto and their respective successors and permitted assignees. G. This Chassis Sublet shall be construed and enforced in accordance with and be governed by the laws of the State of New York. H. If either party shall fail to perform any of its obligations under this Chassis Sublet, the other party may, on twenty-five (25) days' notice to the party so failing to perform, do all acts and make all expenditures necessary to remedy such failure, and the party so failing to perform, shall within ten (10) Business Days after demand therefor by the other party, pay to the other party an amount which is equal to the costs, expense and liabilities incurred by the other party in doing any such act or making any such expenditure. No party, however, shall be under any obligation to do any such act or make any such expenditures, nor 7 shall the making thereof relieve either party from any of the consequences of any failure to perform any of its obligations under this Chassis Sublet. I. In the event a dispute between the parties arises concerning any matter under this Chassis Sublet, the party claiming the existence of a dispute shall notify the other party in writing. In the event that such notice is given, the dispute shall be resolved by the Dispute Resolution process set forth in Section 6 of the Stacktrain Services Agreement. 8 IN WITNESS WHEREOF, this Chassis Sublet has been executed and delivered as of the date first above written, by the duly authorized representatives of the parties hereto. APL Land Transport Services, Inc. By: /s/ Ann Fingarette Hasse ________________________________ Title: Assistant Secretary _____________________________ American President Lines, Ltd. By: /s/ Timothy J. Windle ________________________________ Title: Assistant Secretary _____________________________ APL Limited By: /s/ Timothy J. Rhein ________________________________ Title: President and Chief Executive Officer _____________________________ APL Co. Pte Ltd. By: /s/ Frederick M. Sevekow, Jr. ________________________________ Title: Authorized Signature _____________________________ 9 CHASSIS SUBLET AGREEMENT APPENDIX 1 SCHEDULE FOR CASUALTY VALUE CALCULATIONS A. LEASED CHASSIS For leased equipment and equipment otherwise obtained from third parties, the Casualty Value shall be the amount required to be paid under the lease or other arrangement with third parties upon a Total Loss of the Chassis. The party required to pay the Casualty Value under this Chassis Sublet will pay it within fifteen (15) business days after date of demand therefor and, if it fails to do so, shall pay late charges and penalties in accordance with the lease or other arrangement with the third party. B. Owned Chassis Agreed Cost (January 1, 1999) C20 $8,000 C40 $8,000 C45 $8,000 CHE48 $8,800 To determine the Casualty Value for owned Chassis which is a Total Loss, the Agreed Cost shall be depreciated at five percent (5%) per year and pro rata for portions of a year from the date of manufacture of the Chassis down to a minimum of thirty percent (30%) of the Agreed Cost. For purposes of determining Casualty Value, the cost of the Chassis shall be adjusted annually as of January 1 of each year to reflect changes in the cost of new Chassis. 10 SCHEDULE 1 TPI CHASSIS ALLOCATION AND DAILY PER DIEM RENTAL RATE Current Allocation (i) C20 C40 C45 CHE Requirements Daily Rate 1,669 1999 Budget $ 4.85 2,469 1999 Budget $ 4.85 422 MSC Shipping $ 5.30 898 MSC Shipping $ 5.30 - ----------------------------- 2,091 3,367 Incremental Requirements - ------------------------ (i) C20 C40 C45 CHE Requirements Daily Rate ________________________________________ Allocation Reduction - -------------------- (i) C20 C40 C45 CHE Requirements Daily Rate ________________________________________ 11 EX-4.10 11 EQUIPMENT SUPPLY AGREEMENT DATED MAY 28, 1999 Exhibit 4.10 ------------ EQUIPMENT SUPPLY AGREEMENT This Equipment Supply Agreement (as originally executed and as amended from time to time in accordance with its terms, the "Equipment Supply Agreement") is made as of May 28, 1999 by and among APL Land Transport Services, Inc., a Tennessee corporation ("LTS"), APL Co. Pte Ltd., a Singapore corporation, APL Limited, a Delaware corporation and American President Lines, Ltd., a Delaware corporation (collectively "APL"). ARTICLE I - DEFINITIONS As employed in this Equipment Supply Agreement, the term: 1. "Affiliate" has the meaning set forth in the Stock Purchase Agreement. 2. "APL Container" means a container which is owned, leased or otherwise controlled by APL. 3. "APL Chassis" means a Chassis (as defined in the Chassis Sublet) which is owned, leased or otherwise controlled by APL. 4. "Available Containers" shall have the meaning set forth in the Stacktrain Services Agreement. 5. "Casualty Value" has the meaning set forth in Section 3.2 6. "Chassis Sublet" means the TPI Chassis Sublet Agreement, dated of even date herewith, between APL and LTS. 7. "Interchange[d]," when used with respect to a container means a container which was removed from APL's terminal or depot by LTS, LTS' designee or a motor carrier having a valid interchange with LTS but not redelivered to an APL Equipment Return Location in Appendix 2. "Interchange[d]," when used with respect to a chassis means an APL supplied chassis which has been removed from APL's terminal or depot by LTS, LTS' designee or a motor carrier having a valid interchange with LTS but not redelivered to APL's terminal or depot or a chassis which had been removed and redelivered to APL's terminal or depot. 8. "Quarterly Period" refers collectively to each fiscal quarter of APL beginning with that during which this Equipment Supply Agreement becomes effective and through and including each subsequent fiscal quarter of APL. 9. "Stacktrain Services Agreement" means the Stacktrain Services Agreement, dated of even date herewith, between APL and LTS. 10. "Stock Purchase Agreement" means the Stock Purchase Agreement, dated as of March 15, 1999, between APL Limited and Coyote Acquisition LLC. 11. "Total Loss" has the meaning set forth in Section 3.2 ARTICLE II - APL DRY CONTAINERS TO BE PROVIDED TO LTS BY APL Section 2.1. APL Provides Available Containers A. APL will supply to LTS a quantity of Available Containers of the following types: 1 20' standard height (8' 6" high) dry container ("D20") 2. 40' standard height (8' 6" high) dry container ("D40") 3. 40' high cube (9' 6" high) dry container ("D40H") 4. 45' high cube (9' 6" high) dry container ("D45H") B. The Available Containers will be available for pickup at the APL terminals, rail terminals or depots in the locations listed in Appendix 1. The hours of operation for these terminals and depots will be supplied by APL to LTS. C. In addition to the Chassis provided pursuant to the Chassis Sublet Agreement, APL will supply LTS with an APL Chassis to support those Available Containers at origin. At destination, APL will supply an APL Chassis to LTS at West Coast intermodal rail terminals listed on Appendix 4 for arriving Available Containers. The APL Chassis supplied to LTS under this Section must be promptly returned to APL at the same location, terminal or depot where they were supplied originally unless otherwise specifically agreed to by APL. APL shall also supply to LTS 48' expandable APL chassis but only to the extent necessary to assure that, in addition to LTS' own fleet of 48' and 53' fixed and expandable Chassis, LTS shall have Chassis in proportionally the same number as it had for its fleet of 48' Containers as that 48' Container fleet existed in 1998 ("1998 48' Container Fleet"). D. APL represents that it is an "Equipment Provider" which is a party to that standard Uniform Intermodal Interchange and Facilities Access Agreement administered by the Intermodal Association of North America ("UIIA Agreement"). The Interchange to LTS makes LTS the User (as defined in the Chassis Sublet) of Interchanged APL Chassis and APL Containers and imposes upon LTS the liabilities and responsibilities set forth in the Chassis Sublet as to both APL Containers and APL Chassis. 2 Section 2.2. Interchanges and Custody A. APL will send LTS a transaction message via Electronic Data Interchange ("EDI") in all cases where that is feasible, and LTS recognizes that there are Interchanges and locations when such connectivity is not possible. LTS shall not refuse to accept information on Interchanged APL Chassis and APL Containers because it was not sent as an EDI transaction. B. An Available Container or an APL Chassis will be considered as Interchanged to LTS when either of the following occurs: 1) When the Available Container or an APL Chassis is removed from APL's terminal, depot, or rail terminal by LTS, LTS' designee or a motor carrier having a valid interchange with LTS or 2) When an Available Container or an APL Chassis otherwise comes into LTS' custody due to any transaction commonly referred to as a "Street Turn" where a motor carrier has been authorized by APL to reuse a dry container and to make it an Available Container and LTS is notified by APL through EDI physical exchange of equipment receipts, notice by facsimile or otherwise providing LTS with actual notice of the exchange. Section 2.3. Return Locations, Free Time and Per Diem Rates A. Once empty after their westbound trip, the Available Containers shall be returned by LTS at its cost to the Equipment Return Points in Appendix 2. APL shall be responsible for draying or repositioning the empty containers from any non-APL Return Equipment Points to APL's ocean terminal, container yard or other locations. LTS shall have an average of fourteen (14) free days for all Available Containers received by LTS on an annual aggregate basis to secure a Domestic Shipment (as defined in the Stacktrain Services Agreement) for an Available Container and to make it available to APL at a Return Location. The free days shall commence from the first 12:01 a.m. from the time the Available Container is actually interchanged to LTS. For every day or fraction thereof after the fourteenth day that LTS has possession of an Available Container, LTS shall be charged $10 per day per Available Container. LTS shall be invoiced on an annual basis for these charges. B. For the APL Chassis which are supplied in accordance with Section 2.1(C), APL will allow an average of seven (7) free days of chassis use on an annual aggregate basis. The seven free days shall commence from the first 12:01 a.m. that the Chassis is actually interchanged to LTS. For each day or fraction thereof that an APL Chassis is used by LTS beyond the free days, LTS shall be charged a per diem rental of $4.85 per APL Chassis. LTS shall be invoiced on an annual basis for these charges. 3 APL represents and warrants to LTS that had this Agreement been in effect during the fiscal year ended December 25, 1998, the audited operating results of LTS for such period would not have been negatively affected. In the event of any inaccuracy of this representation, the parties agree to make such adjustments in good faith to amounts payable under this Agreement as are necessary (I) to correct such inaccuracy and (ii) to compensate the party prejudiced by such inaccuracy. C. The per diem rate shall remain the same for the first five (5) years of this Agreement. Upon the sixth year of this Agreement, the per diem rate shall be adjusted on an annual basis when, by mutual agreement of the Parties, the then current per diem rate is not in line with market rates for similar equipment. D. Appendix 3 illustrates the method of calculating the average number of free days for APL Containers (Total Days Less Awaiting Dispatch) and APL Chassis (Total Chassis Use Days) and documents the baseline for the allowed free days. APL shall furnish to LTS a schedule in the same format as Appendix A for each APL Accounting Period so that LTS can track its use of APL Containers and APL Chassis. E. An Available Container or APL Chassis will be considered Interchanged back to APL when any of the following occurs: 1) When the Available Container or APL Chassis is returned empty to the Equipment Return Points or 2) When the Available Container or APL Chassis otherwise comes into APL's custody due to mishandling by an LTS customer. F. An Available Container or APL Chassis will be in LTS' custody at all times between the time it is Interchanged to LTS and the time it is Interchanged back to APL. An Available Container or APL Chassis will be in APL's custody at all other times. LTS will be responsible to APL for loss or damage to APL Containers and APL Chassis in LTS' custody to the extent indicated in Section III, except that APL will have ultimate responsibility for loss or damage to APL Containers or APL Chassis occurring in APL terminals or depots or otherwise due to actions of APL affiliates. ARTICLE III - DAMAGE AND REPAIRS TO CONTAINERS, CHASSIS Section 3.1. APL Equipment A. In the event any APL Container used by LTS under this Equipment Supply Agreement is damaged during the period it is in LTS' custody (unless the damage occurred in an APL terminal or depot or otherwise through the actions of an Affiliate of APL); and the estimated cost of repair (according to survey) exceeds US$100.00, and APL repairs the APL Container, LTS will be invoiced for and shall pay the actual cost of repair; provided, if such container is 4 a Total Loss, LTS shall pay the Casualty Value computed for such container in accordance with Section 3.2. B. If, for any reason, LTS repairs or otherwise services an APL Container, and APL subsequently inspects the APL Container and determines that the repair is inadequate and that further repair is required, and the total cost of repair exceeds US$100, then LTS shall pay for any additional costs of repair. C. In the event any APL Chassis used by LTS under this Equipment Supply Agreement is damaged during the period it is in LTS' custody (unless the damage occurred in an APL terminal or depot or otherwise through the actions of an APL affiliate) and the estimated cost of repair (according to survey) exceeds US$ 100.00 and APL repairs such APL Chassis, LTS will be invoiced for and pay the actual costs of repair; provided. If such chassis is a Total Loss, LTS shall pay the Casualty Value computed for such chassis in accordance with Section 3.2. D. It is assumed that the condition of either an APL Container or an APL Chassis shall be established at Interchange by the use of an Equipment Interchange Receipt (EIR) setting forth the physical condition of the equipment. In the event that no EIR is issued, both APL and LTS shall agree on the use of a non-standard interchange or shall agree on what constitutes presumptive interchange information when that is an issue. Section 3.2. Casualty Value: Total Loss The "Casualty Value" of a container or chassis shall be calculated in accordance with Schedule 1. A container or chassis shall be considered a "Total Loss" in the event it is lost, stolen, destroyed, or surveyed and found to be more costly to repair than its Casualty Value. ARTICLE IV - ELECTRONIC DATA INTERCHANGE AND EQUIPMENT TRACKING AND CONTROL. A. The Manual will include provisions reasonably acceptable to LTS for electronic data interchange and equipment tracking and control, to the extent that existing systems allow for such functions. ARTICLE V - PAYMENTS A. Within fifteen (15) days after the end of each Agreement year, APL will present to LTS an invoice, indicating the total number of units, the aggregate total days or fraction of days over the aggregate allowed free days and the amount due to APL by LTS for APL Containers and a similar invoice for APL Chassis. APL and LTS will confirm the accuracy of the invoices presented and will formulate a final invoice for the net amount to be paid. Payment by LTS to APL shall be due within thirty (30) days of receipt of the original invoice. 5 B. An invoice for APL Containers and or APL Chassis identified as a Total Loss will be prepared quarterly. ARTICLE VI - INSURANCE AND INDEMNITY A. Simultaneously with the execution of this Equipment Supply Agreement, LTS shall furnish APL with certificates of insurance evidencing automobile liability for bodily injury and property damage with a combined single limit of not less than $1 million. The insurers shall be reasonably acceptable to APL. B. LTS agrees to defend, hold harmless and fully indemnify APL against any and all loss, damage, liability, cost or expense (including reasonable attorney's fees) suffered or incurred by APL, arising out of or connected with injuries to or death of any persons or loss of or damage to any property (including equipment and cargo) arising out of the use, operation, maintenance performed by or at the direction of LTS, possession or control of an Interchanged APL Container or APL Chassis after it has been Interchanged out by APL and before it has been Interchanged back to APL. LTS further agrees to defend, indemnify and hold APL harmless against any and all loss, damage, liability, cost or expenses (including reasonable attorney's fees and trip permit dues) arising out of LTS' failure to comply with any federal or state law or regulation when that failure arises out of the use, operation, maintenance performed by or at the direction of LTS, possession or control of APL Containers or APL Chassis provided to LTS under this Equipment Supply Agreement. ARTICLE VII - REVIEW This Equipment Supply Agreement shall be reviewed annually by the parties in consultation with one another on or around July 31, 1999 and thereafter, in January of each year commencing January 2000 (and at lesser intervals as the parties may agree) with a view toward assessing whether this Equipment Supply Agreement is achieving the intentions of the parties and whether improvements are possible. In the event either party proposes any changes in this Equipment Supply Agreement in connection with such review, the other party shall consider the proposal in good faith, but shall not be obligated to agree to it. In the event the parties cannot agree as to any such proposal, it shall be submitted for Dispute Resolution as provided in Section 6 of the Stacktrain Services Agreement. 6 ARTICLE VIII - TERM AND TERMINATION This Equipment Supply Agreement shall commence on Closing (as defined in the Stock Purchase Agreement) and shall have the same term as the Stacktrain Services Agreement. ARTICLE IX - MISCELLANEOUS A. All notices, demands, requests and other communications required or permitted by or provided for in this Equipment Supply Agreement ("Communications") shall be given in writing to the parties at their respective addresses set forth below, or at such other address as a party shall designate in writing in accordance with this Section: To: APL: 1111 Broadway, Oakland, California 94607 Attn: Timothy J. Windle Facsimile: (510)272-8932 With a copy to: Sullivan & Cromwell 1888 Century Park East Los Angeles, California 90067 Attention: Steven B. Stokdyk, Esq. Facsimile: (310) 712-8800 To: APL Land Transport Services, Ltd. Joshua Harris c/o Apollo Management, L.P. 1301 Avenue of the Americas New York, New York 10019 Facsimile: (212)261-4102 and Bruce Spector c/o Apollo Management, L.P. 1999 Avenue of the Stars, Suite 1910 Los Angeles, California 90067 Facsimile (310)201-4199 7 With a copy to: Morton A. Pierce, Esq. Douglas L. Getter, Esq. Dewey Ballantine LLP 1301 Avenue of the Americas New York, New York 10019 Facsimile: (212)259-6333 Communications may by transmitted by (i) personal delivery, (ii) delivery by messenger, express or air courier or similar courier, (iii) delivery by United States first class certified or registered mail, postage prepaid, and (iv) by facsimile. Except as otherwise provided in this Equipment Supply Agreement, delivery or service of any Communication shall be deemed effective only upon receipt; provided, that any Communication received after 5:00 p. m. local time at place of receipt, or on a day other than a Business Day, shall be deemed received on the next succeeding Business Day. B. Except as is otherwise expressly provided in this Equipment Supply Agreement, all periods of time shall be computed by including Saturdays, Sundays and public holidays. C. The captions and table of contents in this Equipment Supply Agreement are for convenience of reference only and are not part of this Equipment Supply Agreement and do not define or limit any of the terms or provisions, or otherwise affect the construction, of this Equipment Supply Agreement. D. References in this Equipment Supply Agreement to Articles, Sections and Appendices are references to Articles, Sections and Appendices of this Equipment Supply Agreement, except as expressly otherwise indicated. E. This Equipment Supply Agreement shall be binding upon, inure to the benefit of, and be enforceable by the parties hereto and their respective successors and permitted assignees. F. This Equipment Supply Agreement shall be construed and enforced in accordance with and be governed by the laws of the State of New York. G. If any party shall fail to perform any of its obligations under this Equipment Supply Agreement, the other party may, on twenty-five (25) days' written notice to the party so failing to perform, do all acts and make all expenditures necessary to remedy such failure, and the party so failing to perform, shall within ten (10) Business Days after demand therefor by the other party, pay to the other party an amount which is equal to the costs, expense and liabilities incurred by the other party in doing any such act or making any such expenditure. No party, however, shall be under any obligation to do any such act or make any such expenditures, nor shall the making thereof relieve either party from any of the consequences of any failure to perform any of its obligations under this Equipment Supply Agreement. 8 H. In the event a dispute between the parties arises concerning any matter under this Equipment Supply Agreement, the party claiming the existence of a dispute shall notify the other party in writing. In the event that such notice is given, the dispute shall be submitted for Dispute Resolution as provided in Section 6 of the Stacktrain Services Agreement. 9 IN WITNESS WHEREOF, this Equipment Supply Agreement has been executed and delivered as of the date first above written, by the duly authorized representatives of the parties hereto. APL LAND TRANSPORT SERVICES, INC. By: /s/ Ann Fingarette Hasse ________________________________ Title: Assistant Secretary _____________________________ AMERICAN PRESIDENT LINES, LTD. By: /s/ Timothy J. Windle ________________________________ Title: Assistant Secretary _____________________________ APL LIMITED By: /s/ Timothy J. Rhein ______________________________ Title: President and Chief Executive Officer ______________________________________ APL Co. Pte Ltd. By: /s/ Frederick M. Sevekow, Jr. ______________________________ Title: Authorized Signature ___________________________ 10 Appendix 1. Supply Points Atlanta, Georgia Baltimore, Maryland Boston, Massachusetts Charleston, South Carolina Charlotte, North Carolina Chicago, Illinois Cincinnati, Ohio Cleveland, Ohio Columbus, Ohio Dallas, Texas Denver, Colorado Detroit, Michigan Harrisburg, Pennsylvania Houston, Texas Indianapolis, Indiana Jacksonville, Florida Kansas City, Missouri Louisville, Kentucky Memphis, Tennessee Miami, Florida Minneapolis, Minnesota Nashville, Tennessee New Orleans, Louisiana New York, New York/Newark, New Jersey Norfolk, Virginia Omaha, Nebraska Saint Louis, Missouri Tampa, Florida Non-USA: Montreal, Canada Toronto, Canada 11 Appendix 2. Equipment Return Points-West Coast SOUTHERN CALIFORNIA Los Angeles: Becker Yard (CY Yard) 9739 South Alameda Street Los Angeles, CA 90022 APL Global Gateway South [APL Return Location] 614 Terminal Way Terminal island, CA 90731 NORTHERN CALIFORNIA Oakland: APL Middle Harbor Terminal [APL Return Location] 1395 Middle Harbor Road Oakland, CA 94607 Stockton: Rail Ramp U.P. - Stockton/Lathrop 4527 East Roth Road Lathrop, CA Hawk Pacific-Lathrop CY Facility 151 Roth Road French Camp, CA 95231 PACIFIC NORTHWEST Portland: Union Pacific Ramp (for repositioning to Seattle) 2745 North Interstate Portland, OR 97227 Seattle: APL Global Gateway North [APL Return Location] Terminal 5 3443 West Marginal Way Seattle, WA 98106 12 Schedule 1. Schedule for Casualty Value Calculations A. Leased Equipment For leased equipment and equipment otherwise obtained from third parties by APL, the Casualty Value shall be the amount required to be paid under the lease or applicable agreement with third parties upon a Total Loss of the container. The party required to pay the Casualty Value under this Equipment Supply Agreement will pay the Casualty Value to the other party within fifteen (15) business days after the date of written demand therefor and, if such other party fails to do so, it shall pay late charges and penalties in accordance with the lease or applicable agreement with the third party. B. Owned Equipment The cost for the various types of equipment, as of January 1, 1999, is as set forth below ("Agreed Cost"): D20 $2400 D40 $4400 D40H $4550 D45H $6100 C20 $8000 C40 $8000 C45 $8000 CHE48 $8800 To determine the Casualty Value for equipment owned by APL which suffers a Total Loss, the Agreed Cost shall be depreciated at five percent (5%) per year and pro rata for portions of a year from the date of manufacture of the equipment down to a minimum of thirty percent (30%) of the Agreed Cost. For purposes of determining Casualty Value, the cost of equipment shall be adjusted annually as of January 1st of each year to reflect the system average cost of APL's owned Containers. Example A 40' high cube dry van is destroyed and determined to be a Total Loss on November 1, 1998. The unit was manufactured in September 1994. The Casualty Value is calculated as follows. 1. Agreed Cost $ 4,550 2. Time from 9/94 to 11/98 4 years, 2 months 3. Depreciation 4 years @ $227 50 = $ 910.00 2 mos. @ ($227,50/12)= $ 37.92 4. Subtract depreciation from Agreed Value ($947.92) Casualty Value payable $3,602.08. 13 EX-4.11 12 PRIMARY OBLIGATION AND GUARANTY AGREEMENT Exhibit 4.11 ------------ PRIMARY OBLIGATION AND GUARANTY AGREEMENT THIS PRIMARY OBLIGATION AND GUARANTY AGREEMENT (this "Agreement") is executed as of March 15, 1999, by Neptune Orient Lines Limited, a Singapore corporation ("NOL"), in favor of Coyote Acquisition LLC, a Delaware limited liability company ("Coyote"), and APL Land Transport Services, Inc., a Tennessee corporation ("LTS"). WHEREAS, APL Limited, a Delaware corporation ("APL"), is a party to a Stock Purchase Agreement, dated as of March 15, 1999, between APL and Coyote. WHEREAS, in connection with the Stock Purchase Agreement, APL will become a party to the following agreements (each as defined in the Stock Purchase Agreement and, together with the Stock Purchase Agreement, the "Agreements"): (1) an Administrative Services Agreement; (2) an Information Technology Access and License Agreement; (3) a Stacktrain Services Agreement; (4) a TPI Chassis Sublet Agreement; (5) an Equipment Supply Agreement; and (6) a Stockholders Agreement. WHEREAS, APL is currently a wholly owned indirect subsidiary of NOL. WHEREAS, APL or APL Bermuda Pte. Ltd., the sole stockholder of APL, may issue equity shares of its capital stock to the public with a value in excess of $25 million such that its shares are listed on a United States or Singapore national securities exchange or quoted on an interdealer quotation system (an "IPO"). FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby acknowledged, NOL hereby agrees with Coyote and LTS as follows: 1. Primary Obligation. Prior to an IPO, (a) NOL hereby agrees that ------------------ it is jointly and severally entitled to all of the rights, subject to all of the covenants and liable for all of the obligations (including, without limitation, indemnity obligations) of APL under each of the Agreements to which APL is a party as if NOL were a signatory thereto and (b) Coyote and LTS may proceed directly against NOL to enforce any of such covenants and obligations. 2. Guaranty. Following an IPO, (a) NOL hereby absolutely, -------- unconditionally and irrevocably guarantees the payment of any amounts due by APL to Coyote or LTS under the Agreements (the "Guaranteed Obligations") and (b) Coyote and LTS shall first exhaust their rights to collect any and all outstanding Guaranteed Obligations from APL before attempting to collect such Guaranteed Obligations from NOL so long as the collection efforts against APL, in the judgment of Coyote or LTS, do not prejudice in any manner the ability of Coyote and LTS to collect such Guaranteed Obligations from NOL, in which case Coyote and LTS may proceed directly against NOL. 3. Representations and Warranties. NOL represents and warrants to ------------------------------ Coyote and LTS as follows: (i) NOL is a corporation duly organized, validly existing and in good standing under the laws of Singapore. NOL has the requisite corporate power and authority to execute, deliver and perform this Agreement. The execution, delivery and performance by NOL of this Agreement has ben duly authorized by all necessary corporate action on the part of NOL. (ii) This Agreement constitutes a valid and binding obligation of NOL, enforceable against NOL in accordance with its terms. (iii) The execution, delivery and performance of this Agreement by NOL will not violate or conflict with, or constitute a breach or default (with or without notice or lapse of time, or both) under (a) the charter documents of NOL, (b) any law, regulation, order, judgment, or decree applicable to NOL or (c) any term, condition or provision of any loan or credit agreement, note, bond, mortgage, indenture, lease, sublease or other material agreement, commitment, instrument, permit, concession, franchise or license to which NOL is a party or by which NOL or its assets may be bound, in each case clause (b) or (c) above, which conflict or violation would adversely affect the ability of NOL to perform its obligations under this Agreement. -2- (iv) No authorization, consent, permit, approval or other order of, declaration to, or registration, qualification, designation or filing with, any governmental authority is required for or in connection with the execution, delivery and performance of this Agreement by NOL other than the approval of the transactions contemplated hereby by the shareholders of NOL pursuant to an extraordinary general meeting. 4. Bankruptcy. NOL's obligations under this Agreement shall not be ---------- limited by any proceedings filed by or against NOL or APL under any applicable bankruptcy, insolvency or corporate reorganization law. NOL further agrees that Coyote and LTS shall be under no obligation to marshall any assets in favor of or against or in payment of any or all of the Guaranteed Obligations. To the extent that APL makes a payment or payments to Coyote or LTS which payment or payments (or any part thereof) is or are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to APL, or its estate, trustee or receiver or any other party, including, without limitation, NOL, under any bankruptcy law, state or federal law, common law or equitable cause, then to the extent of such payment or repayment, the Guaranteed Obligations, or part thereof which had been paid, reduced or satisfied by such amount, shall be reinstated and continued in full force and effect as of the date such initial payment, reduction or satisfaction occurred. 5. Termination. This Agreement shall remain in full force and ----------- effect until, and terminate only after, the termination of all of the Agreements and the indefeasible payment in full of the Guaranteed Obligations, it being understood that this Agreement shall not have been terminated, but shall remain in full force and effect, if any payment or payments (or any part thereof) made by APL to Coyote or LTS are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to APL, or its estate, trustee or receiver or any other party, including, without limitation, NOL, under any bankruptcy, insolvency or corporate reorganization law, state or federal law, common law or equitable cause, until such payment or payments are satisfied in full pursuant to this Agreement. 6. Governing Law. This Agreement shall be governed by and construed ------------- in accordance with the laws of the State of New York without regard to principles of conflicts of laws. Each of the parties hereto hereby irrevocably submits in any legal action or proceeding relating to or -3- arising out of this Agreement or any other document relating hereto or delivered in connection with the transactions contemplated hereby, or for recognition and enforcement of any judgment in respect thereof, to the exclusive jurisdiction of the United States District Court for the Southern District of New York and appellate courts thereof. Each of the parties hereto further (a) consents that any such action or proceeding may be brought in such court and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (b) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such party at its address set forth in Section 10.3 of the Stock Purchase Agreement or at such other address of which such party shall have given notice pursuant thereto; and (c) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law. 7. Severability. Any provision of this Agreement that is held by a ------------ court of competent jurisdiction to violate applicable law shall be limited or nullified only to the extent necessary to bring this Agreement within the requirements of such law. 8. Waiver. This Agreement may not be amended or modified by the ------ express written consent of the parties hereto. Any waiver by the parties of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach thereof or any other provision. 9. No Assignment. Neither of the parties hereto may assign or ------------- transfer any of its rights or delegate any of its obligations hereunder, whether by operation of law or otherwise, to any other person or entity without the prior written consent of the other party hereto. Any purported assignment or delegation that is made other than in accordance with this Section 9 shall be void and of no effect. Subject to the foregoing provisions of this Section 9, this Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties and their respective successors and assigns. 10. Notices. All notices or other communications to NOL shall be in ------- writing and shall be given in the same manner and with the same effect as set forth in Section 10.3 -4- of the Stock Purchase Agreement. NOL's address and facsimile number are as set forth below: Neptune Orient Lines Limited 456 Alexandra Road #06-00 NOL Building Singapore 119962 Attention: Marjorie Wee -5- IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and each of the undersigned hereby represents and warrants that he or she has been and is, on the date of this Agreement, duly authorized by all necessary and appropriate action to execute this Agreement. NEPTUNE ORIENT LINES LIMITED By: /s/ Cederic Foo ________________________________ Name: Title: COYOTE ACQUISITION LLC By: /s/ Joshua Harris ________________________________ Name: Joshua Harris Title: Vice President APL LAND TRANSPORT SERVICES, INC. By: /s/ Timothy J. Rhein ________________________________ Name: Timothy J. Rhein Title: President and Chief Executive Officer -6- EX-4.12 13 SHAREHOLDERS AGREEMENT DATED MAY 28, 1999 Exhibit 4.12 ================================================================================ SHAREHOLDERS' AGREEMENT among APL LIMITED, COYOTE ACQUISITION LLC, COYOTE ACQUISITION II LLC and PACER INTERNATIONAL, INC., Dated as of May 28, 1999 ================================================================================ TABLE OF CONTENTS
Paragraph Page No. 1. Restrictions on Transfer; Permitted Transferees; Pledges..................... 2 2. Notice by Shareholder of Proposed Transfers.................................. 3 3. Offer to Sell Shares......................................................... 3 4. Elections to Purchase Shares................................................. 4 5. Procedures Upon Elections for Less than All of Shares Offered................ 4 6. Closing of Purchase of Shares................................................ 4 7. Disposition by APL of Shares not Purchased by the Company and/or Coyote...... 5 8. Participation Rights......................................................... 5 9. Bring Along Rights........................................................... 6 10. Representations and Warranties............................................... 7 11. Incidental Registration...................................................... 7 12. Expenses..................................................................... 9 13. Holdback Agreements.......................................................... 9 14. Indemnification and Contribution............................................. 9 15. Rule 144 Reporting........................................................... 11 16. Certain Agreements........................................................... 12 17. Confidentiality.............................................................. 12 18. APL Acknowledgement.......................................................... 12 19. General Restriction.......................................................... 12 20. Legends...................................................................... 13 21. Further Assurances........................................................... 13 22. Notices...................................................................... 13 23. Amendment; Termination....................................................... 14 24. General...................................................................... 14 25. Complete Agreement........................................................... 15
THIS SHAREHOLDERS' AGREEMENT, dated as of May 28, 1999, among COYOTE ACQUISITION LLC, a Delaware limited liability company, (together with its transferees and assignees, "Coyote I"), COYOTE ACQUISITION II LLC, a Delaware limited liability company, (together with its transferees and assignees, "Coyote II" and Coyote I and Coyote II jointly, "Coyote"), APL Limited, a Delaware corporation ("APL"), each of the foregoing, shareholders (the "Shareholders") of Pacer International, Inc., a Tennessee corporation (the "Company"), and the Company. WHEREAS, Coyote and APL have entered into a Stock Purchase Agreement, dated as of March 15, 1999 (as the same may be amended or supplemented, the "Purchase Agreement") whereby Coyote will purchase (the "Acquisition") shares of the outstanding common stock, $.01 par value, of the Company (the "Common Shares"); WHEREAS, upon consummation of the Acquisition (the "Closing"), each of Coyote I and Coyote II will be the record and beneficial owner of the number of Common Shares (the "Coyote Shares") and APL will be the record and beneficial owner of the number of Common Shares (on a post-split basis) (the "APL Shares") each as set forth on Exhibit A hereto. The terms "APL Shares" and "Coyote Shares" shall include any Common Shares now owned or hereinafter acquired by APL or Coyote, respectively, any securities that may be issued by the Company to APL or Coyote, respectively, as a result of any stock dividend, stock split or other distribution, recapitalization, reclassification, reorganization or the like, and any warrants or options to acquire Common Shares or securities convertible into Common Shares now owned or hereafter acquired by APL or Coyote, respectively; and the term "Shares" shall include the Coyote Shares and the APL Shares; WHEREAS, the Company, Coyote I, Coyote II and Donald C. Orris, Gerry Angeli, Robert L. Cross, Gary I. Goldfein, Allen E. Steiner, John W. Hein and Richard P. Hyland (the foregoing individuals, the "Pacer Management Shareholders") have entered into a Shareholders' Agreement dated as of May 28, 1999 (the "Management Shareholders' Agreement") governing the Common Shares which may be issued to the Pacer Management Shareholders in exchange for Series B Perpetual Participating Exchangeable Preferred Stock of Pacer Logistics, Inc.; WHEREAS, the Company, Coyote I, Coyote II, BT Capital Investors, L.P. ("BT") and Pacer International Equity Investors, LLC. ("CSFB" and, together with BT, the "Investors") have entered into a Shareholders' Agreement dated as of May 28, 1999 (the "Investors Shareholders' Agreement") governing the Common Shares which will be purchased from the Company pursuant to that certain Assignment and Assumption Agreement, dated as of May 28, 1999, between Coyote I, BT and CSFB; WHEREAS, APL and Coyote desire to impose certain restrictions on the disposition and transfer of the APL Shares, to create certain purchase and sale rights and to create certain registration rights; and WHEREAS, this Agreement shall become effective upon the Closing. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein, the parties agree as follows: 1. Restrictions on Transfer; Permitted Transferees; Pledges. -------------------------------------------------------- (a) APL shall not make, nor suffer to be made, any transfer, sale, assignment, gift, pledge, mortgage, or other disposition or encumbrance (all of which are comprised within the word "transfer" as used hereinafter) of all or any portion of the APL Shares, except that, subject to the further provisions of Paragraph 1(c) below, each of the following transfers are expressly permitted: (i) by APL pursuant to a bona fide written purchase offer from another person (as used herein, the term "person" shall include a natural person, corporation, partnership, limited liability company, association, company, trust, joint venture, unincorporated organization or other entity of any nature whatsoever), after APL shall have first offered the APL Shares to the Company and Coyote in accordance with the procedures hereinafter set forth in Paragraphs 2 through 7 below; provided, that no such transfer -------- shall be permitted prior to the date which is thirty (30) months after the Closing (it being understood that such thirty (30) month prohibition does not apply to public sales of APL Shares, after the initial public offering, pursuant to Rule 144 (subject to the last proviso of this paragraph 1(a)(i)) or pursuant to the incidental registration rights specified in paragraph 11); and, provided, further, that in no event may such transfer -------- ------- to a bona fide purchaser be effected if the board of directors of the Company (the "Board of Directors") determines, that (A) the proposed transferee is a person who or which, directly or indirectly, (including as an employee, director, officer, consultant, partner, owner, adviser or other participant in an entity), engages in the business of the Company, in any related business or in any other business competitive with the Company at the time of sale or (B) such transfer would be materially detrimental to the interests of the Company or any subsidiary thereof; and provided, -------- further, that this paragraph (i) shall not apply to, and shall not be ------- interpreted to permit, any sales by APL of APL Shares pursuant to Rule 144 under the Securities Act of 1933, as amended (the "Act), including without limitation, clause (k) of Rule 144, unless (x) the sale is conducted through the managing underwriter for the Company's initial public offering of securities, (y) the underwriter has not advised the Company or such APL that the sale of all or any portion of such Shares would have a material adverse effect on the market for the Shares and (z) either (1) Coyote has sold 33 1/3% of the Shares owned by it immediately following the Closing or (2) six (6) years have elapsed since the Closing; (ii) by APL to a Permitted Transferee (as hereinafter defined); provided, however, that any such Permitted Transferee may thereafter -------- ------- transfer such APL Shares pursuant to this Paragraph 1(a)(ii) only to another Permitted Transferee of APL or to APL; and provided, further, that -------- ------- if the Permitted Transferee is an entity described in clause (i) of the definition of "Permitted Transferee", then prior to any disposition of such entity's equity interest in APL, or of any equity interest in such entity to a person that is not APL or a Permitted Transferee of APL, as applicable, (in either such event, such entity would cease to be a Permitted Transferee) such entity shall either (A) transfer all APL Shares then held by it to APL or a Permitted Transferee thereof, or (B) offer such APL Shares to the Company or Coyote pursuant to the provisions of Paragraphs 2 through 7 below on 2 the terms upon which such APL Shares were originally transferred to such entity; (iii) as expressly approved in writing by the Board of Directors (but subject to any terms or conditions provided by the Board of Directors in granting any such approval); or (iv) as otherwise expressly provided herein, including pursuant to the participation rights specified in Paragraph 8 or the incidental registration rights specified in Paragraph 11. (b) For the purposes of the foregoing, a "Permitted Transferee" of APL shall mean: (i) any entity in which APL holds, directly or indirectly, a 100% equity interest or any entity which, directly or indirectly, holds a 100% equity interest in APL; and (ii) Coyote or the Company. (c) Prior to any transfer of any APL Shares to a bona fide purchaser pursuant to Paragraph 1(a)(i) or to a Permitted Transferee pursuant to Paragraph 1(a)(ii), (i) the transferee of APL Shares shall agree to be bound by and benefit from, and that such APL Shares shall continue to be subject to, the terms and provisions of this Agreement as if he, she or it were APL hereunder and shall enter into a joinder to this Agreement (in the form attached hereto as Exhibit B) to such effect, and (ii) Coyote and the Company shall receive such assurances as they may reasonably require to the effect that such transfer does not violate the Act or applicable state securities laws (including, without limitation, representations and warranties as to investment intention and an opinion of counsel). 2. Notice by Shareholder of Proposed Transfers. If at any time APL ------------------------------------------- proposes to transfer any APL Shares, APL shall, prior to making any transfer of APL Shares, give written notice (the "Notice") to the Company and Coyote, specifying (i) the APL Shares to be so transferred (which amount shall not be less than 100% of the APL Shares), (ii) the method of transfer, (iii) the identity of the prospective transferee and (iv) in the case of a proposed bona fide sale pursuant to Paragraph 1(a)(i) above, the terms of the written offer made by the prospective purchaser, and attaching a true and correct copy of such bona fide offer. 3. Offer to Sell Shares. In the case of a proposed bona fide sale -------------------- pursuant to Paragraph 1(a)(i) above, the Notice provided in Paragraph 2 shall constitute an irrevocable offer by APL to sell such APL Shares to the Company or Coyote on the terms and at the price specified in this Paragraph 3 (such offer is hereinafter referred to as the "Offer to Sell," and the APL Shares offered in the Offer to Sell are hereinafter referred to as the "Offered Shares"). The Offer to Sell shall be at a price and on other terms (including any deferral of payment in whole or in part) no less favorable to the Company and Coyote than the price and other terms offered by the prospective purchaser specified in the Notice, except that if the proposed sale is to be wholly or partly for ------ consideration other than money (the term "money" being used in this Paragraph 3 to include deferred obligations to pay money), the Offer to Sell shall be at a price equal to the amount of the net monetary consideration plus the fair market value (as determined in good faith by the Board of Directors within ten (10) days after receipt of the Notice by the Company), at the date of the Notice, of any consideration other than money offered by the prospective purchaser. 3 4. Elections to Purchase Shares. ---------------------------- (a) The Company shall have the first right and option, for a period of thirty (30) days after delivery of the Offer to Sell by APL, to accept all or any portion of the Offered Shares at the purchase price and on the terms stated in the Offer to Sell by delivery to APL, with a copy to Coyote, of written notice of its election to purchase (the "Company Election Notice"), specifying the number of Shares the Company elects to purchase. If the Company does not elect to purchase all of the Offered Shares, then Coyote shall have the right and option, for a period of thirty (30) days after the earlier of the expiration of the 30-day period provided above and receipt of the Company Election Notice (the "Exercise Period"), within which to elect to purchase all or any portion of the Offered Shares which were not elected to be purchased by the Company. Such election to purchase Offered Shares shall be irrevocable. (b) If Coyote elects to accept the Offer to Sell with respect to the Offered Shares which were not elected to be purchased by the Company, Coyote shall provide APL with written notice (the "Coyote Election Notice"), no later than the last day of the Exercise Period, specifying the maximum number of such Offered Shares that Coyote elects to purchase. Such election to purchase Offered Shares shall be irrevocable. Except as provided in Paragraph 5 below, all elections to purchase Offered Shares in accordance with Paragraph 4(a) and this Paragraph 4(b) shall be binding on APL. 5. Procedures Upon Elections for Less than All of Shares Offered. ------------------------------------------------------------- Notwithstanding the provisions of Paragraph 4, in the case of a proposed bona fide sale by APL pursuant to Paragraph 1(a)(i), elections to purchase the Offered Shares made by the Company and/or Coyote shall not be binding on APL if the Company and Coyote do not in the aggregate elect to purchase all of the Offered Shares. In such event, no sales pursuant to such elections need be made by APL, and APL may then sell the Offered Shares to the proposed bona fide purchaser, subject to the provisions of Paragraph 7. Notwithstanding the foregoing, APL may, by written notice of acceptance to the Company and Coyote within ten (10) days after the earlier of APL's receipt of an Coyote Election Notice or expiration of the Exercise Period, waive the requirement that all Offered Shares be accepted for purchase by the Company and Coyote and elect to sell to the Company and/or Coyote that part of the Offered Shares for which elections have been made. 6. Closing of Purchase of Shares. If elections have been made by the ----------------------------- Company and/or Coyote in the aggregate for all of the Offered Shares (or if the Company and/or Coyote shall have received from APL a notice of waiver and acceptance pursuant to Paragraph 5), the Company, Coyote and APL shall mutually agree on a place, time and date (not more than thirty (30) days nor less than twenty (20) days after the expiration of the Exercise Period) for a closing of such purchase and sale. At the closing, APL shall (i) deliver against receipt of the purchase price therefor by cash or certified or bank cashier's check or wire transfer of funds, the certificate or certificates representing the APL Shares each of the Company and Coyote has elected to purchase, properly endorsed for transfer, with all necessary transfer and documentary stamps affixed, and in a form such that upon presentation to the Company the APL Shares represented thereby may be registered in the names of the respective purchasers and (ii) be deemed to have represented and warranted to such purchaser that (a) the APL Shares to be sold are beneficially and of record owned by APL free and clear of all liens, claims, privileges, options, security 4 interests, rights of first refusal, agreements, limitations or voting rights, preemptive rights, charges or other encumbrances of any nature (except as expressly provided by this Agreement) (an "Encumbrance") and (b) the sale and delivery of the APL Shares by APL as contemplated hereby shall vest in the purchaser on such date good, valid and marketable title to such APL Shares free and clear of all Encumbrances (clauses (a) and (b), the "Sale Representations"). 7. Disposition by APL of Shares not Purchased by the Company and/or ---------------------------------------------------------------- Coyote. Any APL Shares not purchased by the Company and Coyote pursuant to - ------ Paragraphs 4 through 6 may be disposed of by APL to the prospective transferee named in the Notice under Paragraph 2, at a price and on terms not more favorable to the transferee than those specified in such Notice, but only within ninety (90) days after the expiration of the Exercise Period; provided, that a -------- transferee shall, prior to the transfer, execute and deliver to the Company and Coyote a written joinder to this Agreement and such other assurances as provided in Paragraph 1(c) hereof. Notwithstanding the foregoing, no such transferee shall be entitled to the rights set forth in Paragraph 11 under this Agreement. 8. Participation Rights. -------------------- (a) Coyote shall not transfer, directly or indirectly, other than in a public offering under Paragraph 11 below, Shares which result in a 25% Transfer (as defined below), unless the terms and conditions of such sale shall include an offer to APL to include in the transfer, at the option of APL, a portion (as determined in accordance with Paragraph 8(c) below) of the APL Shares at the same price and on the same terms and conditions applicable to the Shares being transferred by Coyote. For purposes of this Paragraph 8, the term "25% Transfer" shall mean any transfer of or series of related transfers of Shares which would result in Coyote having transferred an amount of Shares which exceeds 25% of the Shares owned by Coyote immediately prior to such transfer or transfers. (b) In the event that Coyote receives a bona fide offer or offers from a third party to purchase, or otherwise determines to transfer, Shares which purchase or transfer would trigger a 25% Transfer (the "Participation Offer"), Coyote shall then cause the Participation Offer to be reduced to writing and shall give APL written notice thereof (the "Participation Notice"). The Participation Notice shall contain a true and correct copy of the Participation Offer and shall identify the number of Shares with respect to which Coyote has a bona fide offer or other agreement to sell (the "Designated Shares"), the total number of Shares which Coyote owns beneficially, the price per Share at which the sale is proposed to be made and any other material term or condition of the Participation Offer. APL shall have the right and option, within fifteen (15) days after the Participation Notice is given to APL (the "Participation Period") to accept the Participation Offer for the number of Shares as determined pursuant to Paragraph 8(c) below. If APL desires to exercise such option, APL shall provide Coyote with written notice, specifying the number of Shares APL wishes to include in the Participation Offer (a "Participation Acceptance Notice"), which shall constitute an irrevocable acceptance of the Participation Offer by APL. (c) In the event the proposed transferee does not agree to accept and purchase all of the additional number of Shares specified in the Participation Acceptance Notice, at the same price and on the same terms and conditions as set forth in the Participation Notice, APL shall 5 have the right to sell pursuant to the Participation Offer the number of Shares (the "Participating Shares") allocated as the lesser of (i) the number of Shares specified in APL's Participation Acceptance Notice and (ii) a pro rata portion --- ---- of the number of Shares that such proposed Transferee has agreed to accept and Purchase on the basis of the respective amounts of Shares then owned by Coyote and APL. (d) Coyote shall notify APL at least five (5) business days prior to the date upon which the transfer of Shares pursuant to this Paragraph 8 shall be consummated, which notice shall contain the date, time and location of the closing, and the final number of Participating Shares to be sold by APL. APL shall deliver at the closing to Coyote the certificate or certificates representing the number of Participating Shares calculated pursuant to Paragraph 8(c) above, together with a power-of-attorney authorizing Coyote to sell such Participating Shares pursuant to the terms of the Participation Offer. At the closing of the transfer of the Designated Shares to the third party pursuant to the Participation Offer, Coyote shall remit to APL the total sales price of the Participating Shares of APL sold or otherwise disposed of pursuant thereto. (e) If at the termination of the Participation Period APL shall not have accepted the offer contained in the Participation Notice, APL will be deemed to have waived any and all of its rights under this Paragraph 8 with respect to the transfer of its Shares to such third party, and Coyote shall have 180 days in which to sell Designated Shares, including the Participating Shares, to the third party, at a price not less than that contained in the Participation Notice and on other terms and conditions not less favorable than those set forth in the Participation Notice. (f) Notwithstanding any other provision contained in this Paragraph 8, there shall not be any liability on the part of Coyote in the event that the transfer of Designated Shares, including the Participating Shares, pursuant to this Paragraph 8 is not consummated for any reason whatsoever. The decision whether to effect a transfer of Designated Shares, including the Participating Shares, pursuant to this Paragraph 8 shall be in the sole and absolute discretion of Coyote. 9. Bring Along Rights. In the event that Coyote shall transfer or ------------------ propose to transfer, directly or indirectly, Shares which, when added to all previous transfers of Shares by Coyote, would result in a transfer to any person other than the Company of greater than twenty-five percent (25%) of the number of Shares outstanding on the date of transfer (a "Significant Transfer"), then Coyote may require, by written notice to APL (the "Bring-Along Notice"), that APL transfer an equivalent portion (on the basis of the amount of Shares to be transferred by Coyote pursuant to the Significant Transfer and the total number of Coyote Shares owned by Coyote at such time) of APL Shares in the Significant Transfer on the same terms and conditions contained in the Bring-Along Notice. The Bring-Along Notice shall contain a true and correct copy of the terms of the Significant Transfer and shall identify the third party, the number of Coyote Shares with respect to which Coyote has a bona fide offer, the price per Coyote Share at which the sale is proposed to be made and all other material terms and conditions of the Significant Transfer, including the date, time and location of the closing. The Bring-Along Notice shall be delivered not less than five (5) business days prior to the closing of the purchase and sale contemplated by this Paragraph 9. In such event, APL shall deliver at the closing to Coyote the certificate or certificates representing the APL Shares together with a power- of-attorney authorizing Coyote to sell such equivalent portion of the APL Shares pursuant to the 6 terms of the Bring-Along Notice. APL shall be obligated to pay not more than its pro rata share (based upon the amount of consideration received for or with - --- ---- respect to the APL Shares) of reasonable fees and expenses incurred in connection with such Significant Transfer (as evidenced by reasonable supporting documentation) to the extent such costs are incurred for the benefit of the selling Shareholders generally, including, without limitation, fees and expenses of one law firm, one accounting firm and one financial advisor acting on behalf of the Company and/or the Shareholders generally, and are not otherwise paid by the Company or the acquiring party. Costs incurred by or on behalf of a Shareholder for such Shareholder's sole benefit will not be considered costs of the transaction hereunder. At the closing of the Significant Transfer, Coyote shall remit to APL the total sales price (net of APL's pro rata portion of --- ---- reasonable related expenses as specified above) of the APL Shares sold or otherwise disposed of pursuant thereto. APL hereby agrees to take all reasonable actions necessary to consummate the Significant Transfer, including, but not limited to, the execution of necessary or appropriate agreements, the taking of any necessary corporate action and the waiving of any dissenters, appraisal or similar rights. 10. Representations and Warranties. ------------------------------ (a) APL hereby represents and warrants to the Company and Coyote that, as of the time APL becomes a party to this Agreement, (i) APL is duly organized, validly existing and in good standing under the laws of Delaware, and has all requisite corporate power to carry on its business as it is now being conducted, (ii) the execution, delivery and performance of this Agreement by APL have been duly authorized by its board of directors, and (iii) this Agreement has been duly executed and delivered by APL and constitutes the legal, valid and binding obligation of APL, enforceable against APL in accordance with its terms. (b) The Company represents and warrants to APL and Coyote that (i) the Company is duly organized, validly existing and in good standing under the laws of Tennessee, and has all requisite corporate power to carry on its business as it is now being conducted, (ii) the execution, delivery and performance of this Agreement by the Company have been duly authorized by the Board of Directors, and (iii) this Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. (c) Coyote hereby represents and warrants to the Company and APL that (i) each of Coyote I and Coyote II is duly organized, validly existing and in good standing under the laws of Delaware, and has all requisite company power to carry on its business as it is now being conducted, (ii) each of Coyote I and Coyote II has the authority to enter into this Agreement and to fully perform its obligations hereunder, and (iii) this Agreement has been duly executed and delivered by each of Coyote I and Coyote II and constitutes the legal, valid and binding obligation of each of Coyote I and Coyote II, enforceable against each of Coyote I and Coyote II in accordance with its terms. 11. Incidental Registration. ----------------------- (a) If the Company at any time (other than pursuant to an initial public offering of the Company's securities) proposes to register any Common Shares under the Act for sale to the 7 public, (i) for its own account (except with respect to registration statements on Forms S-4, S-8 or such other form which is not available for registering Common Shares for sale to the public) or (ii) for the account of Coyote, each such time it will give prior written notice to APL of its intention so to do. Upon the written request of APL, received by the Company within twenty (20) days after the giving of any such notice by the Company, to register any of its Common Shares (which request shall state the intended method of disposition thereof), the Company will use commercially reasonable efforts to cause the Common Shares as to which registration shall have been so requested to be included in the securities to be covered by the registration statement proposed to be filed by the Company, all to the extent requisite to permit the sale by APL (in accordance with its written request) of such Common Shares so registered. Alternatively, the Company may in its sole discretion include such Common Shares in a separate registration statement to be filed concurrently with the registration statement for the securities to be filed by the Company for its own account or for the account of Coyote. In the event that any registration of Common Shares for the account of the Company pursuant to this Paragraph 11 shall be, in whole or in part, an underwritten public offering of Common Shares, the number of Common Shares owned by APL and Coyote to be included in such an underwriting may be reduced (pro rata among APL, Coyote and other persons with pari passu incidental registration rights, as may be applicable, based upon the number of Shares owned by APL, Coyote and such other persons) due to underwriter market limitations if, and to the extent, that the managing underwriter advises the Company that in its opinion such inclusion would adversely affect the marketing of the securities to be sold by the Company therein. In addition, if the managing underwriter so advises, for any reason, against the inclusion of all or any portion of Common Shares owned by APL in the public offering, then APL shall only have the right to register Common Shares therein as so advised by the managing underwriter. It is acknowledged by the parties hereto that the rights of APL to include Common Shares in a registration shall be subordinate to those of the Company and, except as expressly provided herein, on a parity with Coyote or other person selling Common Shares for its own account so that, except as expressly provided herein, cut backs shall be made on a pro rata basis based on the number of Common Shares held by each such person. Except as set forth above, there shall be no limit to the number of registrations that may be requested pursuant to this Paragraph 11. (b) In connection with each registration pursuant to Paragraph 11(a) covering an underwritten public offering pursuant to which APL sells Common Shares, APL agrees to (i) enter into a written agreement with the managing underwriter under the same terms and conditions as apply to the Company or the selling shareholders, as applicable, and (ii) furnish to the Company in writing such information with respect to APL and the proposed distribution by APL as reasonably shall be necessary and shall be requested by the Company in order to comply with federal and applicable state securities laws. (c) If, at any time after giving notice of its intention to register any Common Shares pursuant to this Paragraph 11 and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register such Common Shares, the Company shall give written notice to APL and, thereupon, shall be relieved of its obligation to register any APL Shares in connection with such registration. 8 (d) The APL Shares shall cease to be registrable pursuant to this Paragraph 11 on the date upon which they are effectively registered under the Act and disposed of in accordance with any registration statement covering it. 12. Expenses. All expenses incurred by the Company in complying with -------- Paragraph 11, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel and independent public accountants for the Company, fees and expenses (including counsel fees) incurred in connection with complying with state securities or "blue sky" laws, fees of the National Association of Securities Dealers, Inc., transfer taxes, fees of transfer agents and registrars, costs of insurance and reasonable fees and disbursements of one counsel for APL if it sells Common Shares, but excluding any Selling Expenses, are herein referred to as "Registration Expenses." "Selling Expenses" as used herein mean all underwriting discounts and selling commissions applicable to the sale of APL Shares. The Company will pay all Registration Expenses in connection with each registration statement under Paragraph 11. All Selling Expenses in connection with each registration statement under Paragraph 11 shall be borne by APL. 13. Holdback Agreements. Notwithstanding any other provision hereof, ------------------- except as otherwise may be agreed in writing by the parties hereto concurrently or subsequent to this Agreement, with respect to each and every public offering, each Shareholder agrees not to offer, sell or otherwise transfer any Shares (except for Shares sold (a) in such public offering or (b) to a Permitted Transferee) during the black-out period prior to the effective date of the applicable registration statement or other offering document as advised by counsel for the Company and during the period after such effective date not to exceed six (6) months. 14. Indemnification and Contribution. -------------------------------- (a) In the event of a registration of any APL Shares under the Act pursuant to Paragraph 11, the Company will indemnify and hold harmless, to the full extent permitted by law, APL, each underwriter of such Shares thereunder and each other person, if any, who controls APL or such underwriter within the meaning of the Act or the Securities Exchange Act of 1934, as amended (the "Exchange Act"), against any losses, claims, damages, liabilities and expenses, joint or several, to which APL, such underwriter or controlling person may become subject under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which APL Shares were registered under the Act pursuant to Paragraph 11, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will pay or reimburse APL, each such underwriter and each such controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company (i) will not be -------- ------- liable in any such case if and to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information pertaining to APL and furnished by APL, any such 9 underwriter or any such controlling person, as the case may be, in writing specifically for use in such registration statement, prospectus, amendment or supplement and (ii) will not be liable for amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company, such consent not to be unreasonably withheld or delayed. (b) In the event of a registration of any Common Shares under the Act pursuant to Paragraph 11, APL will indemnify and hold harmless the Company, each person, if any, who controls the Company within the meaning of the Act, each officer of the Company who signs the registration statement, each director of the Company, each underwriter and each person who controls any underwriter within the meaning of the Act, against all losses, claims, damages or liabilities, joint or several, to which the Company or such officer, director, underwriter or controlling person may become subject under the Act or otherwise, but only insofar as such losses, claims, damages or liabilities (or actions in respect thereof), arise out of or are based upon an untrue statement or alleged untrue statement or omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, made in reliance upon and in conformity with information pertaining to APL, as such, furnished in writing to the Company by APL specifically for use in such registration statement under which APL Shares were registered under the Act pursuant to Paragraph 11, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, and will pay or reimburse the Company and each such officer, director, underwriter and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that (i) the liability of APL hereunder -------- ------- shall be limited to the proportion of any such loss, claim, damage, liability or expense which is equal to the proportion that the public offering price of the Common Shares sold by APL under such registration statement bears to the total public offering price of all securities sold thereunder, but not in any event to exceed the net proceeds received by APL from the sale of Common Shares covered by such registration statements and (ii) APL shall not be liable for amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of APL, such consent not to be unreasonably withheld or delayed. (c) Promptly after receipt by an indemnified party hereunder of written notice of any claim or the commencement of any action or proceeding, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to such indemnified party other than under this Paragraph 14 and shall only relieve it from any liability which it may have to such indemnified party under this Paragraph 14 if and to the extent the indemnifying party is materially prejudiced by such omission. In case any such action shall be brought against any indemnified party and the indemnified party shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel reasonably satisfactory to such indemnified party, and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Paragraph 14 for any legal or other professional expenses subsequently incurred by such indemnified party in connection with the defense thereof other 10 than reasonable costs of investigation and of liaison with counsel so selected; provided, however, that if the defendants in any such action include both the - -------- ------- indemnified party and the indemnifying party, and the indemnified party shall have reasonably concluded that there may be reasonable defenses available to it which are different from or additional to those available to the indemnifying party or if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, the indemnified party shall have the right to select a separate counsel and to assume such legal defenses and otherwise to participate in the defense of such action, with the reasonable fees and expenses of such separate counsel and other expenses related to such participation to be reimbursed by the indemnifying party as incurred. No indemnifying party, in the defense of any such claim or litigation against an indemnified party, shall consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation, unless such indemnified party shall otherwise consent in writing. An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim shall not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim. (d) In order to provide for just and equitable contribution in any case in which either (i) APL exercises incidental registration rights under Paragraph 11 of this Agreement, or any controlling person of APL makes a claim for indemnification pursuant to this Paragraph 14 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and following the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case, notwithstanding the fact that this Paragraph 14 provides for indemnification in such case, or (ii) contribution under the Act may be required on the part of APL or any such controlling person in circumstances for which indemnification is provided under this Paragraph 14; then, and in each such case, the Company and APL shall contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect both the relative benefit received by APL and the relative fault of the Company and APL; provided, -------- however, that, in any such case, (A) APL shall not be required to contribute any - ------- amount in excess of the public offering price of all APL Shares offered by it pursuant to such registration statement; and (B) no person or entity guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation. For purposes of the preceding sentence, the relative benefit received by APL shall be deemed to be in the same proportion as the public offering price of APL Shares offered by the registration statement bears to the public offering price of all securities offered by such registration statement; and the relative fault of the Company and such Shareholder shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission of a material fact relates to information supplied by the Company or by APL and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. 15. Rule 144 Reporting. With a view to making available the benefits ------------------ of certain rules and regulations of the Securities and Exchange Commission (the "Commission") which may at any time permit the sale of the Common Shares to the public without registration, at all times after any registration statement covering a public offering of securities of the Company 11 under the Act shall have become effective, the Company agrees to use all reasonable efforts to: (a) make and keep public information available, as those terms are understood and defined in Rule 144 under the Act; (b) use all reasonable efforts to file with the Commission in a timely manner all reports and other documents required of the Company under the Act and the Exchange Act; and (c) furnish to each Shareholder forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of such Rule 144 and of the Act and the Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed by the Company as such Shareholder may reasonably request in availing itself of any rule or regulation of the Commission allowing such Shareholder to sell any Common Shares without registration. 16. Certain Agreements. ------------------ (a) The Company agrees that any transactions between itself and any Affiliate shall (i) be on terms not materially less favorable to the Company than those that would have been obtained in an arm's-length transaction with a non-Affiliate as determined in good faith by the Board of Directors in their reasonable business judgment or (ii) be approved by a majority of the Board of Directors who are not Affiliates of such person other than a director of officer of the Company who is not otherwise an Affiliate of such person. Notwithstanding the foregoing, the parties agree that all amounts payable to Apollo Management, L.P. ("Apollo") pursuant to the terms and provisions of that certain Management Agreement of even date herewith between the Company and Apollo (the "Management Agreement") (as it may be extended) shall be specifically excluded from the foregoing limitations on Affiliate transactions; provided, that the fees set forth in such Management Agreement may not be - -------- increased unless approved in accordance with the first sentence of this Paragraph 16(a). (b) APL will not sell any APL Shares except in compliance with this Agreement. 17. Confidentiality. --------------- (a) During the term of this Agreement and at all times thereafter, APL agrees that it will not divulge to anyone (other than the Company or any persons employed or designated by the Company) any confidential knowledge or information relating to the business of the Company or any of its subsidiaries or affiliates, including, without limitation, all types of trade secrets (unless readily ascertainable from public or published information or trade sources), product design and customer and supplier information. APL further agrees not to disclose, publish or make use of any such knowledge or information for personal purposes or for the benefit of any person, firm, corporation or other entity (other than the Company or any persons employed or designated by the Company) without the prior written consent of the Company. 18. APL Acknowledgement. APL acknowledges and agrees with the terms ------------------- of the Management Shareholders' Agreement and the Investors Shareholders' Agreement and the rights given to, and obligations imposed upon, the parties thereto. 19. General Restriction. Each of APL and Coyote understand and agree ------------------- that (a) the Common Shares retained or received pursuant to the Purchase Agreement have not been 12 registered under the Securities Act and are restricted securities; (b) it will not, directly or indirectly, sell, assign, transfer, grant a participation in, pledge or otherwise dispose of any Common Shares (or solicit any offers to buy or otherwise acquire, or take a pledge of any Common Shares) except in compliance with the Securities Act and the terms and conditions of this Agreement; and (c) any attempt to transfer any Common Shares not in compliance with this Agreement shall be null and void and the Company shall not, and shall cause any transfer agent not to, give any effect in the Company's records to such attempted transfer. 20. Legends. ------- (a) In addition to any other legend that may be required, each certificate for Common Shares that is issued to APL shall bear a legend in substantially the following form: "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD EXCEPT IN COMPLIANCE THEREWITH. THIS SECURITY IS ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE SHAREHOLDERS' AGREEMENT DATED AS OF MAY 28, 1999, COPIES OF WHICH MAY BE OBTAINED UPON REQUEST FROM PACER INTERNATIONAL, INC. OR ANY SUCCESSOR THERETO." (b) If any Common Shares shall become registered under the Securities Act, the Company shall, upon the written request of the holder thereof, issue to such holder a new certificate evidencing such shares without the first sentence of the legend required by Paragraph 20(a) endorsed thereon. If any Common Shares cease to be subject to any and all restrictions on transfer set forth in this Agreement, the Company shall, upon the written request of the holder thereof, issue to such holder a new certificate evidencing such Common Security without the second sentence of the legend required by Paragraph 20(a) endorsed thereon. 21. Further Assurances. The parties hereto agree to execute and ------------------ deliver all such further instruments as may be necessary from time to time to carry out the provisions of this Agreement. 22. Notices. All offers, acceptance, notices, certificates and other ------- communications provided for in this Agreement shall be in writing and (except as otherwise provided in this Agreement) shall be deemed to have been given when (a) sent by facsimile transmission, (b) sent by a nationally known overnight delivery service, (c) delivered by hand or (d) mailed by first-class registered or certified mail in a post-paid envelope, in each case addressed to the respective persons to be notified as follows: in the case of Coyote, c/o Apollo Management, L.P., 1301 Avenue of the Americas, 38th Floor, New York, NY 10019; Attention: Joshua J. Harris, with a copy to, Michael Weiner, Esq., Apollo Management, L.P., 1999 Avenue of the Stars, Suite 1900, Los Angeles, CA 90067, and with a copy to, Morton A. Pierce, Esq./Douglas L. Getter, Esq., Dewey Ballantine LLP, 1301 Avenue of the Americas, New York, New York 10019; in the case of APL, American President Lines, Ltd., 1111 Broadway, Oakland, CA 94607, Attention: Timothy J. Windle, Esq., with a copy to, Steven B. Stokdyk, 13 Esq., Sullivan & Cromwell, 1888 Century Park East, Los Angeles, CA 90067 and in the case of the Company, Pacer International, Inc., 3746 Mt. Diablo Blvd., Suite 110, Lafayette, CA 94549, or at such other address as the party to be notified shall from time to time have furnished to the other parties in writing. 23. Amendment; Termination. No provision of this Agreement may be ---------------------- waived except by an instrument in writing executed by the party against whom the waiver is to be effective. This Agreement may be amended only by an instrument executed by the parties hereto or by their successors and assigns. Except with respect to Paragraphs 14, 17, 18, 19, 20 and Paragraphs 22 through 25 this Agreement shall terminate automatically upon the earlier of (i) the tenth anniversary of the date hereof and (ii) at such time as the Company shall be a Public Company (as defined below) and Coyote shall have sold in the aggregate pursuant to one or more public offerings, fifty percent (50%) of the total number of Coyote Shares owned by them at the Closing. For the purposes of the foregoing provision, the term "Public Company" means a corporation with one or more classes of equity securities listed on a national securities exchange or publicly traded in the over the counter market. 24. General. ------- (a) This Agreement (i) shall be construed and enforced in accordance with the laws of the State of New York, (ii) shall bind and inure to the benefit of the parties hereto and their respective heirs, executors, administrators, personal representatives, successors and assigns and (iii) may be executed in two or more counterparts each of which shall be deemed an original but all of which together shall constitute one and the same instrument. (b) The parties hereto hereby consent and agree that they shall commence any action with respect to any claims or disputes between the parties hereto pertaining to this Agreement or to any matter arising out of or related to this Agreement in the United States District Court for the Southern District of New York, so long as the action falls within the subject matter jurisdiction of such court; in the event any such action shall be determined by the court to be outside its subject matter jurisdiction, then the parties agree to commence any such action in the Supreme Court of New York County, New York and to take such action as may be necessary to effect assignment of such action to the Commercial Part of that court. The parties hereto expressly submit and consent in advance to such jurisdiction in any action or suit commenced in any such court, and hereby waive any objection which it may have based upon lack of personal jurisdiction, improper venue or forum non conveniens and hereby consent to the granting for such legal or equitable relief as is deemed appropriate by such court. Each party hereto irrevocably consents to the service of process by registered or certified mail, postage prepaid, to it at its address given in accordance herewith. (c) The parties hereto acknowledge that irreparable damage would result if this Agreement is not specifically enforced and that, therefore, the rights and obligations of the parties under this Agreement may be enforced by a decree of specific performance issued by a court of competent jurisdiction, and appropriate injunctive relief may be applied for and granted in connection therewith without the necessity of posting any bond. Such remedies shall, however, be cumulative and not exclusive and shall be in addition to any other remedies which any party may have under this Agreement or otherwise. This Agreement may be executed 14 simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (d) The restrictions with respect to APL Shares set forth herein shall be in addition to and shall in no way limit any other restrictions on the APL Shares set forth in any other agreement. (e) The section and other headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. (f) To the extent that any provision of this Agreement shall be invalid or unenforceable, it shall be considered deleted herefrom and the remainder of such provision and of this Agreement shall be unaffected and shall continue in full force and effect. In furtherance and not in limitation of the foregoing, if any provision, term, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void, unenforceable or against its regulatory policy, then such provision, term, covenant or restriction shall be construed to cover only that duration, extent or activities which may be validly and enforceably covered and the remainder of the provisions, terms covenants and restrictions contained herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated. 25. Complete Agreement. This Agreement, the Management Shareholders' ------------------ Agreement, the Investors Shareholders' Agreement and the Exhibits attached hereto and which are hereby incorporated by reference herein, contains the entire agreement among the parties, superseding all prior agreements whether oral or written between parties with respect to the subject matter hereof. APL shall not enter into any Shareholder agreements or arrangements of any kind with any person with respect to any Shares on terms inconsistent with the provisions of this Agreement (whether or not such agreements or arrangements are with persons that are not parties to this Agreement), including agreements or arrangements with respect to the acquisition or disposition of Shares in a manner which is inconsistent with this Agreement. 15 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the day and the year first above written. PACER INTERNATIONAL, INC. By: /s/ Donald C. Orris ________________________________ Donald C. Orris President and Chief Executive Officer COYOTE ACQUISITION LLC By: /s/ Marc Becker ________________________________ Marc Becker Vice President COYOTE ACQUISITION II LLC By: /s/ Marc Becker ________________________________ Marc Becker Vice President APL LIMITED By: /s/ Timothy J. Windle ________________________________ Timothy J. Windle Assistant Secretary Exhibit A --------- Name # of Common Shares (On a Post-Split Basis) - ---- ----------------------------------------- APL Limited 750,000 Coyote Acquisition LLC 8,912,000 Coyote Acquisition II LLC 478,000 Exhibit B --------- JOINDER IN ---------- SHAREHOLDERS' AGREEMENT ----------------------- In consideration of the transfer to (him) (her) (it) of _____ shares of common stock, $.01 par value, of Pacer International, Inc. (the "Company") and the registration of such transfer on the books of the Company, ____________, a __________ ("Additional Shareholder"), and the Company agree that, as of the date written below, Additional Shareholder shall become a party to that certain Shareholders' Agreement, dated as of May 28, 1999, among the Company, Coyote Acquisition LLC, a Delaware limited liability company, Coyote Acquisition II LLC, a Delaware limited liability company, and APL Limited, a Delaware corporation (the "Shareholders' Agreement"), and shall be bound by all of the terms and provisions of the Shareholders' Agreement, as though (he) (she) (it) was an original party thereto and was included in the definition of "APL" as used therein; provided, that an Additional Shareholder shall not be entitled to the rights set forth in Paragraph 11 of the Shareholders Agreement. Executed as of the _____ day of ________________, ____. [ ] By:________________________________ Name: Title: EX-4.13 14 SHAREHOLDERS AGREEMENT DATED MAY 28, 1999 Exhibit 4.13 ================================================================================ SHAREHOLDERS' AGREEMENT among PACER INTERNATIONAL, INC., COYOTE ACQUISITION LLC, COYOTE ACQUISITION II LLC and Certain Individual Shareholders named herein. Dated as of May 28, 1999 ================================================================================ TABLE OF CONTENTS
Paragraph Page No. 1. Restrictions on Transfer; Permitted Transferees; Pledges........................................... 2 2. Notice by Shareholder of Proposed Transfers........................................................ 4 3. Offer to Sell Shares............................................................................... 4 4. Elections to Purchase Shares....................................................................... 5 5. Procedures Upon Elections for Less than All of Shares Offered...................................... 5 6. Closing of Purchase of Shares...................................................................... 6 7. Disposition by Management Shareholder of Shares not Purchased by the Company and/or the Offerees... 6 8. Participation Rights............................................................................... 7 9. Bring Along Rights................................................................................. 8 10. Representations and Warranties..................................................................... 9 11. Incidental Registration............................................................................ 10 12. Expenses........................................................................................... 11 13. Holdback Agreements................................................................................ 11 14. Indemnification and Contribution................................................................... 11 15. Rule 144 Reporting................................................................................. 14 16. Preemptive Rights.................................................................................. 14 17. Certain Agreements................................................................................. 16 18. Confidentiality; Noncompetition.................................................................... 17 19. Voting Proxy....................................................................................... 18 20. Financial Statements............................................................................... 19 21. General Restriction................................................................................ 19 22. Legends............................................................................................ 19 23. Further Assurances................................................................................. 20 24. Notices............................................................................................ 20 25. Amendment; Termination............................................................................. 20 26. General............................................................................................ 21 27. Corporate Agreement................................................................................ 22
THIS SHAREHOLDERS' AGREEMENT, dated as of May 28, 1999, is among COYOTE ACQUISITION LLC, a Delaware limited liability company (together with its transferees and assignees, "Coyote I"), COYOTE ACQUISITION II LLC, a Delaware limited liability company, (together with its transferees and assignees, "Coyote II" and Coyote I and Coyote II, jointly "Coyote"), DONALD C. ORRIS, an individual, GERRY ANGELI, an individual, ROBERT L. CROSS, an individual, JOHN W. HEIN, an individual, RICHARD HYLAND, an individual, GARY L. GOLDFEIN, an individual, ALLEN E. STEINER, an individual (the foregoing individuals, herein sometimes individually referred to as a "Management Shareholder" and, collectively, as the "Management "Shareholders"), all of the foregoing, shareholders (the "Shareholders") of PACER INTERNATIONAL, INC., a Tennessee corporation (the "Company"), and the Company. WHEREAS, Coyote and APL Limited, a Delaware Corporation ("APL") have entered into a Stock Purchase Agreement of even date herewith (as the same may be amended or supplemented, the "Purchase Agreement") whereby Coyote will purchase (the "Recapitalization") approximately ninety percent (90%) of the outstanding shares of common stock, no par value, of the Company (the "Common Shares"); WHEREAS, upon consummation of the Recapitalization (the "Closing"), Coyote will be the record and beneficial owner of the number of Common Shares (the "Coyote Shares") (to the extent the right to purchase such shares has not been assigned to a third party by Coyote) and APL will be the record and beneficial owner of the number of Common Shares (the "APL Shares") each as set forth in the Purchase Agreement; WHEREAS, APL, Coyote and the Company have entered into a Shareholders Agreement, dated as of the date hereof (the "APL Shareholders' Agreement"), to impose certain restrictions on the disposition and transfer of the APL Shares, to create certain purchase and sale rights and to create certain registration rights; WHEREAS, Coyote, the Company, BT Capital Investors, L.P. and Pacer International Equity Investors, LLC. have entered into a Shareholders Agreement, dated as of the date hereof (the "Investors Shareholders' Agreement"), to impose certain restrictions on the disposition and transfer of the APL Shares, to create certain purchase and sale rights and to create certain registration rights; WHEREAS, Mile High Acquisition Corp., a Delaware corporation ("Sub"), Pacer International, Inc., a Delaware corporation ("Pacer"), and the shareholders of Pacer have entered into an Agreement and Plan of Merger, dated as of February 22, 1999 (as the same may be amended or supplemented, the "Merger Agreement"), providing for the merger of Sub with and into Pacer (the "Merger"); WHEREAS, Sub has assigned (the "Assignment") its rights and obligations under the Merger Agreement to a newly formed subsidiary of the Company ("Newco"); WHEREAS, pursuant to the Alternative Consideration Letter, dated March 15, 1999 (the "Alternative Consideration Letter"), as a result of the Assignment, in lieu of receiving shares of common stock, par value $.01 per share, of Pacer and New Options (as defined in the Merger Agreement) upon the consummation of the Merger (the "Effective Time"), the Management Shareholders will be issued Series B Perpetual Participating Exchangeable Preferred Stock (the "Exchangeable Preferred Stock") which may be exchanged for Common Shares and options which are exercisable for Common Shares (the "Management Options"), each in amounts as set forth in the Alternative Consideration Letter (the Common Shares into which the Exchangeable Preferred Stock may be exchanged and the Management Options, collectively, the "Management Shares"). The terms "Management Shares" and "Coyote Shares" shall include any Common Shares and Management Options now owned or hereinafter acquired by any Management Shareholder or Coyote, respectively, any securities that may be issued by the Company to any Management Shareholder or Coyote, respectively, as a result of any stock dividend, stock split or other distribution, recapitalization, reclassification, reorganization or the like, and any warrants or options to acquire Common Shares or securities convertible into Common Shares now owned or hereafter acquired by any Management Shareholder or Coyote, respectively; and the term "Shares" shall include the Coyote Shares, the Management Shares and any and all other capital stock or equity securities (including derivative securities convertible thereinto or exchangeable or exercisable therefor) issued by the Company; WHEREAS, it is desired that the Management Shareholders have an opportunity to participate in the success of the Company, but it is recognized that the success of the Company might be diminished if the Management Shares were transferred to persons who might impair the continuation of harmonious relations among the shareholders of the Company; and WHEREAS, the Management Shareholders and Coyote desire to impose certain restrictions on the disposition and transfer of the Management Shares, to create certain purchase and sale rights, to create certain registration rights and to agree with respect to certain matters relating to the voting of the Management Shares. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein, the parties agree as follows: 1. Restrictions on Transfer; Permitted Transferees; Pledges. -------------------------------------------------------- (a) No Management Shareholder shall make, or suffer to be made, any transfer, sale, assignment, gift, pledge, mortgage, or other disposition or encumbrance (all of which are comprised within the word "transfer" as used hereinafter) of all or any portion of the Management Shares now owned or hereafter acquired by such Management Shareholder, except that, subject to the further provisions of Paragraph 1(c) below, each of the following transfers are expressly permitted: (i) by any Management Shareholder pursuant to a bona fide written purchase offer from another person (as used herein, the term "person" shall include a natural person, corporation, partnership, association, company, trust, joint venture, unincorporated organization or other entity of any nature whatsoever), after the Management Shareholder shall have first offered the Management Shares to Coyote and each other Management Shareholder in accordance with the procedures hereinafter set forth in Paragraphs 2 through 7 below; provided, that no such transfer shall be -------- permitted prior to the date which is thirty (30) months after the Effective Time ( it being understood 2 that such thirty (30) month prohibition does not apply to public sales of Management Shares, after the initial public offering, pursuant to Rule 144 (subject to the last proviso of this paragraph 1(a)(i)) or pursuant to the incidental registration rights specified in paragraph 11); and, provided, -------- further, that in no event may such transfer to a bona fide purchaser be ------- effected if the board of directors of the Company (the "Board of Directors") determines, that (A) the proposed transferee is a person who or which, directly or indirectly, (including as an employee, director, officer, consultant, partner, owner, adviser or other participant in an entity), engages in the business of the corporation, in any related business or in any other business competitive with the Company or any subsidiary thereof at the time of sale or (B) such transfer would be detrimental to the interests of the Company or any subsidiary thereof; and provided, further, that this paragraph (i) shall not apply to, and shall -------- ------- not be interpreted to permit, any sales by the Management Shareholders of Management Shares pursuant to Rule 144 under the Securities Act of 1933, as amended (the "Act"), including without limitation, clause (k) of Rule 144, unless (x) the sale is conducted through the managing underwriter for the Company's initial public offering of securities, (y) the underwriter has not advised the Company or such Management Shareholder that the sale of all or any portion of such Shares would have a material adverse effect on the market for the Shares and (z) either (1) Coyote has sold 33-1/3% of the Shares owned by them immediately following the Effective Time or (2) six (6) years have elapsed since the Effective Time; (ii) by any Management Shareholder to a Permitted Transferee (as hereinafter defined); provided, however, that any such Permitted Transferee -------- ------- may thereafter transfer such Management Shares pursuant to this Paragraph 1(a)(ii) only to any other Permitted Transferee of the Management Shareholder who originally owned such Management Shares or to such original Management Shareholder; and provided, further, that if the Permitted -------- ------- Transferee is an entity described in clause (iv) of the definition of "Permitted Transferee", then prior to any disposition of any equity interest in such entity to a person that is not the original Management Shareholder or a Permitted Transferee of such original Management Shareholder (in which event, such entity would cease to be a Permitted Transferee) such entity shall either (A) transfer all Management Shares then held by it to the original Management Shareholder or a Permitted Transferee thereof, or (B) offer such Management Shares to the Company, Coyote and the other Management Shareholders pursuant to the provisions of Paragraphs 2 through 7 below on the terms upon which such Management Shares were originally transferred to such entity; (iii) as expressly approved by Coyote (but subject to any terms or conditions provided by Coyote in granting any such approval); or (iv) as otherwise expressly provided herein, including pursuant to the participation rights specified in Paragraph 8 or the incidental registration rights specified in Paragraph 11. (b) For the purposes of the foregoing, a "Permitted Transferee" of any Management Shareholder shall mean: (i) the heirs, executor, administrator or personal representative of such 3 Management Shareholder, upon the death of any such Management Shareholder; (ii) the spouse, sibling, parent, child or grandchild of such Management Shareholder who is a natural person; (iii) a trust for the exclusive benefit of such Management Shareholder and any of the family members listed in clause (ii) above; (iv) any entity in which such Management Shareholder holds a 100% equity interest; and (v) Coyote or the Company; provided, however, that Gary I. Goldfein ("Goldfein") and his Permitted Transferees shall be deemed to be "Permitted Transferees" of Allen E. Steiner ("Steiner"). (c) Prior to any transfer of any Management Shares to a bona fide purchaser pursuant to Paragraph 1(a)(i) or to a Permitted Transferee pursuant to Paragraph 1(a)(ii), (i) the transferee of Management Shares shall agree to be bound by and benefit from, and that such Management Shares shall continue to be subject to, the terms and provisions of this Agreement as if he, she or it were a Management Shareholder hereunder and shall enter into a joinder to this Agreement (in the form attached hereto as Exhibit A) to such extent and (ii) Coyote shall receive such assurances as they may reasonably require to the effect that such transfer does not violate the Act or applicable state securities laws (including, without limitation, representations and warranties as to investment intention and an opinion of counsel). 2. Notice by Shareholder of Proposed Transfers. If at any time a ------------------------------------------- Management Shareholder proposes to transfer any Management Shares, such Management Shareholder shall, prior to making any transfer of Management Shares, give written notice (the "Notice") to the Company, Coyote and each other Management Shareholder, specifying (i) the Management Shares to be so transferred, (ii) the method of transfer, (iii) the identity of the prospective transferee and (iv) in the case of a proposed bona fide sale pursuant to Paragraph 1(a)(i) above, the terms of the written offer made by the prospective purchaser, and containing a true and correct copy of such bona fide offer. 3. Offer to Sell Shares. In the case of a proposed bona fide sale -------------------- pursuant to Paragraph 1(a)(i) above, the Notice provided in Paragraph 2 shall constitute an irrevocable offer by the Management Shareholder who delivers the Notice to sell such Management Shares to the Company, Coyote and the other Management Shareholders on the terms and at the price specified in this Paragraph 3 (such offer is hereinafter referred to as the "Offer to Sell," a Management Shareholder making an Offer to Sell is hereinafter referred to as the "Offeror-Shareholder", Coyote and the other Management Shareholders to whom the Offer to Sell is being made are hereinafter referred to as the "Offerees", and the Management Shares offered in the Offer to Sell are hereinafter referred to as the "Offered Shares"). The Offer to Sell shall be at a price and on other terms (including any deferral of payment in whole or in part) no less favorable to the Company and the Offerees than the price and other terms offered by the prospective purchaser specified in the Offeror-Shareholder's Notice, except that ------ if the proposed sale is to be 4 wholly or partly for consideration other than money (the term "money" being used in this Paragraph 3 to include deferred obligations to pay money), the Offer to Sell shall be at a price equal to the amount of the net monetary consideration plus the fair market value (as determined in good faith by the Board of Directors within ten (10) days after receipt of the Notice by the Company), at the date of the Offeror-Shareholder's Notice, of any consideration other than money offered by the prospective purchaser. 4. Elections to Purchase Shares. ---------------------------- (a) The Company shall have the first right and option, for a period of thirty (30) days after delivery of the Offer to Sell by the Offeror-Shareholder, to accept all or any portion of the Offered Shares at the purchase price and on the terms stated in the Offer to Sell by delivery to the Offeror-Shareholder, with a copy to each Offeree, of written notice of its irrevocable election to purchase (the "Company Election Notice"), specifying the number of Shares the Company elects to purchase. If the Company does not elect to purchase all of the Offered Shares, then each Offeree shall have the right and option, for a period of thirty (30) days after the earlier of the expiration of the 30-day period provided above and receipt of the Company Election Notice (the "Exercise Period"), within which to elect to purchase all or any portion of the Offered Shares which were not elected to be purchased by the Company. (b) If the Offerees elect to accept the Offer to Sell with respect to the Offered Shares which were not elected to be purchased by the Company, the Offerees shall provide the Offeror-Shareholder with written notice (the "Offeree Election Notice"), no later than the last day of the Exercise Period, specifying the maximum number of such Offered Shares that each of the Offerees elects to purchase. Each such election to purchase Offered Shares shall be irrevocable, regardless of whether the number of Offered Shares deliverable upon the exercise of such election shall be reduced in accordance with the provisions of Paragraph 4(c) below (in which case such election shall be deemed to constitute an election to purchase such lesser number of Offered Shares as shall be determined in accordance with such Paragraph 4(c)). Except as provided in Paragraph 5 below, all elections to purchase Offered Shares in accordance with Paragraph 4(a) and this Paragraph 4(b) shall be binding on the Offeror-Shareholder. (c) If the aggregate number of Offered Shares accepted by the Offerees exceeds the number of Offered Shares available to the Offerees, then the right to purchase such Offered Shares shall be allocated to the electing Offerees as follows: (i) first by allocating to each Offeree the lesser of (A) its pro rata --- ---- portion of such Offered Shares on the basis of the respective amounts of Shares owned by each electing Offeree on the date of the initial Offer to Sell, and (B) the maximum number of Offered Shares elected to be purchased by such Offeree, as indicated in the Offeree Election Notice, and (ii) thereafter, by repeatedly allocating any remaining Offered Shares among those Offerees that have not yet been allocated the maximum number of Offered Shares indicated in the Offeree Election Notice, pro rata on the basis of the respective amounts of Shares owned --- ---- by such Offerees on the date of the initial Offer to Sell, until all Offered Shares have been allocated. 5. Procedures Upon Elections for Less than All of Shares Offered. ------------------------------------------------------------- Notwithstanding the provisions of Paragraph 4, in the case of a proposed bona fide sale by the Offeror-Shareholder pursuant to Paragraph 1(a)(i), elections to purchase made by the Company 5 and/or the Offerees shall not be binding on the Offeror-Shareholder if the Company and the Offerees do not in the aggregate elect to purchase all of the Offered Shares. In such event, no sales pursuant to such elections need be made by the Offeror-Shareholder and the Offeror-Shareholder may then sell the Offered Shares to the proposed bona fide purchaser, subject to the provisions of Paragraph 7. Notwithstanding the foregoing, the Offeror-Shareholder may, by written notice of acceptance to the Company and the electing Offerees within ten (10) days after the earlier of his receipt of an Offeree Election Notice or expiration of the Exercise Period, waive the requirement that all Offered Shares be accepted by the Company and the Offerees and elect to sell to the Company and/or the electing Offerees that part of the Offered Shares for which elections have been made. 6. Closing of Purchase of Shares. If elections have been made by the ----------------------------- Company and/or the electing Offerees in the aggregate for all of the Offered Shares (or if the Company and/or the electing Offerees shall have received from the Offeror-Shareholder a notice of waiver and acceptance pursuant to Paragraph 5), the Company, the electing Offerees and the Offeror-Shareholder shall mutually agree on a place, time and date (not more than thirty (30) days nor less than twenty (20) days after the expiration of the Exercise Period) for a closing of such purchase and sale. At the closing, the Offeror-Shareholder shall (i) deliver against receipt of the purchase price therefor by cash or certified or bank cashier's check or wire transfer of funds, the certificate or certificates representing the Management Shares each of the Company and the electing Offerees has elected to purchase, properly endorsed for transfer, with all necessary transfer and documentary stamps affixed, and in a form such that upon presentation to the Company the Management Shares represented thereby may be registered in the names of the respective purchasers and (ii) be deemed to have represented and warranted to such purchaser that (a) the Management Shares to be sold are beneficially and of record owned by such Offeror-Shareholder free and clear of all liens, claims, privileges, options, security interests, rights of first refusal, agreements, limitations or voting rights, preemptive rights, charges or other encumbrances of any nature (except as expressly provided by this Agreement) (an "Encumbrance") and (b) the sale and delivery of the Management Shares by such Offeror-Shareholder as contemplated hereby shall vest in the purchaser on such date good, valid and marketable title to such Management Shares free and clear of all Encumbrances (clauses (a) and (b), the "Sale Representations"). 7. Disposition by Management Shareholder of Shares not Purchased by the -------------------------------------------------------------------- Company and/or the Offerees. Any Management Shares not purchased by the Company - --------------------------- and the Offerees pursuant to Paragraphs 4 through 6 may be disposed of by the Offeror-Shareholder to the prospective transferee named in his Notice under Paragraph 2, at a price and on terms not more favorable to the transferee than those specified in such Notice, but only within forty-five (45) days after the expiration of the Exercise Period; provided, that a transferee shall, prior to -------- the transfer, execute and deliver to the Company and each Shareholder a written joinder to this Agreement and such other assurances as provided in Paragraph 1(c) hereof. Notwithstanding the foregoing, no such transferee shall be entitled to be an "Offeree" for purposes of Paragraphs 2 through 6 or be entitled to the rights set forth in Paragraphs 11 and 15 under this Agreement, unless such transferee was a Management Shareholder prior to such transfer. 6 8. Participation Rights. -------------------- (a) No Shareholder or group of Shareholders (a "Transferring Holder") shall transfer, directly or indirectly, other than in a public offering under Paragraph 11 below, Shares which result in a 25% Transfer (as defined below), unless the terms and conditions of such sale shall include an offer to the other Shareholders (the "Other Shareholders") to include in the transfer, at the option of each Other Shareholder, a portion (as determined in accordance with Paragraph 8(c) below) of the Common Shares of each Other Shareholder at the same price and on the same terms and conditions applicable to the Shares being transferred by the Transferring Holder. For purposes of this Paragraph 8, the term "25% Transfer" shall mean (i) with respect to any Management Shareholder or group of Management Shareholders any transfer of Shares which, when added to all previous transfers of Shares by Management Shareholders, would result in Management Shareholders having transferred an amount of Shares which exceeds 25% of the Shares owned collectively by the Management Shareholders immediately after the Effective Time, and (ii) with respect to Coyote, any transfer of Shares which, when added to all previous transfers of Shares by Coyote, would result in Coyote having transferred an amount of Shares which exceeds 25% of the Shares owned by Coyote immediately after the Effective Time. (b) In the event that the Transferring Holder receives a bona fide offer or offers from a third party to purchase, or otherwise determine to transfer, Shares which purchase or transfer would trigger a 25% Transfer (the "Participation Offer"), the Transferring Holder shall then cause the Participation Offer to be reduced to writing and shall give each Other Shareholder written notice thereof (a "Participation Notice"). Each Participation Notice shall contain a true and correct copy of the Participation Offer and shall identify the number of Shares with respect to which the Transferring Holder has a bona fide offer or other agreement to sell (the "Designated Shares"), the total number of Shares which the Transferring Holder owns beneficially, the price per Share at which the sale is proposed to be made and any other material term or condition of the Participation Offer. The Other Shareholders shall have the right and option, within fifteen (15) days after the Participation Notice is given to the Other Shareholders (the "Participation Period") to accept the Participation Offer for the number of Common Shares as determined pursuant to Paragraph 8(c) below. Each Other Shareholder who desires to exercise such option shall provide the Transferring Holder with written notice, specifying the maximum amount of Common Shares he or it wishes to include in the Participation Offer (a "Participation Acceptance Notice"), which shall constitute an irrevocable acceptance of the Participation Offer by such Other Shareholder (each such Other Shareholder, a "Participating Shareholder"). (c) Unless the proposed transferee agrees to accept and purchase the additional number of Common Shares specified in all Participation Acceptance Notices, at the same price and on the same terms and conditions as set forth in the Participation Notice, each Participating Shareholder shall have the right to sell pursuant to the Participation Offer the number of Common Shares (the "Participating Shares") allocated as follows: (i) first, by allocating to each Participating Shareholder the lesser of (A) the maximum number of Common Shares specified in such Participating Shareholder's Participation Acceptance Notice and (B) a pro rata portion of the number of Designated Shares on the basis of --- ---- the respective amounts of Shares then owned by the Transferring Holder and each Participating Shareholder and (ii) thereafter, by repeatedly allocating any remaining Participating Shares among those Participating 7 Shareholders that have not yet been allocated the maximum number of Participating Shares indicated in the Participation Acceptance Notice, pro rata --- ---- on the basis of the respective amounts of Shares owned by such Participating Shareholder on the date of the initial Participation Notice, until all Participating Shares have been allocated. (d) The Transferring Holder shall notify the Participating Shareholders who have elected to sell their Common Shares at least five (5) business days prior to the date upon which the transfer of Shares pursuant to this Paragraph 8 shall be consummated, which notice shall contain the date, time and location of the closing, and the final number of Participating Shares to be sold by each such Participating Shareholder. The Participating Shareholders shall deliver at the closing to the Transferring Holder the certificate or certificates representing the number of Participating Shares calculated pursuant to Paragraph 8(c) above, together with a power-of-attorney authorizing the Transferring Holder to sell such Participating Shares pursuant to the terms of the Participation Offer. At the closing of the transfer of the Designated Shares to the third party pursuant to the Participation Offer, the Transferring Holder shall remit to each of the Participating Shareholders the total sales price of the Participating Shares of such Participating Shareholder sold or otherwise disposed of pursuant thereto. (e) If at the termination of the Participation Period any Other Shareholder shall not have accepted the offer contained in the Participation Notice, such Other Shareholder will be deemed to have waived any and all of his rights under this Paragraph 8 with respect to the transfer of his Common Shares to such third party. The Transferring Holder shall have 180 days in which to sell Designated Shares, including the Participating Shares, to the third party, at a price not less than that contained in the Participation Notice and on other terms and conditions not less favorable than those set forth in the Participation Notice. (f) Notwithstanding any other provision contained in this Paragraph 8, there shall not be any liability on the part of the Transferring Holder in the event that the transfer of Designated Shares, including the Participating Shares, pursuant to this Paragraph 8 is not consummated for any reason whatsoever. The decision whether to effect a transfer of Designated Shares, including the Participating Shares, pursuant to this Paragraph 8 shall be in the sole and absolute discretion of the Transferring Holder. 9. Bring Along Rights. In the event that Coyote shall transfer or ------------------ propose to transfer, directly or indirectly, Shares which, when added to all previous transfers of Shares by Coyote, would result in a transfer to any person other than Coyote, the Company or their respective affiliates of greater than twenty-five percent (25%) of the number of Shares outstanding on the date of transfer (a "Transfer of Control"), then Coyote may require, by written notice to each Management Shareholder (the "Bring-Along Notice") that each Management Shareholder transfer an equivalent portion (on the basis of the amount of Shares to be transferred by the Requisite Holders pursuant to the Transfer of Control and the total number of Coyote Shares owned by Coyote at such time) of his Management Shares in the Transfer of Control on the same terms and conditions contained in the Bring-Along Notice. The Bring-Along Notice shall contain a true and correct copy of the terms of the Transfer of Control and shall identify the third party, the number of Coyote Shares with respect to which Coyote have a bona fide offer, the price per Coyote Share at which the sale is proposed to be made and all other material terms and conditions of the Transfer of Control, including the date, time and location of the closing. 8 The Bring-Along Notice shall be delivered not less than five (5) business days prior to the closing of the purchase and sale contemplated by this Paragraph 9. In such event, each of the Management Shareholders shall deliver at the closing to Coyote the certificate or certificates representing his Management Shares together with a power-of-attorney authorizing Coyote to sell such Management Shareholder's equivalent portion of the Management Shares pursuant to the terms of the Bring-Along Notice. No Management Shareholder shall be obligated to pay more than his pro rata share (based upon the amount of consideration received --- ---- for or with respect to their Shares) of reasonable fees and expenses incurred in connection with such Transfer of Control (as evidenced by reasonable supporting documentation) to the extent such costs are incurred for the benefit of the selling Shareholders generally, including, without limitation, fees and expenses of one law firm, one accounting firm and one financial advisor acting on behalf of the Company and/or the Shareholders generally, and are not otherwise paid by the Company or the acquiring party. Costs incurred by or on behalf of a Shareholder for his or its sole benefit will not be considered costs of the transaction hereunder. At the closing of the Transfer of Control, Coyote shall remit to each of the Management Shareholders the total sales price (net of such Management Shareholder's pro rata portion of reasonable related expenses as --- ---- specified above) of the Management Shares of such Management Shareholder sold or otherwise disposed of pursuant thereto. The Management Shareholders hereby agree to take all reasonable actions necessary to consummate the Transfer of Control, including, but not limited to, the execution of necessary or appropriate agreements, the taking of any necessary corporate action and the waiving of any dissenters, appraisal or similar rights. 10. Representations and Warranties. ------------------------------ (a) Each Management Shareholder hereby, severally, and not jointly represents and warrants to the Company and Coyote that, as of the time such Management Shareholder becomes a party to this Agreement, (i) such Management Shareholder has the power, capacity and authority to enter into this Agreement and to perform fully such Management Shareholder's obligations hereunder and (ii) this Agreement has been duly executed and delivered by such Management Shareholder and constitutes a legal, valid and binding obligation of such Management Shareholder, enforceable against such Management Shareholder in accordance with its terms. (b) The Company represents and warrants to each Management Shareholder that (i) the Company is duly organized, validly existing and in good standing under the laws of Delaware, and has all requisite corporate power to carry on its business as it is now being conducted, (ii) the execution, delivery and performance of this Agreement by the Company have been duly authorized by the Board of Directors, and (iii) this Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms. (c) Coyote hereby represents and warrants to the Company and each Management Shareholder that (i) each of Coyote I and Coyote II is duly organized, validly existing and in good standing under the laws of Delaware, and has all requisite limited liability company power to carry on its business as it is now being conducted, (ii) each of Coyote I and Coyote II has the authority to enter into this Agreement and to fully perform its obligations hereunder, and (iii) this Agreement has been duly executed and delivered by each of Coyote I 9 and Coyote II and constitutes the legal, valid and binding obligation of each of Coyote I and Coyote II, enforceable against each of Coyote I and Coyote II in accordance with its terms. 11. Incidental Registration. ----------------------- (a) If the Company at any time (other than pursuant to an initial public offering of the Company's securities) proposes to register any Common Shares under the Act for sale to the public, (i) for its own account (except with respect to registration statements on Forms S-4, S-8 or such other form which is not available for registering Common Shares for sale to the public) or (ii) for the account of Coyote, each such time it will give prior written notice to all Management Shareholders of its intention so to do. Upon the written request of any such Management Shareholder, received by the Company within twenty (20) days after the giving of any such notice by the Company, to register any of his Common Shares (which request shall state the intended method of disposition thereof), the Company will use all commercially reasonable efforts to cause the Common Shares as to which registration shall have been so requested to be included in the securities to be covered by the registration statement proposed to be filed by the Company, all to the extent requisite to permit the sale by the Management Shareholder (in accordance with its written request) of such Common Shares so registered. Alternatively, the Company may in its sole discretion include such Common Shares in a separate registration statement to be filed concurrently with the registration statement for the securities to be filed by the Company for its own account or for the account of Coyote. In the event that any registration of Common Shares for the account of the Company pursuant to this Paragraph 11 shall be, in whole or in part, an underwritten public offering of Common Shares, the number of Common Shares owned by Management Shareholders and Coyote to be included in such an underwriting may be reduced (pro rata among APL, the requesting Management Shareholders, Coyote and other persons with pari passu incidential registration rights, as may be applicable, based upon the number of Shares owned by APL, such Management Shareholders, Coyote and such other persons) due to underwriter market limitations if, and to the extent, that the managing underwriter advises the Company that in its opinion such inclusion would adversely affect the marketing of the securities to be sold by the Company therein. In addition, if the managing underwriter so advises, for any reason, against the inclusion of all or any portion of Common Shares owned by Management Shareholders in the public offering, then the Management Shareholders shall only have the right to register Common Shares therein as so advised by the managing underwriter. It is acknowledged by the parties hereto that the rights of any selling Management Shareholder to include Common Shares in a registration shall be subordinate to those of the Company and, except as expressly provided herein, on a parity with Coyote or other person selling Common Shares for its own account so that, except as expressly provided herein, cut backs shall be made on a pro rata basis based on the number of Common Shares held by each such person. Except as set forth above, there shall be no limit to the number of registrations that may be requested pursuant to this Paragraph 11. (b) In connection with each registration pursuant to Paragraph 11(a) covering an underwritten public offering, each Management Shareholder selling Common Shares pursuant thereto agrees to (i) enter into a written agreement with the managing underwriter under the same terms and conditions as apply to the Company or the selling shareholders, as applicable, and (ii) furnish to the Company in writing such information with respect to themselves and the proposed 10 distribution by them as reasonably shall be necessary and shall be requested by the Company in order to comply with federal and applicable state securities laws. (c) If, at any time after giving notice of its intention to register any stock pursuant to this Paragraph 11 and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register such stock, the Company shall give written notice to all Management Shareholders and, thereupon, shall be relieved of its obligation to register any Management Shares in connection with such registration. (d) The Management Shares shall cease to be registrable pursuant to this Paragraph 11 on the date upon which they are effectively registered under the Act and disposed of in accordance with any registration statement covering it. 12. Expenses. All expenses incurred by the Company in complying with -------- Paragraph 11, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel and independent public accountants for the Company, fees and expenses (including counsel fees) incurred in connection with complying with state securities or "blue sky" laws, fees of the National Association of Securities Dealers, Inc., transfer taxes, fees of transfer agents and registrars, costs of insurance and reasonable fees and disbursements of one counsel for the sellers of Management Shares, but excluding any Selling Expenses, are herein referred to as "Registration Expenses." "Selling Expenses" as used herein mean all underwriting discounts and selling commissions applicable to the sale of Management Shares. The Company will pay all Registration Expenses in connection with each registration statement under Paragraph 11. All Selling Expenses in connection with each registration statement under Paragraph 11 shall be borne by the participating sellers of Management Shares in proportion to the number of shares sold by each, or by such participating sellers of Management Shares other than the Company (except to the extent the Company shall be a seller of Management Shares) as they may agree. 13. Holdback Agreements. Notwithstanding any other provision hereof, ------------------- except as otherwise may be agreed in writing by the parties hereto concurrently or subsequent to this Agreement, with respect to each and every public offering, each Shareholder agrees not to offer, sell or otherwise transfer any Shares (except for Shares sold (a) in such public offering or (b) to a Permitted Transferee) during the black-out period prior to the effective date of the applicable registration statement or other offering document as advised by counsel for the Company and during the period after such effective date not to exceed six (6) months. 14. Indemnification and Contribution. -------------------------------- (a) In the event of a registration of any Management Shareholder's Common Shares under the Act pursuant to Paragraph 11, the Company will indemnify and hold harmless, to the full extent permitted by law, each Management Shareholder selling Common Shares thereunder, each underwriter of such Common Shares thereunder and each other person, if any, who controls such selling Management Shareholder or underwriter within the meaning of the Act 11 or the Securities Exchange Act of 1934, as amended (the "Exchange Act"), against any losses, claims, damages, liabilities and expenses, joint or several, to which such selling Management Shareholder, underwriter or controlling person may become subject under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such Management Shareholder's Common Shares were registered under the Act pursuant to Paragraph 11, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will pay or reimburse each such selling Management Shareholder, each such underwriter and each such controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company (i) will not be -------- ------- liable in any such case if and to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information pertaining to such selling Management Shareholder and furnished by any such selling Management Shareholder, any such underwriter or any such controlling person, as the case may be, in writing specifically for use in such registration statement, prospectus, amendment or supplement and (ii) will not be liable for amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company, such consent not to be unreasonably withheld or delayed. (b) In the event of a registration of any Common Shares under the Act pursuant to Paragraph 11, each Management Shareholder selling Common Shares thereunder, severally and not jointly, will indemnify and hold harmless the Company, each person, if any, who controls the Company within the meaning of the Act, each officer of the Company who signs the registration statement, each director of the Company, each underwriter and each person who controls any underwriter within the meaning of the Act, against all losses, claims, damages or liabilities, joint or several, to which the Company or such officer, director, underwriter or controlling person may become subject under the Act or otherwise, but only insofar as such losses, claims, damages or liabilities (or actions in respect thereof), arise out of or are based upon an untrue statement or alleged untrue statement or omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, made in reliance upon and in conformity with information pertaining to such selling Management Shareholder, as such, furnished in writing to the Company by such selling Management Shareholder specifically for use in such registration statement under which such Management Shareholder's Common Shares were registered under the Act pursuant to Paragraph 11, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, and will pay or reimburse the Company and each such officer, director, underwriter and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that (i) the liability of -------- ------- each selling Management Shareholder hereunder shall be limited to the proportion of any such loss, claim, damage, liability or expense which is equal to the proportion that the public offering price of the Common Shares sold by such selling Management Shareholder under such registration statement bears to the total public offering price of all securities sold thereunder, but not in any event to exceed the 12 net proceeds received by such selling Management Shareholder from the sale of Common Shares covered by such registration statements and (ii) no selling Management Shareholder shall be liable for amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of such selling Management Shareholder, such consent not to be unreasonably withheld or delayed. (c) Promptly after receipt by an indemnified party hereunder of written notice of any claim or the commencement of any action or proceeding, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to such indemnified party other than under this Paragraph 14 and shall only relieve it from any liability which it may have to such indemnified party under this Paragraph 14 if and to the extent the indemnifying party is materially prejudiced by such omission. In case any such action shall be brought against any indemnified party and the indemnified party shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel reasonably satisfactory to such indemnified party, and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Paragraph 14 for any legal or other professional expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected; provided, however, that if the defendants in any such action -------- ------- include both the indemnified party and the indemnifying party, and the indemnified party shall have reasonably concluded that there may be reasonable defenses available to it which are different from or additional to those available to the indemnifying party or if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, the indemnified party shall have the right to select a separate counsel and to assume such legal defenses and otherwise to participate in the defense of such action, with the reasonable fees and expenses of such separate counsel and other expenses related to such participation to be reimbursed by the indemnifying party as incurred. No indemnifying party, in the defense of any such claim or litigation against an indemnified party, shall consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation, unless such indemnified party shall otherwise consent in writing. An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim shall not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim. (d) In order to provide for just and equitable contribution in any case in which either (i) any Management Shareholder exercising registration rights under Paragraph 10 of this Agreement, or any controlling person of any such Management Shareholder, makes a claim for indemnification pursuant to this Paragraph 14 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and following the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case, notwithstanding the fact that this Paragraph 14 provides for indemnification in such case, or (ii) contribution under the Act may be required on the part of any such Management Shareholder or any such controlling person in circumstances for which 13 indemnification is provided this Paragraph 14; then, and in each such case, the Company and such Management Shareholder shall contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect both the relative benefit received by such Management Shareholder and the relative fault of the Company and such Management Shareholder; provided, however, that, -------- ------- in any such case, (A) no such Management Shareholder will be required to contribute any amount in excess of the public offering price of all such Management Shareholder's Common Shares offered by it pursuant to such registration statement; and (B) no person or entity guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation. For purposes of the preceding sentence, the relative benefit received by such Management Shareholder shall be deemed to be in the same proportion as the public offering price of his Common Shares offered by the registration statement bears to the public offering price of all securities offered by such registration statement; and the relative fault of the Company and such Shareholder shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission of a material fact relates to information supplied by the Company or by such Management Shareholder and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. 15. Rule 144 Reporting. With a view to making available the benefits of ------------------ certain rules and regulations of the Securities and Exchange Commission (the "Commission") which may at any time permit the sale of the Common Shares to the public without registration, at all times after any registration statement covering a public offering of securities of the Company under the Act shall have become effective, the Company agrees to use all reasonable efforts to: (a) make and keep public information available, as those terms are understood and defined in Rule 144 under the Act; (b) use all reasonable efforts to file with the Commission in a timely manner all reports and other documents required of the Company under the Act and the Exchange Act; and (c) furnish to each Management Shareholder forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of such Rule 144 and of the Act and the Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed by the Company as such Shareholder may reasonably request in availing itself of any rule or regulation of the Commission allowing such Management Shareholder to sell any Common Shares without registration. 16. Preemptive Rights. ----------------- (a) In the event that the Company proposes to issue (a "Proposed Issuance") any Common Shares or any securities containing options or rights to acquire any Common Shares or any securities convertible into or exchangeable for Common Shares ("New Securities") prior to an initial public offering of the Company's securities and other than pursuant to the exceptions specified below, the Company shall deliver a notice, with respect to such Proposed Issuance (the "Preemptive Notice"), to each Management Shareholder and Coyote setting forth the identity of the proposed purchaser (the "Proposed Purchaser"), the period of time within which the Preemptive Right must be exercised (the "Acceptance Period") and the price, terms and conditions of the Proposed Issuance. Subject to subsection (c) below, each Management Shareholder and Coyote shall have the right (the "Preemptive Right"), exercisable as hereinafter 14 provided, to participate in such issuance of New Securities ("Offered Securities") by purchasing up to an amount of such New Securities proposed to be issued to the Proposed Purchaser equal to (i) the lesser of (A) the maximum number of New Securities specified in such Shareholder's Purchase Notice (as defined below) and (B) the aggregate amount of such New Securities multiplied by a fraction, the numerator of which shall be the aggregate number of Common Shares owned by such Management Shareholder or Coyote on the date of such notice and the denominator of which shall be the total number of Common Shares outstanding on such date (the "Proportionate Share") and (ii) thereafter, by repeatedly allocating any remaining Offered Securities among those Shareholders that have not yet been allocated the maximum number of Offered Securities indicated in the Purchase Notice, pro rata on the basis of the respective --- ---- amounts of Shares owned by such Shareholder on the date of the initial Purchase Notice, until all Offered Securities have been allocated, such purchase to be at the same price and on the same terms and conditions as the Proposed Issuance. Notwithstanding the foregoing, a Management Shareholder shall only be entitled to exercise the Preemptive Right if at the time of exercise of the Preemptive Right such Management Shareholder is an employee of the Company pursuant to a binding written employment agreement unless such Management Shareholder was terminated by the Company from such position without Cause (as defined in such employment agreement). (b) Anything to the contrary notwithstanding, the Preemptive Rights provided for herein shall not be applicable to: (i) options granted to and New Securities issued upon exercise of options granted to, officers, employees or directors of, or consultants to, the Company and/or any of its subsidiaries; (ii) warrants issued to lenders providing debt financing to the Company and/or any of its subsidiaries and New Securities issued upon the exercise, conversion or exchange of such warrants in accordance with their stated terms; (iii) any New Securities issued by the Company in connection with an acquisition by the Company and/or any of its subsidiaries; (iv) any New Securities issued by the Company in an underwritten public offering; (v) New Securities issued upon the exercise or conversion of any Shares of the Company that are convertible, exchangeable or exercisable for Shares and all stock appreciation rights, phantom stock rights and other rights to acquire, or to receive or be paid an amount based on the market price (less any exercise, conversion or purchase price) of, the Shares, issued in compliance with (or not otherwise in violation of) this Section 16; (vi) New Securities issued in a stock recapitalization pro rata to all holders of Shares; (vii) New Securities issued upon conversion of other Shares of the Company pursuant to the Certificate of Incorporation of the Company as in effect on the date hereof, as the same may be amended, modified, supplemented or restated; and 15 (viii) New Securities issued to Persons (who are not Affiliates (as defined below) of the Company) entering into "corporate partnering," "strategic investment" or other similar types of transactions or relationships with the Company (the characterization of such transactions or relationships to be in the sole discretion of the Board of Directors), in which the granting of equity or equity rights constitutes an aspect of such transaction or relationship. (c) The Preemptive Rights shall be exercisable by delivery of notice (the "Purchaser Notice") to the Company given within the Acceptance Period set forth in the Preemptive Notice. If a Shareholder shall fail to respond to the Company within the Acceptance Period, such failure shall be regarded as a rejection of such Shareholder's right to exercise his Preemptive Right. The closing of any purchase by the Shareholders under this Paragraph 16 shall be held at such time and place upon which the parties to the transaction may agree. At such closing, the Shareholders participating in the purchase shall deliver by certified bank check or wire transfer, payment in full for such New Securities and all parties to the transaction shall execute such additional documents as are otherwise deemed necessary or appropriate by the Company. At such closing, the Company may issue and sell to the Proposed Purchaser such portion of the Offered Securities as have not been purchased by the Shareholders pursuant to the exercise of their Preemptive Rights only at the same price and on the same terms and conditions as the Offered Securities sold to Shareholders. (d) In the event of a Proposed Issuance of New Securities, which Proposed Issuance is subject to the Preemptive Rights under this Paragraph 16 and which is offered only in combination with the purchase of debt or debt securities, then the Preemptive Rights shall apply to the combination and a Shareholder exercising his Preemptive Right shall be entitled and required to purchase his pro rata share of both the debt and equity components of such --- ---- combination on the basis set forth in Paragraph 16(a). (e) For purposes of this Agreement the following terms shall be defined as follows: "Affiliate" means, as to any person, any other person that directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with, such person. "Person" shall be construed as broadly as possible and shall include an individual or natural person, a partnership (including a limited liability partnership), a corporation, an association, a joint stock company, a limited liability company, a trust, a joint venture, an unincorporated organization and a governmental authority. (f) Preemptive Rights pursuant to this Paragraph 16 shall terminate upon an initial public offering of the Company's securities. 17. Certain Agreements. ------------------ (a) Each party agrees that Donald C. Orris will be appointed the chief executive officer of the Company shall hold such office for as long as he is employed by the Company. 16 (b) The Company agrees that, unless on an arms-length basis, no affiliated transaction between the Company and Apollo Management, L.P. ("Apollo") or any affiliate of Apollo which is material to the Company or which, combined with all other affiliated transactions between the Company and Apollo or any affiliate of Apollo would be material to the Company, will be undertaken without the consent of the chief executive officer of the Company. Notwithstanding the foregoing, the parties agree that following shall be specifically excluded from the foregoing limitation on Affiliate transactions: (i) all amounts payable to Apollo pursuant to the terms and provisions of that certain Management Agreement of even date herewith between the Company and Apollo (the "Management Agreement") (as it may be extended); provided, that (x) -------- the fees set forth in such Management Agreement may not be increased unless approved in accordance with the first sentence of this Paragraph 15(b) and (y) the $500,000 management fee shall not be deducted for purposes of calculating net income of the Company for purposes of computing awards under any bonus or stock option plans of the Company, (ii) customary board fees payable to members of the Board of Directors designated by Coyote; (iii) any expense reimbursements; (iv) the Registration Rights Agreement between the Company and Coyote, dated as of even date herewith; (v) indemnification rights in favor of Coyote or its Affiliates; and (vi) securities issued to Coyote as to which preemptive rights pursuant to Section 16 hereof are available. (c) The parties agree that with respect to the right of each of the Management Shareholders to be an "Offeree" for purposes of Paragraphs 2 through 6, as well as the rights set forth in Paragraphs 11 and 16, any notice required to be provided pursuant to such Paragraphs by any party hereto to any Management Shareholder who is no longer an employee of Pacer, will be sufficient as to any such Management Shareholder if such notice is delivered to Pacer International, Inc., 3746 Mt. Diablo Blvd., Suite 110, Lafayette, CA 94549, Attention: Donald C. Orris. (d) Each Management Shareholder acknowledges the APL Shareholders' Agreement and the Investors Shareholders' Agreement and agrees with the terms thereof, the rights given to, and obligations imposed upon, the parties thereto. (e) The Corporation hereby covenants and agrees with Gerry Angeli ("Angeli") and Gary I. Goldfein ("Goldfein") that, until the consummation of the Company's initial public offering of Common Shares for as long as such persons continue to be Shareholders of the Company, Angeli and Goldfein (each, an "Observer") shall have the right to be present at all meetings of the Board of Directors and all committees thereof. The Corporation will give each Observer reasonable prior notice (it being agreed that the same prior notice given to the Board of Directors shall be deemed to be reasonable) in any manner permitted in the Company's bylaws for notices to directors of the time and place of any proposed meeting of the Board of Directors, such notice in all cases to include true and complete copies of all documents furnished to any director in connection with such meeting or, if a meeting is held by telephone conference, to participate therein for the purpose of listening thereto. 18. Confidentiality; Noncompetition. ------------------------------- (a) During the term of this Agreement and at all times thereafter, each Management Shareholder agrees that, except to the extent required in the course of his 17 employment, he will not divulge to anyone (other than the Company, its subsidiary or any persons employed or designated by the Company or its subsidiary) any confidential knowledge or information relating to the business of the Company or any of its subsidiaries or affiliates, including, without limitation, all types of trade secrets (unless readily ascertainable from public or published information or trade sources), product design and customer and supplier information. Each Management Shareholder further agrees not to disclose, publish or make use of any such knowledge or information for personal purposes or for the benefit of any person, firm, corporation or other entity (other than the Company, its subsidiary or any persons employed or designated by the Company or its subsidiary) without the prior written consent of the Company or its subsidiary. (b) No Management Shareholder, nor any Affiliate thereof, will for the period set forth opposite such Management Shareholders name on Annex I hereto ------- following the Effective Time (the "Noncompetition Period"), (i) in any --------------------- geographic area where the Company or its subsidiary conducts business during the Noncompetition Period, engage or participate in directly or indirectly (whether as an officer, director, employee, partner, consultant, holder of an equity or debt investment, lender or in any other manner or capacity, including, without limitation, by the rendering of services or advice to any person), or lend his name (or any part or variant thereof) to, any Competing Business (as defined below); (ii) deal, directly or indirectly, in a competitive manner with any customers doing business with the Company or its subsidiary during the Noncompetition Period; (iii) solicit or employ any officer, director or agent of the Company or its subsidiary to become an officer, director, or agent of any Management Shareholder, their respective Affiliates or anyone else; or (iv) engage in or participate in, directly or indirectly, any business conducted under any name that shall be the same as or similar to the name of the Company or its subsidiary or any trade name used by the Company or its subsidiary. Ownership by a Management Shareholder for investment of less than 2% of the outstanding shares of capital stock or class of debt securities of any corporation with one or more classes of its capital stock listed on a national securities exchange or actively traded in the over-the-counter market shall not constitute a breach of the foregoing covenant. The term "Competing Business" shall mean any transportation or other business that the Company or its subsidiary or any of their respective Affiliates have engaged in at any time during the period of employment of the applicable Management Shareholder in any city or county in any state of the United States, Canada or Mexico including, without limitation, any business engaged in (i) intermodal marketing, (ii) flatbed specialized hauling services, (iii) less-then-truckload common carrier services, (iv) drayage, consolidation, deconsolidation or distribution services, (v) contract warehousing, freight handling or logistic services, (vi) comprehensive transportation management programs or services to third party customers, (vii) freight consolidation and deconsolidation, (viii) traffic management, and (ix) railroad signal project management. 19. Voting Proxy. Each Management Shareholder (other than Goldfein and ------------ Steiner, (each an "Interstate Holder")) hereby grants to the other Management Shareholders (other than the Interstate Holders), acting jointly, effective only upon, but at all times after (except as provided herein), any transfer of Shares owned by such Management Shareholder upon on in connection with the death or marital divorce, annulment or separation of such Management Shareholder (each such event a "Proxy Event"), an irrevocable proxy to vote such Shares at any and all meetings of the stockholders of the Company and to execute and deliver 18 any and all written consents in lieu thereof and otherwise exercise any and all consensual rights with respect to such Shares to the same extent and with the same effect as such Management Shareholder could do under this Agreement, under any applicable law or otherwise. Each Interstate Holder hereby grants to the other (or in the case such interstate Holder is the only Interstate Holder hereunder, to the other Management Shareholders), effective only upon but at all times after (except as provided herein), any transfer of Shares owned by such Interstate Holder upon or in connection with a Proxy Event of such Interstate Holder, an irrevocable proxy to vote such Shares at any and all meetings of the stockholders of the Company and to execute and deliver any and all written consents in lieu thereof and otherwise exercise any and all consensual rights with respect to such Shares to the same extent and with the same effect as such Interstate Holder could do under this Agreement, under any applicable law or otherwise. Each Management Shareholder (including the Interstate Holders) acknowledges and agrees that the proxy granted by him under this Paragraph 19 is coupled with an interest and may not be revoked. All Shares subject to a proxy granted hereunder that becomes effective pursuant to the terms hereof and that is to be voted by a proxy holder or holders pursuant to this Paragraph 19 shall be voted by such proxy holder or holders in the manner provided in the bylaws of the Company as in effect at the time in question. 20. Financial Statements. The Company will provide each Management -------------------- Shareholder with copies of its quarterly (unaudited) and annual audited financial statements promptly upon completion of such financial statements during any period in which a Management Shareholder remains a holder of Shares, but is not an officer or director of or consultant to the Company. 21. General Restriction. Each Management Shareholder and Coyote ------------------- understands and agrees that (a) the Common Shares and Management Options received pursuant to the Alternative Consideration Letter have not been registered under the Securities Act and are restricted securities; (b) he or it will not, directly or indirectly, sell, assign, transfer, grant a participation in, pledge or otherwise dispose of any Common Shares or Management Options (or solicit any offers to buy or otherwise acquire, or take a pledge of any Common Shares or New Options) except in compliance with the Securities Act and the terms and conditions of this Agreement; and (c) any attempt to transfer any Common Shares or Management Options not in compliance with this Agreement shall be null and void and the Company shall not, and shall cause any transfer agent not to, give any effect in the Company's records to such attempted transfer. 22. Legends. ------- (a) In addition to any other legend that may be required, each certificate for Common Shares including Common Shares issued upon exercises of New Options that is issued to any Management Shareholder shall bear a legend in substantially the following form: "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD EXCEPT IN COMPLIANCE THEREWITH. THIS SECURITY IS ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER 19 AS SET FORTH IN THE SHAREHOLDER'S AGREEMENT DATED AS OF May 28, 1999, COPIES OF WHICH MAY BE OBTAINED UPON REQUEST FROM PACER INTERNATIONAL, INC. OR ANY SUCCESSOR THERETO." (b) If any Common Shares shall become registered under the Securities Act, the Company shall, upon the written request of the holder thereof, issue to such holder a new certificate evidencing such shares without the first sentence of the legend required by Paragraph 22(a) endorsed thereon. If any Common Shares cease to be subject to any and all restrictions on transfer set forth in this Agreement, the Company shall, upon the written request of the holder thereof, issue to such holder a new certificate evidencing such Common Security without the second sentence of the legend required by Paragraph 22(a) endorsed thereon. 23. Further Assurances. The parties hereto agree to execute and deliver ------------------ all such further instruments as may be necessary from time to time to carry out the provisions of this Agreement. 24. Notices. All offers, acceptance, notices, certificates and other ------- communications provided for in this Agreement shall be in writing and (except as otherwise provided in this Agreement) shall be deemed to have been given when (a) sent by facsimile transmission, (b) sent by a nationally known overnight delivery service, (c) delivered by hand or (d) mailed by first-class registered or certified mail in a post-paid envelope, in each case addressed to the respective persons to be notified as follows: in the case of Coyote, c/o Apollo Management, L.P., 1301 Avenue of the Americas, 38th Floor, New York, NY 10019; Attention: Joshua J. Harris, with a copy to, Michael Weiner, Esq., Apollo Management, L.P., 1999 Avenue of the Stars, Suite 1900, Los Angeles, CA 90067, and with a copy to, Morton A. Pierce, Esq./Douglas L. Getter, Esq., Dewey Ballantine LLP, 1301 Avenue of the Americas, New York, New York 10019; in the case of the Management Shareholders, at their respective addresses appearing on the signature pages of this Agreement or at such other address as the party to be notified shall from time to time have furnished to the other parties in writing. 25. Amendment; Termination. No provision of this Agreement may be ---------------------- waived except by an instrument in writing executed by the party against whom the waiver is to be effective. This Agreement may be amended only by an instrument executed by the parties hereto holding a majority of all of the Common Shares held by the parties hereto on a fully diluted basis or by their successors and assigns; provided, however, that in the event any amendment materially and -------- ------- adversely affects the rights or obligations of any party to this Agreement without similarly affecting the rights or obligations of any other party hereto, this Agreement may not be amended without such party's approval. Except with respect to Paragraphs 14, 18, 21, 22 and Paragraphs 24 through 27 this Agreement shall terminate automatically upon the earlier of (i) the tenth anniversary of the date hereof and (ii) at such time as the Company shall be a Public Company (as defined below) and Coyote shall have sold in the aggregate pursuant to one or more public offerings, fifty percent (50%) of the total number of Coyote Shares owned by them at the Effective Time. For the purposes of the foregoing provision, the term "Public Company" means a corporation with one or more classes of equity securities listed on a national securities exchange or publicly traded in the over-the-counter market. 20 26. General. ------- (a) This Agreement (i) shall be construed and enforced in accordance with the laws of the State of New York, (ii) except as set forth in Paragraph 26(c) below, constitutes the entire agreement, and supersedes any and all prior agreements and understandings between the parties in respect to the subject matter hereof, (iii) shall bind and inure to the benefit of the parties hereto and their respective heirs, executors, administrators, personal representatives, successors and assigns and (iv) may be executed in two or more counterparts each of which shall be deemed an original but all of which together shall constitute one and the same instrument. The parties hereto hereby consent and agree that they shall commence any action with respect to any claims or disputes between the parties hereto pertaining to this Agreement or to any matter arising out of or related to this Agreement in the United States District Court for the Southern District of New York, so long as the action falls within the subject matter jurisdiction of such court; in the event any such action shall be determined by the court to be outside its subject matter jurisdiction, then the parties agree to commence any such action in the Supreme Court of New York County, New York and to take such action as may be necessary to effect assignment of such action to the Commercial Part of that court. The parties hereto expressly submit and consent in advance to such jurisdiction in any action or suit commenced in any such court, and hereby waive any objection which it may have based upon lack of personal jurisdiction, improper venue or forum non conveniens and hereby consent to the granting for such legal or equitable relief as is deemed appropriate by such court. Each party hereto irrevocably consents to the service of process by registered or certified mail, postage prepaid, to it at its address given in accordance herewith. (b) The parties hereto acknowledge that irreparable damage would result if this Agreement is not specifically enforced and that, therefore, the rights and obligations of the parties under this Agreement may be enforced by a decree of specific performance issued by a court of competent jurisdiction, and appropriate injunctive relief may be applied for and granted in connection therewith without the necessity of posting any bond. Such remedies shall, however, be cumulative and not exclusive and shall be in addition to any other remedies which any party may have under this Agreement or otherwise. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (c) The restrictions with respect to Management Shares set forth herein shall be in addition to and shall in no way limit any other restrictions on the Management Shares set forth in any other agreement. (d) The section and other headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. (e) To the extent that any provision of this Agreement shall be invalid or unenforceable, it shall be considered deleted herefrom and the remainder of such provision and of this Agreement shall be unaffected and shall continue in full force and effect. In furtherance and not in limitation of the foregoing, if any provision, term, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void, 21 unenforceable or against its regulatory policy, then such provision, term, covenant or restriction shall be construed to cover only that duration, extent or activities which may be validly and enforceably covered and the remainder of the provisions, terms covenants and restrictions contained herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated. 27. Complete Agreement. This Agreement and the Exhibit attached hereto ------------------ and which are hereby incorporated by reference herein, contains the entire agreement among the parties, superseding all prior agreements whether oral or written between parties with respect to the subject matter hereof. Without limiting the foregoing, the parties acknowledge that the Amended and Restated Stockholders Agreement, dated December 16, 1997 among PMT Holdings, Inc. and the stockholders party thereto is no longer in effect with respect to any of the parties hereto. No Management Shareholder shall enter into any Shareholder agreements or arrangements of any kind with any person with respect to any Shares on terms inconsistent with the provisions of this Agreement (whether or not such agreements or arrangements are with other Management Shareholders or with persons that are not parties to this Agreement), including agreements or arrangements with respect to the acquisition or disposition of Shares in a manner which is inconsistent with this Agreement. 22 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the day and the year first above written. PACER INTERNATIONAL, INC. By: /s/ Donald C. Orris ________________________________ Donald C. Orris President and Chief Executive Officer COYOTE ACQUISITION LLC By: /s/ Marc Becker ________________________________ Marc Becker Vice President COYOTE ACQUISITION II LLC By: /s/ Marc Becker ________________________________ Marc Becker Vice President MANAGEMENT SHAREHOLDERS: /s/ Donald C. Orris ___________________________________ Donald C. Orris /s/ Gerry Angeli ___________________________________ Gerry Angeli /s/ Robert L. Cross ___________________________________ Robert L. Cross 23 /s/ Gary I. Goldfein ___________________________________ Gary I. Goldfein /s/ Allen E. Steiner ___________________________________ Allen E. Steiner /s/ John W. Hein ___________________________________ John W. Hein /s/ Richard Hyland ___________________________________ Richard Hyland 24 Exhibit A --------- JOINDER IN ---------- SHAREHOLDERS' AGREEMENT ----------------------- In consideration of the transfer to (him) (her) (it) of _____ shares of common stock, no par value, of Pacer International, Inc. (the "Company") and the registration of such transfers on the books of the Company, ____________ , a __________ ("Additional Shareholder"), and the Company agree that, as of the date written below, Additional Shareholder shall become a party as a Management Shareholder to that certain Shareholders' Agreement, dated as of May 28, 1999, among the Company, Coyote Acquisition LLC, Coyote Acquisition II LLC, and certain individual shareholders named therein (the "Shareholders' Agreement"), and shall be bound by all of the terms and provisions of the Shareholders' Agreement, as though he was an original party thereto and was included in the definition of "Management Shareholder" as used therein; provided, that an Additional Shareholder shall not be entitled to be an "Offeree" for purposes of Paragraphs 2 through 6 or be entitled to the rights set forth in Paragraphs 11 and 16 of the Shareholders Agreement. Executed as of the _____ day of ________________, ____. [ ] By:_______________________________ Title: _______________________________ Shareholder 25 EX-4.14 15 SHAREHOLDERS AGREEMENT DATED MAY 28, 1999 Exhibit 4.14 ________________________________________________________________________________ SHAREHOLDERS' AGREEMENT among BT CAPITAL INVESTORS, L.P., PACER INTERNATIONAL EQUITY INVESTORS, LLC., COYOTE ACQUISITION LLC, COYOTE ACQUISITION II LLC AND PACER INTERNATIONAL, INC. Dated as of May 28, 1999 ________________________________________________________________________________ TABLE OF CONTENTS ARTICLE I................................................................. 2 1.1. Restrictions on Transfer....................................... 2 ------------------------ ARTICLE II................................................................ 2 ARTICLE III............................................................... 3 ARTICLE IV................................................................ 4 ARTICLE V................................................................. 6 5.1. Definitions.................................................... 9 ----------- 5.2. Designated Actions and Irrevocable Proxy....................... 9 ---------------------------------------- 5.3. Termination.................................................... 10 ----------- ARTICLE VI................................................................ 12 6.1. Assignment..................................................... 12 ---------- 6.2. Entire Agreement............................................... 12 ---------------- 6.3. Notices........................................................ 12 ------- 6.4. Waivers; Amendments............................................ 14 ------------------- 6.5. Counterparts................................................... 14 ------------ 6.6. Expenses....................................................... 14 -------- 6.7. Remedies....................................................... 14 -------- 6.8. Applicable Law; Submission to Jurisdiction..................... 15 ------------------------------------------ 6.9. Severability................................................... 15 ------------ 6.10. Certain Definitions............................................ 15 ------------------- 6.11. Termination.................................................... 16 -----------
SHAREHOLDERS' AGREEMENT Agreement (this "Agreement") dated as of this 28th day of May, 1999, among BT Capital Investors, L.P., a Delaware limited partnership ("BT "), Pacer International Equity Investors, LLC., a Delaware limited liability company ("CSFB") (BT and CSFB, together, the "Assignee Purchasers"), Coyote Acquisition LLC ("Coyote I"), Coyote Acquisition II LLC, ("Coyote II" and, Coyote I and Coyote II, collectively, the "Coyote Entities") and Pacer International, Inc., a Tennessee corporation (the "Company"). WHEREAS, Coyote I and APL Limited, a Delaware corporation, have entered into a Stock Purchase Agreement, dated as of March 15, 1999 (the "Stock Purchase Agreement"), whereby Coyote I will purchase common shares, no par value, of the Company (the "Common Stock"). WHEREAS, pursuant to the Assignment Agreement, dated as of May 28, 1999, between Coyote II and Coyote I, Coyote I has assigned its right to purchase 478,000 shares of Common Stock (on a post-split basis) under the Stock Purchase Agreement to Coyote II and Coyote II has agreed to acquire such shares; WHEREAS, pursuant to the Assignment Agreement, dated as of May 28, 1999, between BT and Coyote I, Coyote I has assigned its right to purchase 200,000 shares of Common Stock (on a post-split basis) under the Stock Purchase Agreement to BT and BT has agreed to acquire such shares (such acquired shares, the "BT Shares"); WHEREAS, pursuant to the Assignment Agreement, dated as of May 28, 1999, between CSFB and Coyote I, Coyote I has assigned its right to purchase 100,000 shares of Common Stock (on a post-split basis) under the Stock Purchase Agreement to CSFB and CSFB has agreed to acquire such shares (such acquired shares, the "CSFB Shares" and the BT Shares and CSFB Shares, together, the "Restricted Shares"); and WHEREAS, BT, CSFB and the Coyote Entities desire to impose certain restrictions on the disposition and transfer of the Restricted Shares, to create certain purchase and sale rights, to create certain registration rights and to agree with respect to certain matters relating to the voting of the Restricted Shares. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein, the parties hereto agree as follows: ARTICLE I 1.1. Restrictions on Transfer ------------------------ Whether or not permitted under the Securities Act, no Restricted Shares may be pledged, hypothecated, sold, transferred or otherwise disposed of, except as expressly provided in this Agreement, by will or by the laws of descent and distribution. Each Assignee Purchaser agrees not to distribute the Restricted Shares to its members or shareholders, as the case may be, except as may be required by law. In case of a transfer of any of the Restricted Shares pursuant to the foregoing, the transferee must execute an agreement to be bound by provisions of this Agreement as if such transferee were an original party hereto. The foregoing restrictions shall not prohibit sales by any Assignee Purchaser (a "Permitted Transfer") to the Company or the Coyote Entities or an affiliate thereof (the Coyote Entities or any affiliate thereof, collectively, "Coyote") or an affiliate of the Assignee Purchaser. ARTICLE II DRAG-ALONG RIGHT (a) If Coyote transfers to any Person or Persons (other than an affiliate thereof) (such Person, the "Article II Transferee"), pursuant to a stock sale, merger or otherwise, shares of Common Stock then held by Coyote, Coyote shall be entitled, at its option, to require each Assignee Purchaser to sell an Article II Equivalent Portion (as defined below) of all Common Stock held by such Assignee Purchaser, by providing each Assignee Purchaser with written notice ("Drag-Along Notice") at least fifteen days prior to consummation of the proposed transaction, setting forth in reasonable detail the material terms and conditions of the proposed transaction or offering, and the price per share at which each Assignee Purchaser shall be required to sell its shares of Common Stock (which price per share shall be equal to the same price per share Coyote shall receive pursuant to the proposed transaction). An "Article II Equivalent Portion" shall mean with respect to each Assignee Purchaser that portion of all shares of Common Stock then held by such Assignee Purchaser expressed as a fraction where the numerator equals the number of shares of Common Stock proposed to be sold by Coyote pursuant to the Drag-Along Notice and the denominator equals all shares of Common Stock held by Apollo. (b) At the closing of the proposed transaction (notice of the date, place and time of which shall be designated by Coyote and provided to each Assignee Purchaser in writing at least five business days prior thereto), each Assignee Purchaser shall deliver certificates evidencing the shares of Common Stock to be sold by such Assignee Purchaser, duly endorsed for transfer to the proposed transferee, against the purchase price therefor. Such shares of Common Stock shall be delivered free and clear of all liens, charges, encumbrances and other security interests. Coyote shall have no 2 liability or obligation to deliver the purchase price payable pursuant to this Article II, except to the extent that Coyote receives the consideration thereof from the proposed purchaser. All consideration payable pursuant to this Section shall be payable in the same form as the consideration received from the Article II Transferee; provided, that each Assignee Purchaser shall not be required, -------- pursuant to the terms of such sale, to accept any consideration that would cause such Assignee Purchaser to have a Regulatory Problem (as defined below). In case of a potential Regulatory Problem, Coyote may, at its option, elect to pay or cause to be paid to such Assignee Purchaser the cash equivalent of the consideration payable pursuant to this Article II, as determined in good faith by Coyote, in lieu of the consideration offered by the offeree. For purposes hereof, a "Regulatory Problem" shall mean, with respect to any Person, any set of facts, events or circumstances the existence of which would cause such Person to believe that there is a substantial risk of assertion by a governmental entity (which belief shall be based on an opinion of counsel) that such Person is or would be in violation of the Bank Holding Company Act of 1956, as amended by Regulation Y promulgated thereunder. (c) Coyote may assign its rights pursuant to this Article II to the Company or any affiliate or successor of the Company. ARTICLE III TAG-ALONG RIGHT (a) From and after the time the Threshold (as defined in Section 7.10 hereof) has been reached, and to the extent in excess thereof, if Coyote transfers to any Person or Persons (other than an affiliate thereof) shares of Common Stock (the "Article III Transferee"), then (i) at least fifteen business days prior to the consummation of the proposed transaction Coyote shall give written notice ("Tag-Along Notice") to each Assignee Purchaser setting forth in reasonable detail the material terms and conditions of the proposed transfer, the number of shares of Common Stock to be sold and the price per share at which Coyote is selling and (ii) each Assignee Purchaser shall have the right to include an Article III Equivalent Portion (as defined) of all Common Stock held by such Assignee Purchaser in the proposed transaction by providing a written notice of exercise to Coyote at any time on or before ten business days following delivery of the Tag-Along Notice to such Assignee Purchaser. An "Article III Equivalent Portion" shall mean with respect to each Assignee Purchaser that portion of all shares of Common Stock then held by such Assignee Purchaser expressed as a fraction where the numerator equals the number of shares of Common Stock proposed to be sold by Coyote, as set forth in the Tag- Along Notice, and the denominator equals all shares of Common Stock then held by Coyote. (b) At the closing of the proposed transaction (notice of the date, place and time of which shall be designated by Coyote and provided to each Assignee Purchaser in writing at least five business days prior thereto), each Assignee Purchaser shall deliver certificates evidencing the shares of Common Stock owned by such 3 Assignee Purchaser, duly endorsed for transfer to the proposed purchaser, against delivery of the purchase price therefor. Such shares of Common Stock shall be delivered free and clear of all liens, charges, encumbrances and other security interests. Coyote shall not have any liability or obligation to deliver the purchase price payable pursuant to this Section, except to the extent that Coyote receives the consideration thereof from the Article III Transferee. All consideration payable to the Assignee Purchasers pursuant to this Section shall be payable in the same form as the consideration received from the Article III Transferee. ARTICLE IV INCIDENTAL REGISTRATION (a) From and after the time the Threshold has been reached, and to the extent in excess thereof, if the Company at any time proposes to register any Common Stock in a Public Offering for the account of Coyote (except with respect to registration statements on a form which is not available for registering Common Stock for sale to the public), each such time it will give at least ten days prior written notice to each Assignee Purchaser of its intention so to do including the number of shares of Common Stock proposed to be registered by Coyote. Upon the written request of any such Assignee Purchaser, received by the Company within ten days after the giving of any such notice by the Company, to register up to its Article IV Equivalent Portion (as defined below) of all Common Stock held by such Assignee Purchaser (which request shall state the intended method of disposition thereof), the Company will use all commercially reasonable efforts to cause the shares of Common Stock as to which registration shall have been so requested to be included in the securities to be covered by the registration statement proposed to be filed by the Company, all to the extent requisite to permit the sale by such Assignee Purchaser (in accordance with its written request) of such shares of Common Stock so registered. Alternatively, the Company may in its sole discretion include such shares of Common Stock in a separate registration statement to be filed concurrently with the registration statement for the account of Coyote to be filed by the Company. In the event that any registration pursuant to this Article IV shall be, in whole or in part, an underwritten Public Offering of shares of Common Stock, the number of shares of Common Stock to be included in such an underwriting may be reduced (pro rata among the requesting Assignee Purchasers and Coyote based upon the number of shares of Common Stock owned by such Assignee Purchasers and Coyote) due to (i) the provisions of any registration rights or similar agreement between the Company and any Coyote Entity or between the Company and any management shareholders (it being understood that the Coyote Entities and certain management shareholders shall have pro rata rights with respect to incidental registration rights pursuant to (x) the registration rights agreement by and among the Company and the Coyote Entities, dated as of the date hereof, and (y) that certain shareholders agreement, dated as of the date hereof, among the Company, APL Limited and the Coyote Entities and (z) that certain shareholders agreement, dated as of the date hereof, among the Company, the Coyote Entities and certain management shareholders), or (ii) if applicable, underwriter market 4 limitations if, and to the extent, that the managing underwriter advises the Company that in its opinion such inclusion would adversely affect the marketing of the securities to be sold by the Company therein. In addition, if the managing underwriter so advises, for any reason, against the inclusion of all or any portion of shares or Common Stock owned by the Assignee Purchasers in the Public Offering, then the Assignee Purchasers shall only have the right to register shares of Common Stock therein as so advised by the managing underwriter. An "Article IV Equivalent Portion" shall mean with respect to each Assignee Purchaser that portion of all shares of Common Stock then held by such Assignee Purchaser expressed as a fraction where the numerator equals the number of shares of Common Stock proposed to be registered by Coyote pursuant to the notice contemplated by this paragraph (a) and the denominator equals all shares of Common Stock then held by Coyote. (b) In connection with each registration pursuant to paragraph (a) covering a Public Offering, each Assignee Purchaser selling Common Stock pursuant thereto agrees to (i) enter into a written agreement with the managing underwriter under the same terms and conditions as apply to the Company or the selling shareholders, as applicable, or as is otherwise customary in offerings of this type and (ii) furnish to the Company in writing such information with respect to themselves and the proposed distribution by them as reasonably shall be necessary and shall be requested by the Company in order to comply with federal and applicable state securities laws. (c) If, at any time after giving notice of its intention to register any stock pursuant to this Article IV and prior to the effective date of the registration statement filed in connection with such registration, the Company and/or Coyote shall determine for any reason not to register any such stock, the Company shall give written notice to the Assignee Purchasers and, thereupon, shall be relieved of its obligation to register any shares of Common Stock in connection with such registration. If the number of shares to be registered by Coyote is changed, the Article IV Equivalent Proportion shall be appropriately adjusted. (d) All expenses incurred by the Company in complying with this Article IV, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel and independent public accountants for the Company, fees and expenses (including counsel fees) incurred in connection with complying with state securities or "blue sky" laws, fees of the National Association of Securities Dealers, Inc., transfer taxes, fees of transfer agents and registrars and costs of insurance, but excluding any Selling Expenses, are herein referred to as "Registration Expenses." "Selling Expenses" as used herein mean all underwriting discounts and selling commissions applicable to the sale of Common Stock. The Company will pay all Registration Expenses in connection with each registration statement under this Article IV. All Selling Expenses in connection with each registration statement under this Article IV shall be borne by the participating sellers of shares of Common Stock in proportion to the number of shares sold by each, or by 5 such participating sellers of shares of Common Stock other than the Company (except to the extent the Company shall be a seller of shares of Common Stock) as they may agree. In addition, the participating Assignee Purchasers shall be responsible for fees and disbursements of their counsel. (e) In the event of a registration of any Common Stock under the Act pursuant to this Article IV, the Company will indemnify and hold harmless, to the full extent permitted by law, each selling Assignee Purchaser, each underwriter of such Common Stock thereunder and each other person, if any, who controls a selling Assignee Purchaser or such underwriter within the meaning of the Act or the Securities Exchange Act of 1934, as amended (the "Exchange Act"), against any losses, claims, damages, liabilities and expenses, joint or several, to which a selling Assignee Purchaser, such underwriter or controlling person may become subject under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which Common Stock was registered under the Act pursuant to this Article IV, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will pay or reimburse each selling Assignee Purchaser, each such underwriter and each such controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, -------- however, that the Company (i) will not be liable in any such case if and to the - ------- extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information pertaining to a selling Assignee Purchaser, underwriter or controlling person and furnished by such Assignee Purchaser, any such underwriter or any such controlling person, as the case may be, in writing specifically for use in such registration statement, prospectus, amendment or supplement and (ii) will not be liable for amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company, such consent not to be unreasonably withheld or delayed. (f) In the event of a registration of any Common Shares under the Act pursuant to this Article IV, each selling Assignee Purchaser will indemnify and hold harmless the Company, each person, if any, who controls the Company within the meaning of the Act, each officer of the Company who signs the registration statement, each director of the Company, each underwriter and each person who controls any underwriter within the meaning of the Act, against all losses, claims, damages or liabilities, joint or several, to which the Company or such officer, director, underwriter or controlling person may become subject under the Act or otherwise, but only insofar as such losses, claims, damages or liabilities (or actions in respect thereof), arise out of or are based upon an untrue statement or alleged untrue statement or omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, made in reliance upon and in conformity with 6 information pertaining to such selling Assignee Purchaser, furnished in writing to the Company by such Assignee Purchaser specifically for use in such registration statement under which Common Stock was registered under the Act pursuant to this Article IV, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof, and will pay or reimburse the Company and each such officer, director, underwriter and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that (i) the liability of each selling -------- ------- Assignee Purchaser hereunder shall be limited to the proportion of any such loss, claim, damage, liability or expense which is equal to the proportion that the public offering price of the Common Stock sold by such Assignee Purchaser under such registration statement bears to the total public offering price of all securities sold thereunder, but not in any event to exceed the net proceeds received by such Assignee Purchaser from the sale of Common Stock covered by such registration statements and (ii) an Assignee Purchaser shall not be liable for amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of such Assignee Purchaser, such consent not to be unreasonably withheld or delayed. (g) Promptly after receipt by an indemnified party hereunder of written notice of any claim or the commencement of any action or proceeding, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to such indemnified party other than under this Article IV and shall only relieve it from any liability which it may have to such indemnified party under this Article IV if and to the extent the indemnifying party is materially prejudiced by such omission. In case any such action shall be brought against any indemnified party and the indemnified party shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel reasonably satisfactory to such indemnified party, and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Article IV for any legal or other professional expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected; provided, however, that if the defendants in any such action -------- ------- include both the indemnified party and the indemnifying party, and the indemnified party shall have reasonably concluded that there may be reasonable defenses available to it which are different from or additional to those available to the indemnifying party or if the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, the indemnified party shall have the right to select a separate counsel and to assume such legal defenses and otherwise to participate in the defense of such action, with the reasonable fees and expenses of such separate counsel and other expenses related to such participation to be reimbursed by the indemnifying party as incurred. No indemnifying party, in the defense of any such claim or litigation against an indemnified party, shall consent to entry of any judgment or enter into any settlement which does not 7 include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation, unless such indemnified party shall otherwise consent in writing. An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim shall not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim. (h) In order to provide for just and equitable contribution in any case in which either (i) an Assignee Purchaser exercises incidental registration rights under this Article IV, or any controlling person of such Assignee Purchaser makes a claim for indemnification pursuant to this Article IV but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and following the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case, notwithstanding the fact that this Article IV provides for indemnification in such case, or (ii) contribution under the Act may be required on the part of such Assignee Purchaser or any such controlling person in circumstances for which indemnification is provided under this Article IV; then, and in each such case, the Company and such Assignee Purchaser shall contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect both the relative benefit received by such Assignee Purchaser and the Company and the relative fault of the Company and such Assignee Purchaser; provided, however, that, in any such case, (A) such Assignee Purchaser shall not be required to contribute any amount in excess of the public offering price of all Common Stock offered by it pursuant to such registration statement; and (B) no person or entity guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation. For purposes of the preceding sentence, the relative benefit received by such Assignee Purchaser or the Company shall be deemed to be in the same proportion as the public offering price of Common Stock offered by such Assignee Purchaser or the Company bears to the public offering price of all securities offered by such registration statement; and the relative fault of the Company and such Assignee Purchaser shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission of a material fact relates to information supplied by the Company or by such Assignee Purchaser and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. ARTICLE V VOTING PROXY 5.1. Definitions ----------- (a) "Designated Actions" means (i) the voting of any Common Stock and any action to be taken with respect to a matter properly brought before the stockholders 8 of the Company holding shares of Common Stock, including without limitation the election of members of the Board of Directors of the Company, (ii) any action to be taken by any holder of Common Stock in its capacity as a stockholder of the Company under this Agreement, including without limitation any consent or waiver relating to this Agreement and (iii) all actions taken in connection with any of the actions referred to in clauses (i) and (ii) above. (b) "Designated Shareholders" means each Assignee Purchaser and each Person to whom the Common Stock of such Assignee Purchaser are sold or transferred pursuant to the first two sentences of Section 1.5 above. (c) "Proxyholder" means Joshua J. Harris or any additional or successor Proxyholder as may be appointed by the Coyote Entities by written notice to the Assignee Purchasers and the Company. 5.2. Designated Actions and Irrevocable Proxy ---------------------------------------- (a) Each Designated Shareholder, so long as he, she or it owns any Common Stock, hereby agrees to take all Designated Actions in the manner that the Proxyholder, in his sole and absolute discretion, shall direct, at any annual or special meeting of stockholders of the Company, at any and all adjournments thereof, and on any other occasion in respect of which the consent of such Designated Shareholder with respect to his, her or its shares of Common Stock may be given or may be requested or solicited by the Company or any other Person, whether at a meeting, pursuant to the execution of a written consent, under the Stock Purchase Agreement or otherwise, for all purposes in connection with any Designated Action, and such Designated Shareholder hereby ratifies and confirms all that such Proxyholder may do by virtue hereof. (b) For purposes of effecting any Designated Action, each Designated Shareholder does hereby irrevocably constitute and appoint the Proxyholder, his, her or its true and lawful attorney, agent and proxy for and in his, her or its name, place and stead, with the exclusive right to take all Designated Actions, in such Proxyholder's sole and absolute discretion, at any annual or special meeting of stockholders of the Company, at any and all adjournments thereof, and on any other occasion in respect of which the consent of such Designated Shareholder may be given or may be requested or solicited by the Company or any other Person, whether at a meeting, pursuant to the execution of a written consent, under the Stock Purchase Agreement or otherwise, for all purposes in connection with any Designated Action, and such Designated Shareholder hereby ratifies and confirms all that the Proxyholder may do by virtue hereof. Each Designated Shareholder agrees with the Proxyholder that, without the prior written consent of the Proxyholder, he, she or it will not, so long as this Agreement shall be in effect with respect to any such Designated Shareholder, take any Designated Action, appoint any Person other than the Proxyholder as his, her or its attorney, agent or proxy with respect to such shares of Common Stock, or take any action inconsistent with the appointment of 9 the Proxyholder as his, her or its lawful attorney, agent and proxy, or the exercise by the Proxyholder of the powers granted to him, hereunder. (c) The parties hereto agree that, in taking or giving directions for the taking of any Designated Action or in otherwise acting hereunder, the Proxyholder shall have no responsibility in respect of the management of the Company by directors for whom he shall have voted or for any action taken by any such directors or for any action taken pursuant to any consent given or vote cast by him or other action taken by him, and the Proxyholder's powers herein shall be discretionary and any of them may be exercised from time to time when he sees fit and without leave of any court or any other Person and the Proxyholder may refrain from exercising any powers or rights from time to time as he sees fit in each case irrespective of any relationship that the Proxyholder or any of his Affiliates may have with any of the parties hereto otherwise than pursuant to this Agreement. (d) The powers granted pursuant to this Section 5.2, and the proxy granted pursuant hereto, are coupled with an interest and shall be irrevocable during the term of this Article V. 5.3. Termination ----------- The agreements contained in this Article V shall terminate and be of no further force and effect as of the earlier of (i) tenth anniversary of the date hereof and (ii) the termination of this Agreement as contemplated by Section 7.11 below. ARTICLE VI PREEMPTIVE RIGHTS (a) In the event that the Company proposes to issue (a "Proposed Issuance") any Common Stock to Coyote, other than pursuant to the exceptions specified in paragraph (b) below, the Company shall deliver a notice, with respect to such Proposed Issuance (the "Preemptive Notice"), to each Assignee Purchaser setting forth the period of time within which the Preemptive Right must be exercised (the "Acceptance Period") and the price, terms and conditions of the Proposed Issuance. Each Assignee Purchaser shall have the right (the "Preemptive Right"), exercisable as hereinafter provided, to participate in such issuance of Common Stock ("Offered Securities") on a pro rata basis in --- ---- accordance with the respective aggregate number of shares of Common Stock held by such Assignee Purchaser on the date of such notice from the Company by purchasing an amount of such Common Stock to be sold to Coyote pursuant to the Proposed Issuance multiplied by a fraction, the numerator of which shall be the aggregate number of shares of Common Stock owned by such Assignee Purchaser on the date of such notice and the denominator of which shall be the total number of shares of Common Stock outstanding on such date, such purchase to be at the same price and on the same terms and conditions 10 as the Proposed Issuance. The number of shares of Common Stock to be sold to Coyote pursuant to the Proposed Issuance shall be calculated after first taking into account the effect of the preemptive rights granted by the Company to certain management shareholders pursuant to that certain Management Shareholders' Agreement, dated as of May 28, 1999, by and among Coyote I, Coyote II, the Company and certain management shareholders named therein. (b) Anything to the contrary notwithstanding, the Preemptive Rights provided for herein shall not be applicable to: (i) any Proposed Issuance of Common Stock to Coyote, in an amount equal to (A) 100,000 (as appropriately adjusted for splits, rollups, etc.) or fewer shares, in the aggregate or (B)(1) the number of shares of Common Stock previously sold or otherwise transferred by Coyote to members of management of the Company less (2) the number of shares of Common Stock previously purchased by Coyote pursuant to the provisions of this clause (i)(B); provided that in no event shall Coyote be entitled to repurchase Common Stock with an aggregate purchase price in excess of $5,000,000 pursuant to the provisions of this clause (i)(B); (ii) any stock split or Proposed Issuance of Common Stock as a dividend. (c) The Preemptive Rights shall be exercisable by delivery of notice (the "Purchase Notice") to the Company given within the Acceptance Period set forth in the Preemptive Notice. If an Assignee Purchaser shall fail to respond to the Company within the Acceptance Period, such failure shall be regarded as a rejection of such Assignee Purchaser's right to exercise such Assignee Purchaser's Preemptive Right. The closing of any purchase by the Assignee Purchasers under this Article VI shall be held at such time and place upon which the parties to the transaction may agree. At such closing, the Assignee Purchasers participating in the purchase shall deliver by certified bank check, payment in full for such Common Stock and all parties to the transaction shall execute such additional documents as are otherwise deemed necessary or appropriate by the Company. At such closing, the Company may issue and sell to Coyote such portion of the Common Stock which has not been purchased by Assignee Purchasers pursuant to the exercise of their Preemptive Rights at the same price and on the same terms and conditions as the Common Stock sold or proposed to be sold to the Assignee Purchasers. (d) In the event of a Proposed Issuance of Common Stock, which Proposed Issuance is subject to the Preemptive Rights under this Article VI and which is offered only in combination with the purchase of debt or debt securities, then the Preemptive Rights shall apply to the combination and an Assignee Purchaser exercising his Preemptive Right shall be entitled and required to purchase his pro rata share of both the debt and equity components --- ---- of such combination on the basis set forth above. 11 ARTICLE VII MISCELLANEOUS 7.1. Assignment ---------- This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors, assigns, heirs and personal representatives. Unless otherwise expressly provided in this Agreement, neither this Agreement nor any right or obligation hereunder of any party may be assigned or delegated without the prior written consent of the other parties hereto, provided, that any of the Coyote Entities may assign this Agreement to an affiliate. 7.2. Entire Agreement ---------------- This Agreement and the other writings referred to herein or delivered pursuant hereto which form a part hereof contain the entire agreement among the parties with respect to the subject matter hereof and supersede all prior and contemporaneous arrangements or understandings with respect thereto. 7.3. Notices ------- All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given (a) when delivered personally to the recipient, (b) one business day after being sent by reputable overnight courier (charges prepaid) (regardless of whether the recipient refuses to accept delivery), (c) five business days after being sent to the recipient by certified or registered mail, return receipt requested and postage prepaid (regardless of whether the recipient refuses to accept delivery) or (d) when sent to the recipient by facsimile (followed promptly by courier or certified or registered mail delivery). Deliveries should be directed as follows: If to the Company or the Coyote Entities, to: c/o Apollo Management, L.P. 1301 Avenue of the Americas, 38th Floor New York, NY 10019 Telephone: 212-515-3200 Telecopy: 212-515-3232 Attention: Joshua J. Harris 12 with a copy to: Dewey Ballantine LLP 1301 Avenue of the Americas New York, NY 10019 Telephone: 212-259-8000 Telecopy: 212-259-6333 Attention: Morton A. Pierce, Esq. Douglas L. Getter, Esq. If to the Assignee Purchasers, to: BT Capital Investors, L.P. 130 Liberty Street New York, NY 10006 Telephone: 212-250-3709 Telecopy: 212-250-7651 Attention: Ethan Falcove with a copy to: Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 Telephone: 212-701-3000 Telecopy: 212-269-5420 Attention: John A. Tripodoro, Esq. and Pacer International Equity Investors, LLC. Eleven Madison Avenue New York, NY 10010 Telephone: 212-325-2625 Telecopy: 212-325-8018 Attention: Mark Kennelley with a copy to: Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 Telephone: 212-701-3000 Telecopy: 212-269-5420 Attention: John A. Tripodoro, Esq. 13 7.4. Waivers; Amendments ------------------- (a) No failure or delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. (b) Any provision of this Agreement may be waived if, but only if, such waiver is in writing and is signed, by the party or parties against whom the waiver is to be effective. No provision of this Agreement may be amended or otherwise modified except by an instrument in writing executed by the parties hereto. 7.5. Counterparts ------------ This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. 7.6. Expenses -------- All costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense. 7.7. Remedies -------- Each party hereto acknowledges that the remedies at law of the other parties for a breach or threatened breach of this Agreement would be inadequate and, in recognition of this fact, any party to this Agreement, without posting any bond, and in addition to all other remedies which may be available, shall be entitled to obtain equitable relief in the form of specific performance, a temporary restraining order, a temporary or permanent injunction or any other equitable remedy which may then be available. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. 7.8. Applicable Law; Submission to Jurisdiction ------------------------------------------ This Agreement (other than the provisions of Article V which shall be construed in accordance with and governed by the laws of the State of Delaware) shall be construed in accordance with and governed by the laws of the State of New York, without regard to the conflicts of law rules of such state. Each of the parties hereto hereby consents to the non-exclusive jurisdiction of the United States District Court for the Southern District of New York, or any other New York State court sitting in New York, New York (and of the appropriate appellate courts therefrom) over any suit, action 14 or proceeding arising out of or relating to this Agreement. Each party hereto irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of venue in any such court or that any such proceeding which is brought in accordance with this Section has been brought in an inconvenient forum. Subject to applicable law, process in any such proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing and subject to applicable law, each party agrees that service of process on such party as provided in Section 7.3 shall be deemed effective service of process on such party. Nothing herein shall affect the right of any party to serve legal process in any other manner permitted by law or at equity or to enforce in any lawful manner a judgment obtained in one jurisdiction in any other jurisdiction. WITH RESPECT TO A PROCEEDING IN ANY SUCH COURT, EACH OF THE PARTIES IRREVOCABLY WAIVES AND RELEASES TO THE OTHER ITS RIGHT TO A TRIAL BY JURY, AND AGREES THAT IT WILL NOT SEEK A TRIAL BY JURY IN ANY SUCH PROCEEDING. 7.9. Severability ------------ The invalidity or unenforceability of any provisions of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of this Agreement, including any such provision, in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law. 7.10. Certain Definitions ------------------- (a) For purposes of this Agreement, a "Public Offering" means any underwritten public offering of equity securities of the Company pursuant to an effective registration statement under the Securities Act of 1933, as amended (the "Act") other than pursuant to a registration statement on Form S-4 or S-8 or any successor or similar form. (b) For purposes of this Agreement, the "Threshold" means the public or private sale by Coyote in any one or more transactions of $16 million, in the aggregate, of Common Stock. (c) For purposes of this Agreement, a "Person" shall mean an individual, a partnership, a joint venture, a corporation, a limited liability company, a trust, an unincorporated organization, a governmental entity or any other entity. 7.11. Termination ----------- This Agreement shall terminate at such time that Coyote shall own less than 10% of the outstanding Common Stock on a fully diluted basis. 15 IN WITNESS WHEREOF, the parties hereto have caused this Common Stock Purchase Agreement to be executed as of the date first above written. PACER INTERNATIONAL, INC. By: /s/ Donald C. Orris ________________________________________ Donald C. Orris President and Chief Executive Officer BT CAPITAL INVESTORS, L.P. By: /s/ Joseph E. Wood ________________________________________ Name: Joseph E. Wood Title: Managing Director PACER INTERNATIONAL EQUITY INVESTORS, LLC. By: /s/ Mark Patterson ________________________________________ Name: Mark Patterson Title: Vice President COYOTE ACQUISITION LLC By: /s/ Marc Becker ________________________________________ Marc Becker Vice President COYOTE ACQUISITION II LLC By: /s/ Marc Becker ________________________________________ Marc Becker Vice President 16 INDEX OF TERMS Acceptance Period 10 Act 15 Agreement 1 Article II Equivalent Portion 2 Article II Transferee 2 Article III Transferee 3 Article IV Equivalent Portion 5 Assignee Purchasers 1 BT 1 BT Shares 1 Common Stock 1 Company 1 Coyote 2 Coyote Entities 1 Coyote I 1 Coyote II 1 CSFB Shares 1 Drag-Along Notice 2 Offered Securities 10 Permitted Transfer 2 Person 15 Preemptive Notice 10 Preemptive Right 10 Proposed Issuance 10 Public Offering 15 Purchase Notice 11 Regulatory Problem 3 Restricted Shares 1 Stock Purchase Agreement 1 Tag-Along Notice 3 Threshold 15
17 EX-4.15 16 APOLLO MANAGEMENT AGREEMENT DATED MAY 28, 1999 EXHIBIT 4.15 MANAGEMENT AGREEMENT THIS MANAGEMENT AGREEMENT (this "Agreement") made as of this 28th day of May, 1999, by and between Pacer International, Inc., (formerly known as APL Land Transport Services, Inc.), a Tennessee corporation, (the "Company") and Apollo Management IV, L.P. ("Apollo"). WHEREAS, APL Limited and Coyote Acquisition LLC, a Delaware limited liability company and an affiliate of Apollo ("Purchaser"), have entered into a Stock Purchase Agreement (the "Purchase Agreement"), dated as of March 15, 1999, providing for the purchase by Purchaser of substantially all of the capital stock of the Company from APL Limited (the "Purchase"); and WHEREAS, upon the consummation of the Purchase (the "Closing"), the Company desires to retain the ongoing services of Apollo for financial and strategic advice; NOW, THEREFORE, in consideration of the mutual promises contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Appointment. The Company appoints Apollo, following the Closing, ----------- to provide financial and strategic advice, subject to the direction of the Board of Directors of the Company and the terms and conditions of this Agreement, and Apollo hereby accepts the aforesaid appointment. 2. Duties. Apollo shall perform and provide all such financial and ------ strategic services to the Company as shall be reasonably requested by the Board of Directors of the Company. 3. Term. The term of this Agreement shall commence at the Closing ---- and end on the first anniversary of the date thereof. This Agreement shall be extended automatically on each anniversary of the Closing for an additional one year period unless written notice of such non-extension is provided by either party to the other party at least 30 days prior to such anniversary. 4. Compensation. (a) The Company shall pay Apollo, for services to ------------ be rendered hereunder, an initial fee of 1% of total equity value ("TEV") of the transaction contemplated by the Purchase Agreement (calculated by subtracting total debt from the aggregate purchase price), as it may be amended, at the Closing ("Initial Payment"). Thereafter, the Company shall pay Apollo a fee of $500,000 per annum ("Annual Fee") payable by the Company in equal quarterly installments of $125,000 due on the last day of September, December, March and June of each year, subject to appropriate proration for the first payment after the Closing. (b) The Company shall pay Apollo a transaction fee of 1% of TEV of any purchase, sale, recapitalization or similar transaction (whether by merger, stock purchase or sale, asset purchase or sale or otherwise) completed by the Company or by any affiliate thereof promptly upon the closing of such transaction. (c) The amounts payable under this Paragraph 4 shall be paid in cash by wire transfer of immediately available funds. 5. Termination. Notwithstanding anything to the contrary contained ----------- herein, each party hereto may terminate this Agreement without cause upon thirty (30) calendar days' written notice (the "Termination Notice") to the other, said notice to set forth the date of such termination, which date shall not be less than thirty (30) days, nor more than sixty (60) days from the date of such Termination Notice. Compensation owed to Apollo under this Agreement shall be paid pro rata through the date of the Termination Notice. 6. Independent Contractor. Apollo is retained and employed as an ---------------------- advisor by the Company under this Agreement only for the purposes and to the extent set forth herein, and the relation of Apollo to the Company is and shall remain, during the term or terms hereof, that of an independent contractor. 7. Confidentiality. In furtherance of this Agreement, the Company --------------- shall provide Apollo with all financial, business and other relevant information about the Company reasonably requested by Apollo for the purpose of rendering the services contemplated herein. All such information of a non-public or confidential nature furnished to Apollo by the Company shall be treated as confidential by Apollo. Apollo may rely, without independent verification, on the accuracy and completeness of the information furnished to it by the Company in furtherance of this Agreement. 8. Losses. None of Apollo, any of its employees, officers and ------ directors, any person controlling Apollo, or any of their respective agents or affiliates shall be liable to the Company for any losses, claims, damages, liabilities or expenses arising from, related to or in connection with this Agreement or the Company's business or affairs. 9. Indemnification. The Company will indemnify and hold harmless --------------- Apollo, its employees, officers and directors, persons controlling Apollo and its and their respective agents and affiliates, from any and all liabilities, claims, suits, judgments, damages or expenses arising out of, or in connection with, any action taken under this Agreement by Apollo or any of its agents, employees, officers or directors, except to the extent that any such liabilities, claims, suits, judgments, damages or expenses are substantially attributable to the gross negligence or willful misconduct of Apollo or any such employee, officer, director, controlling person, agent or affiliate. 2 10. Binding Effect; Assignment. This Agreement shall be binding upon -------------------------- and shall inure to the benefit of the parties hereto, and their respective successors and assigns. Notwithstanding the foregoing, this Agreement may not be assigned without the prior written consent of the parties hereto, except that Apollo shall have the right to assign its rights, interests and obligations hereunder to any of its affiliates at its sole option and without the prior consent (written or otherwise) of the Company. This Agreement may be modified by the parties hereto only by written supplemental agreement. 11. Choice of Law. This Agreement shall be construed in accordance ------------- with and governed by the laws of the State of New York without regard to any choice of law provisions. Each of the parties hereto hereby irrevocably submits in any legal action or proceeding relating to or arising out of this Agreement or any other document relating hereto or delivered in connection with the transactions contemplated hereby, or for recognition and enforcement of any judgment in respect thereof, to the exclusive jurisdiction of the United States District Court for the Southern District of New York and appellate courts thereof. Each of the parties hereto further (a) consents that any such action or proceeding may be brought in such court and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (b) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such party at its address set forth in Section 12 below; and (c) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law. 12. Notices. All notices hereunder shall be in writing and shall be ------- given to the respective parties by U.S. mail, personal delivery or facsimile transmission to their respective addresses as follows: If to the Company: c/o Donald C. Orris 1675 Larimer Street Suite 620 Denver, Colorado 80202 Facsimile: (303) 623-5115 If to Apollo: 1301 Avenue of the Americas New York, New York 10019 Attn: Joshua J. Harris Facsimile: (212) 261-4102 3 with a copy to: Morton A. Pierce, Esq. Douglas L. Getter, Esq. Dewey Ballantine LLP 1301 Avenue of the Americas New York, New York 10019 Facsimile: (212) 259-6333 All such notices shall be deemed effective upon receipt. 13. Counterparts. This Agreement may be executed in any number of ------------ counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. 4 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written. PACER INTERNATIONAL, INC. (formerly known as APL LAND TRANSPORT SERVICES, INC.) By: /s/ Donald C. Orris ---------------------------------- Name: Donald C. Orris Title: President, Chairman, CEO APOLLO MANAGEMENT IV, L.P. BY AIF IV MANAGEMENT, INC., its general partner By: /s/ Joshua Harris ---------------------------------- Name: Joshua Harris Title: Vice President 5 EX-4.16 17 TAX SHARING AGREEMENT DATED MAY 28, 1999 Exhibit 4.16 TAX SHARING AGREEMENT --------------------- THIS TAX SHARING AGREEMENT (the "Agreement"), dated as of May 28, 1999, is by and among Coyote Acquisition LLC, a Delaware limited liability company ("Holding Company"), Pacer International, Inc., a Tennessee corporation (formerly known as APL Land Transport Services, Inc.) ("Company," together with any subsidiary thereof, including any subsidiary acquired or formed subsequent to the date hereof), and Pacer Logistics, Inc., a Delaware corporation (formerly known as Pacer International, Inc.) ("Subsidiary," together with any subsidiary thereof, including any subsidiary acquired or formed subsequent to the date hereof). WITNESSETH: WHEREAS, upon the consummation of the transactions described in the Stock Purchase Agreement, dated as of March 15, 1999, Holding Company will own approximately eighty-five percent (85%) of the issued and outstanding shares of Company's common stock, no par value, and upon the consummation of the transactions described in the Agreement and Plan of Merger, dated as of February 22, 1999, Company will own approximately one-hundred percent (100%) of the issued and outstanding shares of Subsidiary's common stock, par value $.01 per share, and none of the issued and outstanding shares of Subsidiary's preferred stock, par value $.01 per share; WHEREAS, following the consummation of the transactions described above, two or more of the parties hereto may become members of an affiliated group within the meaning of Section 1504(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and, perhaps, one or more consolidated, combined or unitary groups for state, local and/or foreign tax purposes ("Group"); WHEREAS, two or more of the parties hereto, at Holding Company's option, may file consolidated federal income tax returns ("Federal Consolidated Returns") and, perhaps, consolidated, combined and/or unitary tax returns for state, local and/or foreign tax purposes ("Other Consolidated Returns," and, collectively with Federal Consolidated Returns, "Consolidated Returns"); and WHEREAS, it is the intent and desire of the parties hereto that a method be established for allocating the Group's tax liability among its members; for reimbursing Holding Company (or any other entity designated by Holding Company) for the payment of any such tax liability; and for reimbursing members for the use of net operating losses and other tax benefits to reduce the Group's tax liability otherwise payable. NOW, THEREFORE, in consideration of the promises, covenants and agreements contained herein, the parties hereto agree as follows: 1. Filing of Consolidated Returns. At Holding Company's option, Holding ------------------------------ Company (or any other entity designated by Holding Company) may file, and Company and Subsidiary agree to join in any such filing of, (i) a Federal Consolidated Return for any taxable year (or portion thereof) for which the Group is permitted or required to file a Federal Consolidated Return and/or (ii) any Other Consolidated Return for any taxable year (or portion thereof) for which the Group is permitted or required to file a Consolidated Return. 2. Cooperation on Consolidated Return Matters. Company and Subsidiary ------------------------------------------ hereby designate Holding Company (or Holding Company's designee) as their agent for the purpose of taking any and all action necessary or incidental to the filing of 2 Consolidated Returns. Company and Subsidiary agree to furnish Holding Company with any and all information requested by Holding Company in order to carry out the provisions of this Agreement; to cooperate with Holding Company in any tax return or consent contemplated by this Agreement; to take such action with respect to such returns as Holding Company may request, including, without limitation, the filing of all elections and the filing of all requests for the extension of time within which to file tax returns; to cooperate in connection with any audit or refund claim; and to undertake all of the foregoing obligations in a timely manner as requested by Holding Company. 3. Apportionment of Taxes. For each taxable period (or portion thereof) ---------------------- for which a Federal Consolidated Return is filed for the Group pursuant to this Agreement, the consolidated federal income tax liability of the Group, as determined under Treasury Regulations (S) 1.1502-2 and the remaining consolidated return regulations, will be apportioned among the members of the Group pursuant to Treasury Regulations (S) 1.1552-1(a)(1) in accordance with the ratio which that portion of the consolidated taxable income attributable to each member of the Group bears to the consolidated taxable income; provided, however, -------- ------- in the event that Holding Company (including any member of the Group other than Company or Subsidiary) has no taxable income, the sum of the apportioned tax liabilities of Company and Subsidiary hereunder shall, at a minimum, always equal the consolidated federal income tax liability of the Group, and in the event that none of Company or Subsidiary has any taxable income, the tax liability of Holding Company hereunder shall, at a minimum, always equal the consolidated federal income tax liability of the Group. 3 4. Payment of Taxes. For each taxable period (or portion thereof) for ---------------- which a Federal Consolidated Return is filed for the Group pursuant to this Agreement, Holding Company shall prepare or cause to be prepared the Federal Consolidated Return of the Group and shall pay all taxes (including any penalties, fines, interest or other additions thereto) reported on such Federal Consolidated Return to the Internal Revenue Service ("IRS"). At least five (5) business days prior to the due date of any payment Holding Company is required to make to the IRS of any taxes due with respect to a Federal Consolidated Return of the Group (including, without limitation, estimated taxes), Company and/or Subsidiary, as the case may be, shall pay to Holding Company an amount equal to its share of such tax liability as determined under Section 3 of this Agreement. 5. Tax Benefit. For each taxable period (or portion thereof) for which a ----------- Federal Consolidated Return is filed for the Group pursuant to this Agreement, Holding Company shall elect (if necessary) in the manner specified in Treasury Regulations (S) 1.1502-33(d)(5) that the method described in Treasury Regulations (S) 1.1502-33(d)(3) be applied to the Group with respect to additional allocations of income tax liability. Pursuant to Treasury Regulations (S) 1.1502-33(d)(3), an additional liability will be allocated to each member of the Group which, as a result of net operating losses, excess charitable contributions, foreign tax credits, investment tax credits or similar items arising from or generated by the activities of another member with respect to a taxable period (or portion thereof) for which a Federal Consolidated Return was filed, has an allocated tax liability as determined under Section 3 of this Agreement that is smaller than its tax liability if such tax liability had been computed on a separate tax return 4 ("Separate Return Tax Liability"). The additional tax liability allocated to such member will be equal to 100 percent of the excess, if any, of (a) the Separate Return Tax Liability of such member for the taxable year, over (b) the allocated tax liability as determined under Section 3 above. The total of any additional amounts determined in this Section 5 will be paid to such member that generated such losses, credits or deductions to which such total is attributable. Such payment will be made pursuant to a consistent method which reasonably reflects such items and which is substantiated by specific records maintained by the Group for such purposes. 6. Subsequent Adjustments. If for any taxable period (or portion ---------------------- thereof) for which a Federal Consolidated Return is filed for the Group pursuant to this Agreement the federal income tax liability of the Group as reported on such Federal Consolidated Return is adjusted, whether by means of an amended return, a claim for refund, or an audit by the IRS, then the liabilities of the members of the Group shall be recomputed under the relevant sections of this Agreement to give effect to those adjustments as if such adjustments had been part of the original determination of the Group's consolidated federal income tax liability. In the case of a refund, Holding Company shall make a payment to each member of the Group in an amount equal to such member's share of the refund, if any, within five (5) business days after the refund is received by Holding Company and, in the case of an increase in tax liability, each member of the Group shall pay to Holding Company its allocable share of such increased tax liability at least five (5) business days prior to the date on which Holding Company reasonably expects to pay such liability to the IRS. If any interest is to be paid or received as a result of any tax deficiency or refund, that interest shall be allocated among 5 the members of the Group in the ratio that each such member's change in income tax liability bears to the total change in the income tax liability of the Group. If any penalty is to be paid or received as a result of any tax deficiency or refund, that penalty shall be allocated to the member whose income resulted in the imposition of such penalty. 7. Election for Computing Earnings and Profits. For each taxable period ------------------------------------------- (or portion thereof) for which a Federal Consolidated Return is filed for the Group pursuant to this Agreement, Holding Company shall elect (if necessary) in the manner specified in Treasury Regulations (S) 1.1552-1(c) that the Group's consolidated federal income tax liability be apportioned for purposes of computing earnings and profits in accordance with the method provided in Section 1552(a)(1) of the Code and Treasury Regulations (S) 1.1552-1(a)(1). 8. Other Tax Items. This Agreement shall not apply with respect to the --------------- carryback of any net operating loss, tax credit or other tax benefit generated by a party and attributable to a taxable year beginning after the date hereof in which such party is not a member of the Group. 9. Other Consolidated Returns. Each member of the Group agrees to, at -------------------------- the request of Holding Company, join with Holding Company (or any direct or indirect subsidiary of Holding Company (if any)) in any Other Consolidated Return for any taxable period (or portion thereof) for which Holding Company (or any direct or indirect subsidiary of Holding Company (if any)) elects to file an Other Consolidated Return that includes such member. If at any time subsequent to the date hereof, the liability for any state, local or foreign income, franchise or other tax of Holding Company, Company, Subsidiary and/or any other affiliated corporation (if any) is determined on a unitary, 6 consolidated, group or combined basis (or any member becomes responsible for the payment of any such tax), this Agreement shall be applied to such state or local tax in like manner as it is applied to matters relating to federal income taxes, after taking into consideration the extent to which each party has been included in an Other Consolidated Return that relates to those taxes and other relevant issues. 10. Disputes. Any dispute concerning the interpretation of a Section or -------- an amount of payment due under this Agreement shall be resolved by Holding Company, whose reasonable judgment shall be conclusive and binding on the parties. 11. Successors. A party's rights and obligations under this Agreement ---------- may not be assigned without the prior written consent of the other party to this Agreement. This Agreement shall be binding upon and inure to the benefit of any successor to any party hereto. 12. Exclusive Agreement. This Agreement embodies the entire ------------------- understanding among the parties as to the subject matter hereof, and no change or modification may be made except in writing by each of the parties. 13. Waivers. The waiver of a breach of any term or condition of this ------- Agreement shall not be deemed to constitute the waiver of any other breach of the same or any other term or condition. 14. Counterparts. This Agreement may be executed in counterparts, each ------------ of which shall be deemed an original and all of which together shall constitute one and the same instrument. 15. Choice of Law; Amendments; Headings; Jurisdiction. This Agreement ------------------------------------------------- shall be governed by the internal laws of the State of New York. This Agreement may 7 not be amended or modified orally. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 16. Severability. Any term or provision of this Agreement which is ------------ invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable. 8 IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written above. COYOTE ACQUISITION LLC, a Delaware limited liability company By: /s/ Marc E. Becker __________________________________ Name: Marc E. Becker Title: Vice President PACER INTERNATIONAL, INC., a Tennessee corporation (formerly known as APL Land Transport Services, Inc.) By: /s/ Donald C. Orris _________________________________ Name: Donald C. Orris Title: Chairman, President and Chief Executive Officer PACER LOGISTICS, INC., a Delaware corporation (formerly known as Pacer International, Inc.) By: /s/ Donald C. Orris _________________________________ Name: Donald C. Orris Title: Chairman, President and Chief Executive Officer 9 EX-4.17 18 PURCHASE AGREEMENT DATED MAY 24, 1999 EXHIBIT 4.17 $150,000,000 Pacer International, Inc. 11 3/4% Senior Subordinated Notes due 2007 PURCHASE AGREEMENT May 24, 1999 May 24, 1999 Morgan Stanley & Co. Incorporated BT Alex. Brown Incorporated Credit Suisse First Boston Corporation Credit Lyonnais Securities (USA) Inc. c/o Morgan Stanley & Co. Incorporated 1585 Broadway New York, New York 10036 Dear Sirs and Mesdames: Each of Pacer International, Inc., a Tennessee corporation (f/k/a APL Land Transport Services, Inc., the "Company"), and the subsidiary guarantors listed on Schedule A hereto (the "Guarantors" and, together with the Company, the "Issuers"), propose to issue and sell to the several purchasers named in Schedule B hereto (the "Placement Agents") $150,000,000 aggregate principal amount of the Company's 11 3/4% Senior Subordinated Notes due 2007 (the "Notes") which Notes will be jointly and severally guaranteed (the "Guarantees" and, together with the Notes, the "Securities") on a senior subordinated basis by the Guarantors. The Notes are to be issued pursuant to the provisions of an indenture to be dated as of May 28, 1999 (the "Indenture") by and among the Company, the Guarantors and Wilmington Trust Company, as trustee (the "Trustee"). The Securities will be offered without being registered under the Securities Act of 1933, as amended (the "Securities Act"), to qualified institutional buyers in compliance with the exemption from registration provided by Rule 144A under the Securities Act and in offshore transactions in reliance on Regulation S under the Securities Act ("Regulation S"). Securities issued in book-entry form will be issued to Cede & Co. as nominee of The Depositary Trust Company ("DTC") pursuant to a letter agreement (the "DTC Agreement"), to be dated as of the Closing Date (as defined in Section 4), among the Company, the Guarantors, the Trustee and DTC. The Placement Agents and their direct and indirect transferees will be entitled to the benefits of a Registration Rights Agreement, substantially in the form attached hereto as Exhibit A, dated as of the Closing Date among the Company, the Guarantors and the Placement Agents (the "Registration Rights Agreement"). In connection with the sale of the Securities, the Company has prepared a preliminary offering memorandum dated May 7, 1999 (the "Preliminary Memorandum") and will prepare a final offering memorandum dated May 24, 1999 (the "Final Memorandum" and each of the Final Memorandum and the Preliminary Memorandum, a "Memorandum") -2- including or incorporating by reference a description of the terms of the Securities, the terms of the offering of the Securities and a description of the Company. The offering of the Securities is part of the financing that will be used to consummate the recapitalization of the Company (the "Recapitalization") which will be effected through (i) the purchase of shares of the Company's outstanding common stock by Coyote Acquisition LLC ("Coyote"), an entity formed by certain affiliates of Apollo Management L.P. ("Apollo"), (ii) the redemption by the Company of certain of its shares of common stock held by APL Limited and (iii) the formation of a transitory subsidiary which will be merged with and into Pacer Logistics, Inc. (f/k/a Pacer International, Inc., "Pacer") whereby Pacer will become a wholly-owned subsidiary of the Company. In connection with the Recapitalization, the Company will execute an agreement (the "Credit Agreement") with Bankers Trust Company, Morgan Stanley & Co. Incorporated and Credit Suisse First Boston Corporation, as agents, and certain other lenders to provide the Company a loan commitment of up to $235,000,000. Additionally, in connection with the Recapitalization, certain affiliates of Apollo Management, L.P. and APL Limited shall make an equity investment in the Company, as described in the Final Memorandum (the "Equity Investment"). The offering of the Securities, the Recapitalization, the Equity Investment and the related borrowings under the Credit Agreement are collectively referred to herein as the "Transactions." This agreement (this "Agreement" or the "Purchase Agreement"), the Indenture, the Notes, the Guarantees, the Securities, the Registration Rights Agreement and the DTC Agreement and each of the Exchange Notes and the Private Exchange Notes (as defined in the Registration Rights Agreement) and the related guarantees thereof are referred to collectively as the "Operative Documents." This Agreement is being entered into by Coyote on the date hereof. Simultaneously with the closing of the Transactions (each of which is deemed to have occurred simultaneously with the closing of the others), each of the Issuers shall enter into the Joinder Agreement, substantially in the form of Exhibit C, (the "Joinder Agreement") pursuant to which each such Issuer will observe and perform all of the rights, obligations and liabilities of an Issuer as provided in this Agreement as if it were an original signatory hereto. Upon the execution and delivery of the Joinder Agreement, Coyote shall be fully, unconditionally, and irrevocably released from all rights, obligations and liabilities hereunder. 1. Representations and Warranties. Coyote and each of the Issuers, jointly and severally, represents and warrants to, and agrees with, each Placement Agent that: (a) Neither the Final Memorandum nor any amendment or supplement thereto, as of the date thereof and the Closing Date, contains or will contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not -3- misleading, except that the representations and warranties set forth in this paragraph do not apply to statements or omissions in the Final Memorandum (or any such amendment or supplement thereto) based upon information relating to any Placement Agent furnished to the Company in writing by or on behalf of such Placement Agent expressly for use therein. (b) The Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the requisite corporate power and authority to own or lease its property and to conduct its business as now conducted and as described in the Final Memorandum and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the business, condition (financial or other), or results of operations of the Issuers and their respective subsidiaries, taken as a whole (a "Material Adverse Effect"). (c) Each Guarantor and its material subsidiaries has been duly organized, is validly existing as a corporation or limited liability company in good standing under the laws of the jurisdiction of its organization, has the requisite power and authority to own its property and to conduct its business as described in the Final Memorandum, if at all, and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not result in a Material Adverse Effect. (d) This Agreement has been duly authorized, executed and delivered by Coyote and as of the Closing Date by each of the Issuers. (e) As of the Closing Date, the Notes, the Exchange Notes and the Private Exchange Notes will have been duly authorized by the Company and, when executed and authenticated in accordance with the provisions of the Indenture and, in the case of the Notes, delivered to and paid for by the Placement Agents in accordance with the terms of this Agreement, will be valid and legally binding obligations of the Company, enforceable against the Company in accordance with their terms, subject to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally, (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought (regardless of whether such enforcement is considered in a proceeding in equity or at law) and (iii) public policy considerations, and will be entitled to the benefits of the Indenture and the Registration Rights Agreement. No holder of securities of any of the Issuers will be entitled to have such securities registered under the -4- registration statements required to be filed by any of the Issuers pursuant to the Registration Rights Agreement, other than as expressly permitted thereby. (f) As of the Closing Date, the Guarantees will have been duly authorized by each of the Guarantors and, upon the execution, authentication and delivery of the Notes and payment therefor in accordance with the terms of this Agreement, will have been duly executed and delivered, will be entitled to the benefits of the Indenture and will constitute a valid and legally binding obligation of each of the Guarantors, enforceable against each of the Guarantors in accordance with their terms, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect relating to creditor's rights generally, (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought (regardless of whether such enforcement is considered in a proceeding in equity or at law) and (iii) public policy considerations. (g) As of the Closing Date, each of the Indenture and Registration Rights Agreement will have been duly authorized by each of the Issuers and when executed and delivered by each of the Issuers (with respect to the Indenture, assuming the due authorization, execution, and delivery thereof by the Trustee) in accordance with the terms of this Agreement will be, valid and legally binding obligations of each of the Issuers, enforceable against each of the Issuers in accordance with its respective terms, (A) subject to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally, (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought (regardless of whether such enforcement is considered in a proceeding in equity or at law) and (iii) public policy considerations and (B) except as rights to indemnification and contribution under the Registration Rights Agreement may be limited by federal and state securities laws and public policy considerations. (h) The execution and delivery by each of the Issuers of, and the performance by each of the Issuers of the Transactions and its respective obligations under the Operative Documents, will not contravene any provision of applicable law or the certificate of incorporation, by-laws or other organizational document of any of the Issuers or any of the Agreements and Instruments (as defined in Section 1(o)) binding upon any of the Issuers that is material to any of the Issuers, or any judgment, order or decree of any governmental body, agency or court having jurisdiction over any of the Issuers, and no consent, approval, authorization or order of, or qualification with, any governmental body or agency is required for the performance by any of the Issuers of the Transactions or their respective obligations under any of the Operative Documents, which, if contravened, individually or in the aggregate, would have a Material Adverse Effect, and except such as may be required by the Securities Act, state securities or -5- "Blue Sky" laws in connection with the purchase and initial resale of the Securities by the Placement Agents other than as contemplated by the Registration Rights Agreement. (i) Each of the Issuers has all requisite corporate power and authority to execute, deliver and perform each of its obligations under this Agreement and the other Operative Documents and to consummate the Transactions and any other transactions contemplated hereby and thereby, including, without limitation, the power and authority to issue, sell and deliver the Securities as contemplated by this Agreement. (j) As of the Closing Date, the Company will have the authorized, issued and outstanding capital stock as set forth under the caption "Capitalization" in the Final Memorandum. All of the shares of issued and outstanding capital stock of each of the Issuers have been duly authorized and validly issued and are fully paid and non-assessable; none of the outstanding shares of capital stock of any of the Issuer was issued in violation of any preemptive or other similar rights of any securityholder of any such Issuer; and except as disclosed in the Final Memorandum, all of the outstanding shares of capital stock of each of the Issuers are owned free and clear of all liens, encumbrances, equities and claims or restrictions on transferability or voting (other than those imposed by the Securities Act, the securities or "Blue Sky" laws of certain jurisdictions and the Shareholders Agreements dated as of the Closing Date, among (i) APL Limited, Coyote Acquisition LLC, Coyote Acquisition II LLC and the Company, (ii) certain management shareholders, Coyote Acquisition LLC, Coyote Acquisition II LLC and the Company and (iii) certain affiliates of certain of the Placement Agents, Coyote Acquisition LLC, Coyote Acquisition II LLC and the Company. The Company does not own, directly or indirectly, any shares of stock or any other equity or long-term debt securities or have any equity interest in any firm, partnership, joint venture or other entity other than interests in its subsidiaries or as described in the Final Memorandum. (k) Subsequent to the respective dates as of which information is given in the Final Memorandum and except as described therein (A) none of the Issuers will have incurred any material liabilities or obligations, direct or contingent, or entered into any material transactions, not in the ordinary course of business and (B) there shall not be any material change in the capital stock (other than changes in the ordinary course of business) or long-term indebtedness of any of the Issuers. (l) Except as described in the Final Memorandum, there is not pending or, to the knowledge of any Issuer, threatened, any action, suit, proceeding, inquiry or investigation to which any Issuer is a party, or to which the property of any Issuer is subject, before or brought by any court or governmental agency or body, which could reasonably be expected to have a Material Adverse Effect. -6- (m) Except as would not, singly or in the aggregate, have a Material Adverse Effect (A) each of the Issuers is in compliance with applicable Environmental Laws (as defined below), (B) each of the Issuers has made all filings and provided all notices required under any applicable Environmental Law, and has and is in compliance with all permits required under any applicable Environmental Laws and each of them is in full force and effect, (C) there is no civil, criminal or administrative action, suit, demand, claim, hearing, notice of violation, investigation, proceeding, notice or demand letter or request for information pending or, to the knowledge of any of the Issuers, threatened against any of the Issuers under any Environmental Law, (D) no lien, charge, encumbrance or restriction has been recorded under any Environmental Law with respect to any assets, facility or property owned, operated, leased or controlled by any of the Issuers, (E) none of the Issuers has received notice that it has been identified as a potentially responsible party under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), or any comparable state law and (F) no property or facility of any of the Issuers is (i) listed or proposed for listing on the National Priorities List under CERCLA or (ii) listed in the Comprehensive Environmental Response, Compensation, Liability Information System List promulgated pursuant to CERCLA, or on any comparable list maintained by any state or local governmental authority. For purposes of this Agreement, "Environmental Laws" means the common law and all applicable federal, state and local laws or regulations, codes, orders, decrees, judgments or injunctions issued, promulgated, approved or entered thereunder, relating to pollution or protection of public or employee health and safety or the environment, including, without limitation, laws relating to (i) emissions, discharges, releases or threatened releases of hazardous materials into the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata), (ii) the manufacture, processing, distribution, use, generation, treatment, storage, disposal, transport or handling of hazardous materials, and (iii) underground and above ground storage tanks and related piping, and emissions, discharges, releases or threatened releases therefrom. (n) Each of the Operative Documents will conform in all material respects to the respective statements relating thereto contained in the Final Memorandum; the statements in the Final Memorandum under the caption "Certain United States Federal Income Tax Considerations," insofar as such statements constitute a summary of the United States federal tax laws referred to therein, are accurate and fairly summarize in all material respects the United States federal tax laws referred to therein. (o) None of the Issuers is in violation of its charter, by-laws or other organizational document or in violation of any applicable law, statute, rule, regulation, judgment, order, writ or decree of any government, government instrumentality or court, domestic or foreign, having jurisdiction over any of the Issuers or any of their -7- respective properties or assets or in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which any of the Issuers is a party or by which any of them may be bound, or to which any of the property or assets of any of the Issuers is subject (collectively, "Agreements and Instruments") except for such violations and defaults that would not result in a Material Adverse Effect. (p) No strike, labor dispute, slowdown or work stoppage with the employees of any of the Issuers exists or, to the knowledge of any of the Issuers, is pending or threatened which may reasonably be expected to result in a Material Adverse Effect. (q) Each of the Issuers owns or possesses all licenses or other rights to use all material patents, trademarks, service marks, trade names, copyrights and know-how necessary to conduct the businesses now or proposed to be operated by it as described in the Final Memorandum, and none of the Issuers has received any notice of infringement of or conflict with (or knows of any such infringement of or conflict with) asserted rights of others with respect to any patents, trademarks, service marks, trade names, copyrights or know-how which, if such assertion of infringement or conflict were sustained, would have a Material Adverse Effect. (r) No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any court or governmental authority or agency is necessary or required for the performance by any of the Issuers of their respective obligations hereunder, in connection with the offering, issuance or sale of the Securities, the Exchange Notes or the Private Exchange Notes (and the related guarantees thereof), for the performance by any of the Issuers of their respective obligations under the Operative Documents, or the consummation of the Transactions or any other transactions contemplated hereby or thereby or for the due execution, delivery or performance by the Issuers of the Operative Documents, except such as may be required by the Securities Act, state securities or "Blue Sky" laws in connection with the purchase and initial resale of the Securities by the Placement Agents, other than as contemplated by the Registration Rights Agreement. (s) Each of the Issuers has obtained or has applied for all licenses, franchises and other governmental authorizations necessary to conduct the business now operated or proposed to be operated as described in the Final Memorandum, the lack of which would result in a Material Adverse Effect. (t) Each of the Issuers has good and marketable title to all real property and good title to all personal property described in the Final Memorandum as being owned by it and good and marketable title to a leasehold estate in the real and personal property described in the Final Memorandum as being leased by it (except for those -8- leases of real property in which such Issuer has good title and that would be marketable but for the requirement that the landlord consent to an assignment or sublease of the lease), free and clear of all liens, charges, encumbrances or restrictions, except, in each case to the extent the failure to have such title or the existence of such liens, charges, encumbrances or restrictions would not result in Material Adverse Effect. (u) None of the Issuers has incurred any liability for any prohibited transaction or funding deficiency or any complete or partial withdrawal liability with respect to any pension, profit sharing or other plan which is subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), to which any Issuer makes or ever has made a contribution and in which any employee of any Issuer is or has ever been a participant, which, individually or in the aggregate, could reasonably be expected to have or result in a Material Adverse Effect; and with respect to such plans, each of the Issuers is in compliance in all respects with all applicable provisions of ERISA, except where the failure to so comply would not, singly or in the aggregate, reasonably be expected to result in a Material Adverse Effect. (v) Each of the Issuers has filed all necessary federal, state, local and foreign income and franchise tax returns that are required to be filed or have duly requested extensions thereof, except where such failure would not have a Material Adverse Effect, and have paid all taxes required to be paid by any of them and any related assessments, fines or penalties, except for any such tax, assessment, fine or penalty that is of a de minimus amount or that is being contested in good faith and by appropriate proceedings and for which adequate reserves have been made in accordance with GAAP; and each of the Issuers believes charges, accruals and reserves adequate in all material respects have been provided for in the financial statements included in the Final Memorandum in respect of all federal, state, local and foreign taxes for all periods as to which the tax liability of any of the Issuers has not been finally determined or remains open to examination by applicable taxing authorities. (w) Each of the Issuers carry or are entitled to the benefits of insurance, including self-insurance with financially sound and reputable insurers other than with respect to self-insurance, in such amounts and covering such risks as is generally maintained by companies of established repute engaged in the same or similar business, and all such insurance is in full force and effect. (x) Each of the Issuers has reviewed its operations and that of its respective subsidiaries to evaluate the extent to which the business or operations of the Issuers or any of their subsidiaries will be affected by the Year 2000 Problem (that is, any significant risk that computer hardware or software applications used by the Issuers and their respective subsidiaries will not, in the case of dates or time periods occurring after December 31, 1999, function at least as effectively as in the case of dates or times periods occurring prior to January 1, 2000); as a result of such review, the Issuers do -9- not believe, that (A) there are any issues related to this preparedness to address the Year 2000 Problem that are of a character required to be described or referred to in the Final Memorandum which have not been accurately described in the Final Memorandum and (B) except as discussed in the Final Memorandum, the Year 2000 Problem will have a Material Adverse Effect. (y) The fair value and present fair saleable value of the assets of each of the Issuers exceeds the sum of its stated liabilities and identified contingent liabilities; and after giving effect to the Transactions and the consummation of the transactions contemplated thereby and by the Final Memorandum, none of the Issuers will be (a) left with unreasonably small capital with which to carry on its business as it is proposed to be conducted, (b) unable to pay its debts (contingent or otherwise) as they mature or (c) insolvent. (z) The statistical and market-related data included in the Final Memorandum are based on or derived from independent sources which the Issuers believe to be reliable in all material respects or represent the Issuers' good faith estimates based on information they believe to be reliable. (aa) The Company is not, and after giving effect to the offering and sale of the Securities and the application of the proceeds thereof as described in the Final Memorandum will not be, an "investment company" or an entity "controlled" by an "investment company" as such terms are defined in the Investment Company Act of 1940, as amended. (bb) Neither any of the Issuers nor any affiliate (as defined in Rule 501(b) of Regulation D under the Securities Act, an "Affiliate") of any of the Issuers has directly, or through any agent, (i) sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any security (as defined in the Securities Act) which is or will be integrated with the sale of the Securities in a manner that would require the registration under the Securities Act of the Securities or (ii) engaged in any form of general solicitation or general advertising in connection with the offering of the Securities, (as those terms are used in Regulation D under the Securities Act) or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act. (cc) None of the Issuers, their respective Affiliates or any person acting on their behalf has engaged or will engage in any directed selling efforts (within the meaning of Regulation S) with respect to the Securities; and the Issuers and their respective Affiliates and any person acting on their behalf have complied and will comply with the offering restrictions requirement of Regulation S, except no representation, warranty or agreement is made by the Issuers in this paragraph with respect to the Placement Agents. -10- (dd) It is not necessary in connection with the offer, sale and delivery of the Securities to the Placement Agents in the manner contemplated by this Agreement to register the Securities under the Securities Act or to qualify the Indenture under the Trust Indenture Act of 1939, as amended. (ee) The Securities satisfy the requirements set forth in Rule 144A(d)(3) under the Securities Act. (ff) No securities of the Company or any subsidiary are of the same class (within the meaning of Rule 144A under the Act) as the Securities and listed on a national securities exchange registered under Section 6 of the Exchange Act, or quoted in a U.S. automated inter-dealer quotation system. (gg) Neither the consummation of the Transactions or any other transactions contemplated hereby nor the sale, issuance, execution or delivery of the Securities, nor the application of the proceeds therefrom (applied as described in the Final Memorandum under the caption "Use of Proceeds"), will violate Regulation T (12 C.F.R. Part 220), U (12 C.F.R. Part 221) or X (12 C.F.R. Part 224) of the Board of Governors of the Federal Reserve System. (hh) Neither any of the Issuers nor any of their respective Affiliates, officers, directors or controlling persons has taken, directly or indirectly, any action designed to cause or to result in, or that has constituted or that might reasonably be expected to constitute, the stabilization or manipulation of the price of any security of any of the Issuers to facilitate the sale or resale of the Securities. (ii) Except pursuant to this Agreement, there are no contracts, agreements or understandings between any of the Issuers and any other person that would give rise to a valid claim against the Issuers or the Placement Agents for a brokerage commission, finder's fee or like payment in connection with the issuance, purchase and sale of the Securities. (jj) The audited and unaudited consolidated financial statements and related notes of each of the Company and its consolidated subsidiaries and Pacer and its consolidated subsidiaries included in the Final Memorandum present fairly, in all material respects, the consolidated financial position, results of operations and cash flows of the Company and its consolidated subsidiaries and Pacer and its consolidated subsidiaries, respectively, at the dates and for the periods to which they relate and have been prepared in accordance with generally accepted accounting principles applied on a consistent basis. Arthur Andersen LLP, which has audited the consolidated financial statements as set forth in its reports included in the Final Memorandum, is an independent public accounting firm as required by the Act and the rules and regulations promulgated thereunder. -11- (kk) The unaudited pro forma condensed consolidated balance sheet and statements of operations (including the notes thereto) included in the Final Memorandum (A) have been prepared in all material respects in accordance with applicable requirements of Regulation S-X promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"); and (B) have been properly computed on the bases described therein. The assumptions used in the preparation of the unaudited pro forma condensed consolidated balance sheet and statements of income and other pro forma condensed consolidated financial information included in the Final Memorandum are reasonable and the adjustments used therein are appropriate to give effect to the transactions or circumstances referred to therein. (ll) Each of the Transactions conforms in all material respects to the description thereof in the Final Memorandum. (mm) There has not occurred any material adverse change, or any development involving a prospective material adverse change, in the business, condition (financial or other), or results of operations of the Issuers and their respective subsidiaries, taken as a whole, from that set forth in the Final Memorandum (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement). (nn) The Company has delivered to counsel for the Placement Agents a true and correct copy of each of the documents contemplated by the Transactions, together with all related agreements and all schedules and exhibits thereto, and there shall have been no material amendments, alterations, modifications or waivers of any of the provisions of any such documents since their respective dates of execution, other than any such amendments, alterations, modifications and waivers as to which the Placement Agents have been advised in writing and which would be required to be disclosed in the Final Memorandum; and to the best knowledge of the Issuers there exists no event or condition which would constitute a default or an event of default under any of the documents contemplated by the Transactions which would result in a Material Adverse Effect or materially adversely affect the ability of the Issuers to consummate the Transactions. 2. Agreements to Sell and Purchase. Coyote agrees to cause the Issuers, and as of the Closing Date, the Issuers agree, to sell to the several Placement Agents, and each Placement Agent, upon the basis of the representations and warranties herein contained, but subject to the conditions hereinafter stated, agrees, severally and not jointly, to purchase from the Issuers the respective principal amount of Securities set forth in Schedule B hereto opposite its name at a purchase price of 100% of the principal amount thereof (the "Purchase Price") plus accrued interest, if any, to the Closing Date. Coyote hereby agrees not to permit the Company to, and as of the Closing Date the Company agrees that, without the prior written consent of the Placement Agents, it will -12- not, during the period beginning on the date hereof and continuing to and including the Closing Date, offer, sell, contract to sell or otherwise dispose of any debt of the Company or warrants to purchase debt of the Company substantially similar to the Securities (other than the sale of the Securities under this Agreement). 3. Terms of Offering. The Placement Agents have advised Coyote and the Issuers that they will make an offering of the Securities purchased by them hereunder on the terms to be set forth in the Final Memorandum, as soon as practicable after this Agreement is entered into as in the Placement Agents' judgment is advisable. 4. Payment and Delivery. Payment for the Securities shall be made to the Company in immediately available funds in New York City against delivery of such Securities for the respective accounts of the several Placement Agents at 10:00 a.m., New York City time, on May 28, 1999 or such other time as shall be agreed upon by the Placement Agents and Coyote, such time and date hereinafter referred to as the "Closing Date." Certificates for the Securities shall be in definitive form or global form, as specified by the Placement Agents, and registered in such names and in such denominations as the Placement Agents shall request in writing not later than one full business day prior to the Closing Date. The certificates evidencing the Securities shall be delivered to the Placement Agents on the Closing Date for the respective accounts of the several Placement Agents, with any transfer taxes payable in connection with the transfer of the Securities to the Placement Agents duly paid, against payment of the Purchase Price therefor plus accrued interest, if any, to the date of payment and delivery. 5. Conditions to the Placement Agents' Obligations. The several obligations of the Placement Agents to purchase and pay for the Securities on the Closing Date are subject to the following conditions: (a) Subsequent to the execution and delivery of this Agreement and prior to the Closing Date: (i) there shall not have occurred any downgrading, nor shall any notice have been given of any intended or potential downgrading, in the rating accorded any of the Company's securities by any "nationally recognized statistical rating organization," as such term is defined for purposes of Rule 436(g)(2) under the Securities Act; and (ii) there shall not have occurred any change, or any development involving a prospective change, in the condition (financial or otherwise), or in the earnings, business or operations of the Issuers, taken as a whole, from that set forth in the Final Memorandum (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement) that, in the judgment of the Placement Agents, is material and adverse and that makes it, in the -13- judgment of the Placement Agents, impracticable to market the Securities on the terms and in the manner contemplated in the Final Memorandum. (b) The Placement Agents shall have received on the Closing Date a certificate, dated the Closing Date and signed by at least two executive officers of each of the Issuers, to the effect set forth in Section 5(a)(i) and to the effect that the representations and warranties of the Issuers contained in this Agreement are true and correct as of the Closing Date (other than to the extent any such representation or warranty is expressly made to a certain date) and that each of the Issuers has performed, in all material respects, all covenants and agreements and satisfied, in all material respects, all of the conditions on their part to be performed or satisfied hereunder on or before the Closing Date. The executive officers signing and delivering such certificate may rely upon the best of their knowledge as to proceedings threatened. (c) The Placement Agents shall have received on the Closing Date an opinion of Dewey Ballantine LLP, special counsel for the Issuers, and other special counsel to the Issuers, dated the Closing Date, substantially in the form of Exhibit B hereto. Such opinion shall be rendered to the Placement Agents and the Trustee at the request of the Issuers and shall so state therein. (d) The Placement Agents shall have received on the Closing Date an opinion of Cahill Gordon & Reindel, counsel for the Placement Agents, dated the Closing Date, with respect to certain legal matters relating to this Agreement and such other related matters as the Placement Agents may require. In rendering such opinion, Cahill Gordon & Reindel shall have received and may rely upon such certificates and other documents and information as they may reasonably request to pass upon such matters. In addition, in rendering their opinion, Cahill Gordon & Reindel may state that their opinion is limited to matters of New York law, Delaware corporations law and federal law. (e) The Placement Agents shall have received on each of the date hereof and the Closing Date letters, dated the date hereof or the Closing Date, as the case may be, in form and substance reasonably satisfactory to the Placement Agents, from Pricewaterhouse Coopers and Arthur Andersen, LLP, independent public accountants, containing statements and information of the type ordinarily included in accountants' "comfort letters" to underwriters with respect to the financial statements and certain financial information contained in or incorporated by reference into the Final Memorandum. (f) The representations and warranties of Coyote and the Issuers, as the case may be, contained in this Agreement shall be true and correct in all material respects as of the date hereof and as of the Closing Date (other than to the extent any -14- such representation or warranty is expressly made as of a certain date); the Issuers shall have complied in all material respects with all covenants and agreements and satisfied all conditions on their part to be performed or satisfied hereunder at or prior to the Closing Date; and subsequent to the date of the most recent financial statements in the Final Memorandum, there shall have been no material adverse change in the business, condition (financial or other), results of operations or prospects of the Issuers, taken as a whole, except as set forth in, or contemplated by, the Final Memorandum. (g) Subsequent to the date as of which information is given in the Final Memorandum, except as described in the Final Memorandum, none of the Issuers shall have incurred any liabilities or obligations, direct or contingent (other than in the ordinary course of business) that are material to the Issuers, taken as a whole, or entered into any transactions not in the ordinary course of business that are material to the business, condition (financial or other), results of operations or prospects of the Issuers, taken as a whole, and, other than as described in the Final Memorandum, there shall not have been any change in the capital stock (other than changes in the ordinary course of business) or long-term indebtedness of any Issuer that is material to the business, condition (financial or other), results of operations or prospects of the Issuers, taken as a whole. (h) Subsequent to the date as of which information is given in the Final Memorandum, the conduct of the business and operations of the Issuers or any of their respective subsidiaries has not been interfered with by strike, fire, flood, hurricane, accident or other calamity (whether or not insured) or by any court or governmental action, order or decree, and, except as otherwise stated therein, the properties of the Issuers or any of their respective subsidiaries have not sustained any loss or damage (whether or not insured) as a result of any such occurrence, except any such interference, loss or damage which would not have a Material Adverse Effect. (i) On the Closing Date, the Placement Agents shall have received the Registration Rights Agreement executed by each of the Issuers and such agreement shall be in full force and effect on the Closing Date. (j) The Recapitalization and the other Transactions shall have been consummated concurrently with the offering of the Securities and the Placement Agents shall have received a true and correct copy of the (i) Stock Purchase Agreement, dated as of March 15, 1999 by and between APL Limited and Coyote Acquisition LLC and (ii) the Agreement and Plan of Merger dated as of February 22, 1999 by and among Mile High Acquisition Corp., Pacer and the stockholders of Pacer. -15- (k) The Credit Agreement shall have been executed and delivered by all parties thereto and the Placement Agents shall have received a true and correct copy thereof. (l) On the Closing Date, the Company shall have, to the extent a party thereto, complied in all material respects with all agreements and covenants in all documents contemplated by the Transactions and satisfied or waived all conditions specified therein to be complied with or performed at or prior to the Closing Date, and each of the documents contemplated by the Transactions shall be in full force and effect. (m) On the Closing Date, the Placement Agents shall have received the Joinder Agreement executed by each of the Issuers and such agreement shall be in full force and effect on the Closing Date. (n) On or before the Closing Date, the Placement Agents and counsel for the Placement Agents shall have received such further documents, opinions, certificates and schedules or instruments relating to the business, corporate, legal and financial affairs of the Issuers as they shall have heretofore reasonably requested from the Issuers and Coyote. All such opinions, certificates, letters, schedules, documents or instruments delivered pursuant to this Agreement will comply with the provisions hereof only if they are reasonably satisfactory in all material respects to the Placement Agents and counsel for the Placement Agents. The Company shall furnish to the Placement Agents such conformed copies of such opinions, certificates, letters, schedules, documents and instruments in such quantities as the Placement Agents shall reasonably request. 6. Covenants of the Issuers. In further consideration of the agreements of the Placement Agents contained in this Agreement, Coyote and, as of the Closing Date, the Issuers covenant with each Placement Agent as follows: (a) To furnish to the Placement Agents in New York City, without charge, as soon as practicable after the date of this Agreement and during the period mentioned in Section 6(c), as many copies of the Preliminary Memorandum, the Final Memorandum, any documents incorporated by reference therein and any supplements and amendments thereto as the Placement Agents may reasonably request. (b) Before amending or supplementing either Memorandum, to furnish to the Placement Agents a copy of each such proposed amendment or supplement and not to use any such proposed amendment or supplement to which the Placement Agents reasonably object. -16- (c) If, during such period after the date hereof and prior to the date on which all of the Securities shall have been sold by the Placement Agents, any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Final Memorandum in order to make the statements therein, in the light of the circumstances when the Final Memorandum is delivered to a purchaser, not misleading, or if, in the opinion of counsel for the Placement Agents, it is necessary to amend or supplement the Final Memorandum to comply with applicable law, forthwith to prepare and furnish, at its own expense, to the Placement Agents, either amendments or supplements to the Final Memorandum so that the statements in the Final Memorandum as so amended or supplemented will not, in the light of the circumstances when the Final Memorandum is delivered to a purchaser, be misleading or so that the Final Memorandum, as amended or supplemented, will comply with applicable law. (d) To endeavor to qualify the Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions as the Placement Agents may designate and will continue such qualifications in effect for as long as may be reasonably necessary to complete the resale of the Securities; provided, however, that in connection therewith, none of the Issuers shall be required to qualify as a foreign corporation or to execute a general consent to service of process in any jurisdiction or subject itself to taxation in any such jurisdiction where it is not so subject. (e) Whether or not the Transactions or the other transactions contemplated in this Agreement are consummated or this Agreement is terminated, to pay or cause to be paid all expenses incident to the performance of its obligations under this Agreement, including: (i) the fees, disbursements and expenses of the Issuers' counsel and the Issuers' accountants in connection with the issuance and sale of the Securities and all other fees or expenses in connection with the preparation of each Memorandum and all amendments and supplements thereto, including all printing costs associated therewith, and the delivering of copies thereof to the Placement Agents, in the quantities herein above specified, (ii) all costs and expenses related to the transfer and delivery of the Securities to the Placement Agents, including any transfer or other taxes payable thereon, (iii) the cost of printing or producing any Blue Sky or legal investment memorandum in connection with the offer and sale of the Securities under state securities laws and all expenses in connection with the qualification of the Securities for offer and sale under state securities laws as provided in Section 6(d) hereof, including filing fees and the reasonable fees and disbursements of counsel for the Placement Agents in connection with such qualification and in connection with the Blue Sky or legal investment memorandum, (iv) any fees charged by rating agencies for the rating of the Securities, (v) all document production charges and expenses of counsel to the Placement Agents (but not including their fees for professional services) in connection with the preparation of this Agreement, (vi) the fees and expenses, if any, incurred in connection with the admission of the Securities for trading in PORTAL or any appropriate market system, (vii) the costs and charges of the Trustee and any transfer agent, regis- -17- trar or depositary, (viii) the cost of the preparation, issuance and delivery of the Securities, (ix) the costs and expenses of the Issuers relating to investor presentations on any "road show" undertaken in connection with the marketing of the offering of the Securities, including, without limitation, expenses associated with the production of road show slides and graphics, fees and expenses of any consultants engaged in connection with the road show presentations with the prior approval of the Issuers, travel and lodging expenses of the representatives and officers of the Issuers and any such consultants, and the cost of any aircraft chartered in connection with the road show, and (x) all other costs and expenses incident to the performance of the obligations of the Issuers hereunder for which provision is not otherwise made in this Section. It is understood, however, that except as provided in this Section, Section 8, and the last paragraph of Section 10, the Placement Agents will pay all of their costs and expenses, including fees and disbursements of their counsel, transfer taxes payable on resale of any of the Securities by them and any advertising expenses connected with any offers they may make. (f) Neither the Issuers nor any Affiliate will sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in the Securities Act) which could be integrated with the sale of the Securities in a manner which would require the registration under the Securities Act of the Securities. (g) Not to solicit any offer to buy or offer or sell the Securities by means of any form of general solicitation or general advertising (as those terms are used in Regulation D under the Securities Act) or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act. (h) While any of the Securities remain "restricted securities" within the meaning of the Securities Act, to make available, upon request, to any seller of such Securities the information specified in Rule 144A(d)(4) under the Securities Act, unless the Company is then subject to Section 13 or 15(d) of the Exchange Act. (i) To use their commercially reasonable efforts to permit the Securities to be designated PORTAL securities in accordance with the rules and regulations adopted by the National Association of Securities Dealers, Inc. relating to trading in the PORTAL Market. (j) None of the Issuers, their Affiliates or any person acting on their behalf (other than the Placement Agents) will engage in any directed selling efforts (as that term is defined in Regulation S) with respect to the Securities, and the Issuers and their Affiliates and each person acting on their behalf (other than the Placement Agents) will comply with the offering restrictions requirement of Regulation S. (k) During the period of two years after the Closing Date, the Issuers will not, and will not permit any of their affiliates (as defined in Rule 144 under the Secu- -18- rities Act) to resell any of the Securities which constitute "restricted securities" under Rule 144 that have been reacquired by any of them. (l) The Company will apply the net proceeds from the sale of the Securities substantially as set forth under "Use of Proceeds" in the Final Memorandum. (m) For so long as the Securities remain outstanding, the Issuers will furnish to the Placement Agents copies of all reports and other communications (financial or otherwise) furnished by the Issuers to the Trustee or to the holders of the Securities and, as soon as available, copies of any reports or financial statements furnished to or filed by the Company with the Commission or any national securities exchange on which any class of securities of the Company may be listed. (n) Prior to the Closing Date, the Company will furnish to the Placement Agents, as soon as practicable after they have been prepared, a copy of any unaudited interim consolidated financial statements of the Company for any period subsequent to the period covered by the most recent financial statements appearing in the Final Memorandum. 7. Offering of Securities; Restrictions on Transfer. (a) Each Placement Agent, severally and not jointly, represents and warrants that such Placement Agent is a qualified institutional buyer as defined in Rule 144A under the Securities Act (a "QIB"). Each Placement Agent, severally and not jointly, agrees with the Issuers that (i) it has not and will not solicit offers for, or offer or sell, such Securities by any form of general solicitation or general advertising (as those terms are used in Regulation D under the Securities Act) or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act and (ii) it has and will solicit offers for such Securities only from, and will offer such Securities only to, persons that it reasonably believes to be (A) in the case of offers inside the United States, QIBs and (B) in the case of offers outside the United States, to persons other than U.S. persons ("foreign purchasers," which term shall include dealers or other professional fiduciaries in the United States acting on a discretionary basis for foreign beneficial owners (other than an estate or trust)); provided, however, that, in the case of this clause (B), in purchasing such Securities such persons are deemed to have represented and agreed as provided in the Final Memorandum under the caption "Transfer Restrictions." (b) Each Placement Agent, severally and not jointly, represents, warrants, and agrees with respect to offers and sales outside the United States that: (i) such Placement Agent understands that no action has been or will be taken in any jurisdiction by the Issuers that would permit a public offering of the Securities, or possession or distribution of either Memorandum or any other offering or publicity material relating to the Securities, in any country or jurisdiction where action for that purpose is required; -19- (ii) such Placement Agent will comply with all applicable laws and regulations in each jurisdiction in which it acquires, offers, sells or delivers Securities or has in its possession or distributes either Memorandum or any such other material, in all cases at its own expense; (iii) the Securities have not been registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in accordance with Rule 144A or Regulation S under the Securities Act or pursuant to another exemption from the registration requirements of the Securities Act; (iv) such Placement Agent has offered the Securities and will offer and sell the Securities (A) as part of their distribution at any time and (B) otherwise until 40 days after the later of the commencement of the offering and the Closing Date, only in accordance with Rule 903 of Regulation S or as otherwise permitted in Section 7(a); accordingly, no Placement Agent, its Affiliates nor any persons acting on its or their behalf have engaged or will engage in any directed selling efforts (within the meaning of Regulation S) with respect to the Securities, and any such Placement Agent, its Affiliates and any such persons have complied and will comply with the offering restrictions requirement of Regulation S; (v) such Placement Agent has (A) not offered or sold and, prior to the date six months after the Closing Date, will not offer or sell any Securities to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995; (B) complied and will comply with all applicable provisions of the Financial Services Act 1986 with respect to anything done by it in relation to the Securities in, from or otherwise involving the United Kingdom, and (C) only issued or passed on and will only issue or pass on in the United Kingdom any document received by it in connection with the issue of the Securities to a person who is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996 (as amended) or is a person to whom such document may otherwise lawfully be issued or passed on; (vi) such Placement Agent understands that the Securities have not been and will not be registered under the Securities and Exchange Law of Japan, and represents that it has not offered or sold, and agrees not to offer or sell, directly or indirectly, any Securities in Japan or for the account of any resident thereof except pursuant to any exemption from the registration requirements of the Securities and Exchange Law of Japan and otherwise in compliance with applicable provisions of Japanese law; and -20- (vii) such Placement Agent agrees that, at or prior to confirmation of sales of the Securities, it will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases Securities from it during the restricted period a confirmation or notice to substantially the following effect: "The Securities covered hereby have not been registered under the U.S. Securities Act of 1933 (the "Securities Act") and may not be offered and sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the offering and the closing date, except in either case in accordance with Regulation S (or Rule 144A if available) under the Securities Act. Terms used above have the meaning given to them by Regulation S." Terms used in this Section 7(b) have the meanings given to them by Regulation S. 8. Indemnity and Contribution. (a) Each of the Issuers and, subject to the last sentence of the ninth introductory paragraph of this Agreement, Coyote, jointly and severally, agrees to indemnify and hold harmless each Placement Agent, its directors, officers and each person, if any, who controls such Placement Agent within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in either Memorandum (as amended or supplemented if the Issuers shall have furnished any amendments or supplements thereto to the Placement Agents), or caused by any omission or alleged omission to state therein a material fact necessary to make the statements therein in the light of the circumstances under which they were made not misleading, except insofar as such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission that is based upon information relating to any Placement Agent furnished to the Issuers in writing by such Placement Agent expressly for use therein; provided, however, that the foregoing indemnity agreement with respect -------- ------- to any Preliminary Memorandum shall not inure to the benefit of any Placement Agent from whom the person asserting any such losses, claims, damages or liabilities purchased Securities, or any person controlling such Placement Agent, if a copy of the Final Memorandum (as then amended or supplemented if the Issuers shall have furnished any amendments or supplements thereto) was not sent or given by or on behalf of such Placement Agent to such person, if required by law so to have been delivered, at or prior to the written confirmation of the sale of the Securities to such person, and if the Final Memorandum (as so amended or supplemented) would have cured the defect giving rise to such losses, claims, damages or liabilities, unless such failure is the result of noncompliance by the Issuers with Section 6(a) hereof. -21- (b) Each Placement Agent agrees, severally and not jointly, to indemnify and hold harmless each of the Issuers and Coyote, its directors, officers and each person, if any, who controls such Issuer or Coyote within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Issuers and Coyote to such Placement Agent, but only with reference to information relating to such Placement Agent furnished to the Issuers in writing by such Placement Agent expressly for use in either Memorandum or any amendments or supplements thereto. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to Section 8(a) or 8(b), such person (the "indemnified party") shall promptly notify the person against whom such indemnity may be sought (the "indemnifying party") in writing and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in respect of the legal expenses of any indemnified party in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all such indemnified parties and that all such fees and expenses shall be reimbursed as they are incurred. Such firm shall be designated in writing by the Placement Agents, in the case of parties indemnified pursuant to Section 8(a), and by the Issuers and Coyote, in the case of parties indemnified pursuant to Section 8(b). The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement (x) includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding and (y) does not include any statement as to an admission of fault, culpability or failure to act by or on behalf of such indemnified party. (d) To the extent the indemnification provided for in Section 8(a) or 8(b) is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each indemnifying party under such paragraph, in lieu of -22- indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Issuers and Coyote on the one hand and the Placement Agents on the other hand from the offering of the Securities or (ii) if the allocation provided by clause 8(d)(i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause 8(d)(i) above but also the relative fault of the Issuers and Coyote on the one hand and of the Placement Agents on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Issuers and Coyote on the one hand and the Placement Agents on the other hand in connection with the offering of the Securities shall be deemed to be in the same respective proportions as the net proceeds from the offering of the Securities (before deducting expenses) received by the Issuers and Coyote and the total discounts and commissions received by the Placement Agents, in each case as set forth in the Final Memorandum, bear to the aggregate offering price of the Securities. The relative fault of the Issuers and Coyote on the one hand and of the Placement Agents on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Issuers or Coyote, or by the Placement Agents and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Placement Agents' respective obligations to contribute pursuant to this Section 8 are several in proportion to the respective principal amount of Securities they have purchased hereunder, and not joint. (e) The Issuers, Coyote and the Placement Agents agree that it would not be just or equitable if contribution pursuant to this Section 8 were determined by pro rata allocation (even if the Placement Agents were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in Section 8(d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in Section 8(d) shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 8, no Placement Agent shall be required to contribute any amount in excess of the amount by which the total price at which the Securities resold by it in the initial placement of such Securities were offered to investors exceeds the amount of any damages that such Placement Agent has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The remedies provided for in this Section 8 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. -23- (f) The indemnity and contribution provisions contained in this Section 8 and the representations, warranties and other statements of the Issuers and Coyote, as the case may be, contained in this Agreement shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Placement Agent or any person controlling any Placement Agent or by or on behalf of the Issuers, their respective officers or directors or any person controlling any of the Issuers and (iii) acceptance of and payment for any of the Securities. 9. Termination. This Agreement shall be subject to termination by notice given by the Placement Agents to Coyote, if (a) after the execution and delivery of this Agreement and prior to the Closing Date (i) trading generally shall have been suspended or materially limited on or by, as the case may be, any of the New York Stock Exchange, the American Stock Exchange, the Nasdaq National Market, the Chicago Board of Options Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any securities of the Company shall have been suspended on any exchange or in any over-the-counter market, (iii) a general moratorium on commercial banking activities in New York shall have been declared by either Federal or New York State authorities or (iv) there shall have occurred any outbreak or escalation of hostilities or other domestic or international calamity or any crisis or change in political or economic conditions or in the financial markets or any calamity or crisis that, in the judgment of the Placement Agents, is material and adverse and (b) in the case of any of the events specified in clauses 9(a)(i) through 9(a)(iv), such event, singly or together with any other such event, makes it, in the judgment of the Placement Agents, impracticable or inadvisable to market the Securities on the terms and in the manner contemplated in the Final Memorandum. Termination of this Agreement pursuant to this Section 9 shall be without liability of any party to any other party except as provided in Section 6(e) and 8(f). 10. Effectiveness; Defaulting Placement Agents. (a) This Agreement shall become effective upon the execution and delivery hereof by the parties hereto. (b) If, on the Closing Date, any one or more of the Placement Agents shall fail or refuse to purchase Securities that it or they have agreed to purchase hereunder on such date, and the aggregate principal amount of Securities which such defaulting Placement Agent or Placement Agents agreed but failed or refused to purchase is not more than one-tenth of the aggregate principal amount of Securities to be purchased on such date, the other Placement Agents shall be obligated, severally in the proportions that the principal amount of Securities set forth opposite their respective names in Schedule B bears to the aggregate principal amount of Securities set forth opposite the names of all such non-defaulting Placement Agents, or in such other proportions as you may specify, to purchase the Securities which such defaulting Placement Agent or Placement Agents agreed but failed or refused to purchase on such date; provided that in no event shall the principal amount of Securities that any Placement Agent has agreed to purchase pursuant to this Agreement be increased pursuant to this Section 10(b) by an amount in excess of one-ninth of such principal amount of Securities -24- without the written consent of such Placement Agent. If, on the Closing Date, any Placement Agent or Placement Agents shall fail or refuse to purchase Securities which it or they have agreed to purchase hereunder on such date and the aggregate principal amount of Securities with respect to which such default occurs is more than one-tenth of the aggregate principal amount of Securities to be purchased on such date, and arrangements satisfactory to the Placement Agents and the Issuers for the purchase of such Securities are not made within 36 hours after such default, this Agreement shall terminate without liability on the part of any non-defaulting Placement Agent or of the Issuers. In any such case, either the Placement Agents or the Issuers shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Final Memorandum or in any other documents or arrangements may be effected. Any action taken under this paragraph shall not relieve any defaulting Placement Agent from liability in respect of any default of such Placement Agent under this Agreement. If this Agreement shall be terminated by the Placement Agents, or any of them, because of any failure or refusal on the part of any of the Issuers to comply with the terms or to fulfill any of the conditions of this Agreement, or if for any reason any of the Issuers shall be unable to perform their respective obligations under this Agreement, the Issuers will reimburse the Placement Agents or such Placement Agents as have so terminated this Agreement with respect to themselves, severally, for all out-of-pocket expenses (including the fees and disbursements of Cahill Gordon & Reindel, counsel for the Placement Agents) reasonably incurred by such Placement Agents in connection with this Agreement or the offering contemplated hereunder. 11. Notices. All communications hereunder shall be in writing and, if sent to the Issuers, shall be mailed or delivered (a) to the Company at: Pacer International, Inc. 3746 Mt. Diablo Blvd. Suite 110 Lafayette, CA 94549 Telecopy: (925) 299-1939 Attention: Donald C. Orris with a copy to: Dewey Ballantine LLP 1301 Avenue of the Americas New York, New York 10019 Telecopy: (212) 259-6333 Attention: Morton A. Pierce, Esq. Douglas L. Getter, Esq. -25- or (b) to the Placement Agents at: Morgan Stanley & Co. Incorporated 1585 Broadway New York, New York 10036 Telecopy: (212) 761-4000 Attention: Joel Feldmann BT Alex. Brown Incorporated 130 Liberty Street New York, New York 10006 Telecopy: (212) 250-7200 Attention: Larry Zimmerman Credit Suisse First Boston Corporation 11 Madison Avenue New York, New York 10010-3629 Telecopy: (212) 325-8018 Attention: Mark W. Kennelley Credit Lyonnais Securities (USA) Inc. 1301 Avenue of the Americas New York, New York 10019-6022 Telecopy: (212) 261-4190 Attention: Michael E. Sohr with a copy to: Cahill Gordon & Reindel 80 Pine Street New York, New York 10005 Telecopy: (212) 269-5420 Attention: John A. Tripodoro, Esq. All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; and one business day after being timely delivered to a next-day air courier; and when receipt is acknowledged by addressee, if telecopied. 12. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be deemed an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. -26- 13. Applicable Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to any provisions thereof relating to conflicts of law. 14. Headings. The headings of the sections of this Agreement have been inserted for convenience of reference only and shall not be deemed a part of this Agreement. -27- Very truly yours, COYOTE ACQUISITION LLC By: /s/ Joshua Harris __________________________ Joshua Harris Vice President -28- Accepted as of the date hereof: MORGAN STANLEY & CO. INCORPORATED By: /s/ Clifton E. Strain ____________________________ Name: Clifton E. Strain Title: Principal BT ALEX. BROWN INCORPORATED By: /s/ Bruce Tully ____________________________ Name: Bruce Tully Title: Managing Director CREDIT SUISSE FIRST BOSTON CORPORATION By: /s/ Harold W. Bogle ____________________________ Name: Harold W. Bogle Title: Managing Director CREDIT LYONNAIS SECURITIES (USA) INC. By: /s/ David C. Travis ____________________________ Name: David C. Travis Title: Managing Director -29- SCHEDULE A GUARANTORS Name State of Incorporation - ---- ---------------------- Pacer Logistics, Inc. Delaware Cross Con Transport, Inc. Illinois Cross Con Terminals, Inc. Delaware Pacer International Rail Services LLC Colorado Pacer International Consulting LLC Colorado Pacer Rail Services LLC Colorado Pacific Motor Transport Company California Pacer Express, Inc. California Pacer Integrated Logistics, Inc. Delaware PLM Acquisition Corporation Delaware Manufacturers Consolidation Service, Inc. Tennessee Levcon, Inc. Tennessee Manufacturers Consolidation Service of Canada, Inc. Delaware Interstate Consolidation Service, Inc. California Interstate Consolidation, Inc. California Intermodal Container Service, Inc. California Keystone Terminals Acquisition Corp. Delaware SCHEDULE B Principal Amount of Placement Agents Securities to be Purchased ---------------- -------------------------- Morgan Stanley & Co. Incorporated................ $ 57,000,000 BT Alex. Brown Incorporated...................... $ 57,000,000 Credit Suisse First Boston Corporation........... $ 28,500,000 Credit Lyonnais Securities (USA) Inc............ 7,500,000 Total.................................. $ 150,000,000 EXHIBIT A FORM OF REGISTRATION RIGHTS AGREEMENT EXHIBIT B OPINION OF COUNSEL FOR THE ISSUERS AND COYOTE The opinion of the counsel for the Issuers and Coyote, to be delivered pursuant to Section 5(c) of the Purchase Agreement shall be to the effect that: A. The Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own or lease its property and to conduct its business as described in the Final Memorandum and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect. B. Each Guarantor and its material subsidiaries has been duly organized, is validly existing as a corporation or limited liability company in good standing under the laws of the jurisdiction of its organization, has the requisite power and authority to own its property and to conduct its business as described in the Final Memorandum, if at all, and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not result in a Material Adverse Effect. C. The Purchase Agreement has been duly authorized, executed and delivered by Coyote and each of the Issuers. D. The Notes, the Exchange Notes and the Private Exchange Notes have been duly authorized by the Company and, when executed and authenticated in accordance with the provisions of the Indenture and, in the case of the Notes, delivered to and paid for by the Placement Agents in accordance with the terms of the Purchase Agreement, will be valid and legally binding obligations of the Company, enforceable against the Company in accordance with their terms, subject to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally, (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought (regardless of whether such enforcement is considered in a proceeding in equity or at law) and (iii) public policy considerations, and will be entitled to the benefits of the Indenture and the Registration Rights Agreement. No holder of securities of any of the Issuers will be entitled to have such securities registered under the registration statements required to be filed by any of the Issuers pursuant to the Registration Rights Agreement, other than as expressly permitted thereby. E. The Guarantees have been duly authorized, executed and delivered by each of the Guarantors, and, upon the execution, authentication and delivery of the Notes and payment therefor in accordance with the terms of this Agreement, will be entitled to the benefits of the Indenture and will constitute a valid and legally binding obligation of each of the Guarantors, enforceable against each of the Guarantors in accordance with their terms, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect relating to creditor's rights generally, (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought (regardless of whether such enforcement is considered in a proceeding in equity or at law) and (iii) public policy considerations. F. Each of the Indenture and the Registration Rights Agreement has been duly authorized, executed and delivered by each of the Issuers, and are valid and legally binding obligations of each of the Issuers, enforceable against each of the Issuers in accordance with its respective terms, (A) subject to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally, (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought (regardless of whether such enforcement is considered in a proceeding in equity or at law) and (iii) public policy considerations and (B) except as rights to indemnification and contribution under the Registration Rights Agreement may be limited by federal and state securities laws and public policy considerations. G. The execution and delivery by each of the Issuers of, and the performance by each of the Issuers of the Transactions and its respective obligations under the Operative Documents will not contravene any provision of applicable law or the certificate of incorporation, by-laws or other organizational documents of any of the Issuers or, any of the Agreements or Instruments, known to us, binding upon any of the Issuers that is material to any of the Issuers or, to our knowledge, any judgment, order or decree of any governmental body, agency or court having jurisdiction over any of the Issuers, and no consent, approval, authorization or order of, or qualification with, any governmental body or agency is required for the performance by any of the Issuers of the Transactions or their respective obligations under any of the Operative Documents, which, if contravened, individually or in the aggregate, would have a Material Adverse Effect, and except such as may be required by the Securities Act, state securities or "Blue Sky" laws in connection with the purchase and initial resale of the Securities by the Placement Agents, other than as contemplated by the Registration Rights Agreement. H. Each of the Issuers has all requisite corporate power and authority to execute, deliver and perform each of its obligations under the Purchase Agreement and the other Operative Documents and to consummate the Transactions and any other transactions contemplated thereby, including, without limitation, the power and authority to issue, sell and deliver the Securities as contemplated by the Purchase Agreement. I. As of the Closing Date, the Company will have the authorized, issued and outstanding capital stock as set forth under the caption "Capitalization" in the Final Memorandum. All of the shares of issued and outstanding capital stock of each of the Issuers have been duly authorized and validly issued and are fully paid and non-assessable; none of the outstanding shares of capital stock of any of the Issuers was issued in violation of any preemptive or, to the best of our knowledge, other similar rights of any securityholder of any such Issuer; and except as disclosed in the Final Memorandum, all of the outstanding shares of capital stock of each of the Issuers are owned free and clear of all liens, encumbrances, equities and claims or restrictions on transferability or voting (other than those imposed by the Securities Act, the securities or "Blue Sky" laws of certain jurisdictions and the Shareholders Agreement dated as of the Closing Date, among (i) APL Limited, Coyote Acquisition LLC, Coyote Acquisition II LLC and the Company, (ii) certain management shareholders, Coyote Acquisition LLC, Coyote Acquisition II LLC and the Company and (iii) certain affiliates of certain of the Placements Agents, Coyote Acquisition LLC, Coyote Acquisition II LLC and the Company. J. To our best knowledge, except as described in the Final Memorandum, there is not pending or, to the knowledge of any Issuer, threatened, any action, suit, proceeding, inquiry or investigation to which any Issuer is a party, or to which the property of any Issuer is subject, before or brought by any court or governmental agency or body, which could reasonably be expected to have a Material Adverse Effect. K. Each of the Transactions conforms in all material respects to the descriptions thereof in the Final Memorandum. L. Each of the Operative Documents conforms in all material respects to the respective statements relating thereto contained in the Final Memorandum; the statements in the Final Memorandum under the caption "Certain United States Federal Income Tax Considerations," insofar as such statements constitute a summary of the United States federal tax laws referred to therein, are accurate and fairly summarize in all material respects the United States federal tax laws referred to therein. M. To our best knowledge, none of the Issuers is in violation of its charter, by-laws or other organizational document or in violation of any applicable law, statute, rule, regulation, judgment, order, writ or decree of any government, government instrumentality or court, domestic or foreign, having jurisdiction over any of the Issuers or any of their respective properties or assets or in default in the performance or observance of any Agreements and Instruments except for such violations and defaults that would not result in a Material Adverse Effect. N. No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any court or governmental authority or agency is necessary or required for the performance by any of the Issuers of their respective obligations under the Purchase Agreement, in connection with the offering, issuance or sale of the Securities, the Exchange Notes or the Private Exchange Notes (and the related guarantees thereof), for the performance by any of the Issuers of their respective obligations under the Operative Documents, or the consummation of the Transactions or any other transactions contemplated thereby or for the due execution, delivery or performance by the Issuers of the Operative Documents, except such as may be required by the Securities Act, state securities or "Blue Sky" laws in connection with the purchase and initial resale of the Securities by the Placement Agents, other than as contemplated by the Registration Rights Agreement. O. The Company is not, and after giving effect to the offering and sale of the Securities and the application of the proceeds thereof as described in the Final Memorandum will not be, an "investment company" or an entity "controlled" by an "investment company" as such terms are defined in the Investment Company Act of 1940, as amended. P. It is not necessary in connection with the offer, sale and delivery of the Securities to the Placement Agents in the manner contemplated by the Purchase Agreement to register the Securities under the Securities Act or to qualify the Indenture under the Trust Indenture Act of 1939, as amended. Q. The Securities satisfy the requirements set forth in Rule 144A(d)(3) under the Securities Act. R. Neither the consummation of the Transactions or any other transactions contemplated by the Purchase Agreement nor the sale, issuance, execution or delivery of the Securities, nor the application of the proceeds therefrom (applied as described in the Final Memorandum under the caption "Use of Proceeds"), will violate Regulation T (12 C.F.R. Part 220), U (12 C.F.R. Part 221) or X (12 C.F.R. Part 224) of the Board of Governors of the Federal Reserve System. In addition, we have participated in conferences with directors and other representatives of the Issuers, representatives of the independent certified public accountants for the Issuers, and your representatives, at which the contents of the Final Memorandum and related matters were discussed and, although we are not passing upon, and do not assume any responsibility for, the accuracy, completeness or fairness of the statements contained in the Final Memorandum and have not made any independent check or verification thereof (other than as expressly described in paragraphs K and L above), during the course of such participation (relying as to materiality to the extent we have deemed appropriate upon the statements of officers and other representatives of the Issuers), no facts came to our attention that caused us to believe that the Final Memorandum, as of its date or as the date hereof, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; it being understood that we express no belief with respect to the finan- cial statements, including the notes thereto, pro forma financial statements and other financial and statistical data included in the Final Memorandum. EXHIBIT C FORM OF JOINDER AGREEMENT Reference is hereby made to the Purchase Agreement, dated May 24, 1999 (the "Agreement"), between Coyote Acquisition LLC ("Coyote") and the Placement Agents named therein. Unless otherwise defined herein, terms defined in the Agreement and used herein shall have the meanings given them in the Agreement. Each of the undersigned parties hereby unconditionally and irrevocably expressly assumes, confirms and agrees to perform and observe as an Issuer each and any of the covenants, agreements, terms, conditions, obligations, appointments, duties, promises and liabilities of an Issuer under the Agreement as if it were an original signatory thereto. Each of the undersigned hereby agrees to promptly execute and deliver any and all further documents and take such further action as any other undersigned party or the Placement Agents may reasonably require to effect the purpose of this Joinder Agreement. This Joinder Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to conflict of law principles thereof. B-1 IN WITNESS WHEREOF, the undersigned have executed this Joinder Agreement this 28th day of May 1999. PACER INTERNATIONAL, INC. PACER LOGISTICS, INC. CROSS CON TRANSPORT, INC. CROSS CON TERMINALS, INC. PACIFIC MOTOR TRANSPORT COMPANY PACER EXPRESS, INC. PACER INTEGRATED LOGISTICS, INC. PLM ACQUISITION CORPORATION INTERSTATE CONSOLIDATION SERVICE, INC. INTERSTATE CONSOLIDATION, INC. MANUFACTURERS CONSOLIDATION SERVICE, INC. INTERMODAL CONTAINER SERVICE, INC. LEVCON, INC. MANUFACTURERS CONSOLIDATION SERVICE OF CANADA, INC. KEYSTONE TERMINALS ACQUISITION CORP. By: _____________________________________ Name: Title: PACER INTERNATIONAL RAIL SERVICES LLC PACER INTERNATIONAL CONSULTING LLC PACER RAIL SERVICES LLC By: PACER LOGISTICS, INC., as Manager By: _____________________________________ Name: Title: EX-4.18 19 REGISTRATION RIGHTS AGREEMENT DATED MAY 28, 1999 EXHIBIT 4.18 REGISTRATION RIGHTS AGREEMENT Dated as of May 28, 1999 by and among PACER INTERNATIONAL, INC., and MORGAN STANLEY & CO. INCORPORATED, BT ALEX. BROWN INCORPORATED, CREDIT SUISSE FIRST BOSTON CORPORATION and CREDIT LYONNAIS SECURITIES (USA) INC. THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and --------- entered into as of May 28, 1999, by and among PACER INTERNATIONAL, INC., a Tennessee corporation (the "Company"), the companies named on Schedule A hereto ------- and any company which later becomes a party hereto in accordance with this Agreement, as guarantors (collectively, the "Guarantors" and together with the ---------- Company, the "Issuers"), and MORGAN STANLEY & CO. INCORPORATED, BT ALEX. BROWN ------- INCORPORATED, CREDIT SUISSE FIRST BOSTON CORPORATION and CREDIT LYONNAIS SECURITIES (USA) INC. (collectively, the "Placement Agents"). ---------------- This Agreement is made pursuant to the Purchase Agreement dated May 24, 1999, by and among the Company, the Guarantors and the Placement Agents (the "Purchase Agreement"), which provides for the sale by the Company to the ------------------ Placement Agents of an aggregate of $150,000,000 principal amount of the Company's 11 3/4% Senior Subordinated Notes Due 2007 (the "Notes") and the ----- guarantees thereof by the Guarantors (the "Guarantees" and together with the ---------- Notes, the "Securities"). The Securities are being issued pursuant to an ---------- indenture, dated as of the date hereof (the "Indenture"), among the Company, the --------- Guarantors and Wilmington Trust Company, as trustee (the "Trustee"). ------- In order to induce the Placement Agents to enter into the Purchase Agreement, the Issuers have agreed to provide to the Placement Agents and their direct and indirect transferees the registration rights set forth in this Agreement. The execution of this Agreement is a condition to the closing under the Purchase Agreement. 1. The parties hereby agree as follows: 1. Definitions. As used in this Agreement, the following terms ----------- shall have the following meanings: Additional Interest: See Section 4 hereof. ------------------- Advice: See the last paragraph of Section 5 hereof. ------ affiliate: An "affiliate" as such term is defined in Rule 405. --------- Agreement: See the introductory paragraphs hereto. --------- Applicable Period: See Section 2(b) hereof. ----------------- Business Day: Any day that is not a Saturday, Sunday or a day on ------------ which banking institutions in New York are authorized or required by law to be closed. Company: See the introductory paragraphs hereto. ------- Effectiveness Date: The 180th day after the Issue Date; provided, ------------------ -------- however, that with respect to any Shelf Registration, the Effectiveness Date - ------- shall be the 60th day after the Filing Date with respect thereto. Effectiveness Period: See Section 3(a) hereof. -------------------- Event Date: See Section 4(b) hereof. ---------- Exchange Act: The Securities Exchange Act of 1934, as amended, and ------------ the rules and regulations of the SEC promulgated thereunder. Exchange Notes: See Section 2(a) hereof. -------------- Exchange Offer: See Section 2(a) hereof. -------------- Exchange Offer Registration Statement: See Section 2(a) hereof. ------------------------------------- Filing Date: (A) With respect to an Exchange Offer Registration ----------- Statement, the earlier of the date of the filing thereof with the SEC and the 120th day after the Issue Date, and (B) in each other case (which may be applicable notwithstanding the consummation of the Exchange Offer), the 60th day after the delivery (or, if earlier, the date of required delivery) of a Shelf Notice pursuant to Section 2(c) hereof. Guarantees: See the introductory paragraphs hereto. ---------- Guarantors: See the introductory paragraphs hereto. ---------- Holder: Any holder of a Security. ------ indemnified parties: See Section 7(c) hereof. ------------------- indemnifying parties: See Section 7(c) hereof. -------------------- Indenture: See the introductory paragraphs hereto. --------- Information: See Section 5(n) hereof. ----------- Initial Shelf Registration: See Section 3(a) hereof. -------------------------- Inspectors: See Section 5(n) hereof. ---------- Issue Date: May 28, 1999, the date of original issuance of the Notes. ---------- -2- NASD: See Section 5(s) hereof. ---- Notes: See introductory paragraphs hereto. ----- Offering Memorandum: The final offering memorandum of the Company ------------------- dated May 24, 1999, in respect of the offering of the Securities. Participating Broker-Dealer: See Section 2(b) hereof. --------------------------- Person: An individual, trustee, corporation, partnership, limited ------ liability company, joint stock company, trust, unincorporated association, union, business association, firm or other legal entity. Placement Agents: See the introductory paragraphs hereto. ---------------- Private Exchange: See Section 2(b) hereof. ---------------- Private Exchange Notes: See Section 2(b) hereof. ---------------------- Prospectus: The prospectus included in any Registration Statement ---------- (including, without limitation, any prospectus subject to completion and a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A under the Securities Act), as amended or supplemented by any prospectus supplement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus. Purchase Agreement: See the introductory paragraphs hereof. ------------------ Records: See Section 5(n) hereof. ------- Registrable Notes: Each Note upon its original issuance and at all ----------------- times subsequent thereto, each Exchange Note (and the related Guarantees) as to which Section 2(c)(iv) hereof is applicable upon original issuance and at all times subsequent thereto and each Private Exchange Note (and the related Guarantees) upon original issuance thereof and at all times subsequent thereto, until the earliest to occur of (i) a Registration Statement (other than, with respect to any Exchange Note as to which Section 2(c)(iv) hereof is applicable, the Exchange Offer Registration Statement) covering such Note, Exchange Note or Private Exchange Note has been declared effective by the SEC and such Note (unless such Note was not tendered for exchange by the Holder thereof), Exchange Note or such Private Exchange Note (and the related Guarantees), as the case may be, has been disposed of in accordance with -3- such effective Registration Statement, (ii) such Note has been exchanged pursuant to the Exchange Offer for an Exchange Note or Exchange Notes (and the related Guarantees) that may be resold without restriction under state and federal securities laws, (iii) such Note, Exchange Note or Private Exchange Note (and the related Guarantees), as the case may be, ceases to be outstanding for purposes of the Indenture, or (iv) such Note, Exchange Note or Private Exchange Note (and the related Guarantees), as the case may be, in the reasonable opinion of the Company, may be resold without restriction pursuant to Rule 144(k) under the Securities Act. Registration Default: See Section 4(c). -------------------- Registration Statement: Any registration statement of the Company ---------------------- that covers any of the Notes, the Exchange Notes or the Private Exchange Notes (and the related Guarantees) filed with the SEC under the Securities Act, including the Prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. Rule 144: Rule 144 under the Securities Act. -------- Rule 144A: Rule 144A under the Securities Act. --------- Rule 405: Rule 405 under the Securities Act. -------- Rule 415: Rule 415 under the Securities Act. -------- Rule 424: Rule 424 under the Securities Act. -------- SEC: The Securities and Exchange Commission. --- Securities: See the introductory paragraphs hereto. "Securities" ---------- shall include all Notes, Exchange Notes and Private Exchange Notes. Securities Act: The Securities Act of 1933, as amended, and the rules -------------- and regulations of the SEC promulgated thereunder. Shelf Notice: See Section 2(c) hereof. ------------ Shelf Registration: See Section 3(a) hereof. ------------------ Subsequent Shelf Registration: See Section 3(b) hereof. ----------------------------- TIA: The Trust Indenture Act of 1939, as amended. --- -4- Trustee: The trustee under the Indenture and the trustee (if any) ------- under any indenture governing the Exchange Notes and Private Exchange Notes (and the related Guarantees). underwritten registration or underwritten offering: A registration in -------------------------------------------------- which securities of the Company are sold to an underwriter for reoffering to the public. Except as otherwise specifically provided, all references in this Agreement to acts, laws, statutes, rules, regulations, releases, forms, no- action letters and other regulatory requirements (collectively, "Regulatory ---------- Requirements") shall be deemed to refer also to any amendments thereto and all - ------------ subsequent Regulatory Requirements adopted as a replacement thereto having substantially the same effect therewith. 2. Exchange Offer -------------- (a) The Issuers shall file with the SEC, no later than the Filing Date, a Registration Statement (the "Exchange Offer Registration Statement") on ------------------------------------- an appropriate registration form with respect to a registered offer (the "Exchange Offer") to exchange any and all of the Registrable Notes for a like - --------------- aggregate principal amount of notes (the "Exchange Notes") of the Company, -------------- guaranteed by the Guarantors on substantially the same terms as the Guarantees, that are identical in all material respects to the Securities, except that such notes shall contain no restrictive legend thereon, and which are entitled to the benefits of the Indenture or a trust indenture which is identical in all material respects to the Indenture (other than such changes to the Indenture or any such identical trust indenture as are necessary to comply with the TIA) and which, in either case, has been qualified under the TIA. The Exchange Offer shall comply with all applicable tender offer rules and regulations under the Exchange Act and other applicable law. The Issuers shall use their commercially reasonable efforts to (x) cause the Exchange Offer Registration Statement to be declared effective under the Securities Act on or before the Effectiveness Date, (y) keep the Exchange Offer open for not less than 20 Business Days (or longer if required by applicable law) after the date that notice of the Exchange Offer is mailed to Holders; and (z) consummate the Exchange Offer on or prior to the 35th day following the date on which the Exchange Offer Registration Statement is declared effective by the SEC. If, after the Exchange Offer Registration Statement is initially declared effective by the SEC, the Exchange Offer or the issuance of the Exchange Notes thereunder is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, the Exchange Offer Registration Statement shall be deemed not to have become effective for purposes of this Agreement, unless such interference is cured within five Business Days. -5- Each Holder (including, without limitation, each Participating Broker- Dealer (as defined)) who participates in the Exchange Offer will be required to represent to the Company, in writing (which may be contained in the applicable letter of transmittal) that: (i) any Exchange Notes acquired in exchange for Registrable Notes tendered are being acquired in the ordinary course of business of the Person receiving such Exchange Notes, whether or not such recipient is a Holder of Registrable Notes, (ii) at the time of the commencement of the Exchange Offer, neither such Holder nor, to the actual knowledge of such Holder, any other Person receiving Exchange Notes from such Holder has an arrangement or understanding with any Person to participate in the distribution of the Exchange Notes in violation of the provisions of the Securities Act, (iii) the Holder is not an affiliate of any Issuer, (iv) if such Holder is not a Participating Broker-Dealer, that it has not engaged in, and does not intend to engage in, the distribution of Exchange Notes, and (v) if such Holder is a Participating Broker-Dealer, such Holder acquired the Registrable Notes as a result of market- making activities or other trading activities and that it will comply with the applicable provisions of the Securities Act with respect to resale of any Exchange Notes. Upon consummation of the Exchange Offer in accordance with this Section 2, the provisions of this Agreement shall continue to apply, mutatis ------- mutandis, solely with respect to Registrable Notes that are Private Exchange - -------- Notes, Exchange Notes as to which Section 2(c)(iv) hereof is applicable and Exchange Notes held by Participating Broker-Dealers, and the Company shall have no further obligation to register Registrable Notes (other than Private Exchange Notes and Exchange Notes as to which clause 2(c)(iv) hereof applies) pursuant to Section 3 hereof. (b) The Company shall include within the Prospectus contained in the Exchange Offer Registration Statement a section entitled "Plan of Distribution," reasonably acceptable to the Placement Agents, which shall contain a summary statement of the positions taken or policies made by the staff of the SEC with respect to the potential "underwriter" status of any broker-dealer that is the "beneficial owner" (as defined in Rule l3d-3 under the Exchange Act) of Exchange Notes received by such broker-dealer in the Exchange Offer (a "Participating ------------- Broker-Dealer"). Such "Plan of Distribution" section shall also expressly - ------------- permit, to the extent permitted by applicable policies and regulations of the SEC, the use of the Prospectus by all Persons subject to the prospectus delivery requirements of the Securities Act, including, to the extent permitted by applicable policies and regulations of the SEC, all Participating Broker- Dealers, and include a statement describing the means by which Participating Broker-Dealers may resell the Exchange Notes in compliance with the Securities Act. In accordance with Section 5 hereof, the Issuers shall use their commercially reasonable efforts to keep the Exchange Offer Registration Statement effective and to amend and supplement the Prospectus contained therein in order to permit such Prospectus to be law- -6- fully delivered by all Persons subject to the prospectus delivery requirements of the Securities Act during the period required by the Securities Act for use in connection with any resale of Exchange Notes; provided that such period shall -------- not exceed 180 days after consummation of the Exchange Offer (or such longer period if extended pursuant to the last paragraph of Section 5 hereof) (the "Applicable Period"). ----------------- If, prior to consummation of the Exchange Offer, any Placement Agent holds any Notes acquired by it that have, or that are reasonably likely to be determined to have, the status of an unsold allotment in an initial distribution, or any Holder is not entitled to participate in the Exchange Offer, the Company, upon the request of any such Holder, shall simultaneously with the delivery of the Exchange Notes in the Exchange Offer, issue and deliver to any such Holder, in exchange (the "Private Exchange") for such Notes held by ---------------- any such Holder, a like principal amount of notes (the "Private Exchange Notes") ---------------------- of the Company, guaranteed by the Guarantors on substantially similar terms as the Guarantees, that are identical in all material respects to the Exchange Notes except for the placement of a restrictive legend on such Private Exchange Notes. The Private Exchange Notes shall be issued pursuant to the same indenture as the Exchange Notes and bear the same CUSIP number as the Exchange Notes. All of the Securities shall vote and consent together on all matters as one class, and none of the Notes, the Exchange Notes or the Private Exchange Notes will have the right to vote or consent as a separate class on any matter. In connection with the Exchange Offer, the Company shall: (1) mail, or cause to be mailed, to each Holder of record entitled to participate in the Exchange Offer a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (2) utilize the services of a depositary for the Exchange Offer with an address in the Borough of Manhattan, The City of New York; (3) permit Holders to withdraw tendered Registrable Notes at any time prior to the close of business, New York time, on the last Business Day on which the Exchange Offer remains open; and (4) otherwise comply in all material respects with all applicable laws, rules and regulations. As soon as practicable after the close of the Exchange Offer and the Private Exchange, if any, the Company shall: -7- (1) accept for exchange all Registrable Notes validly tendered and not validly withdrawn pursuant to the Exchange Offer and the Private Exchange, if any; (2) deliver to the Trustee for cancellation all Registrable Notes so accepted for exchange; and (3) cause the Trustee to authenticate and deliver promptly to each Holder of Registrable Notes tendered for exchange, Exchange Notes or Private Exchange Notes, as the case may be, equal in principal amount to the Registrable Notes of such Holder so accepted for exchange; provided, -------- that in the case of any Registrable Notes held in global form by a depositary, authentication and delivery to such depositary of one or more Exchange Notes in global form in an equivalent principal amount thereto for the account of such Holders in accordance with the Indenture (or the indenture described in Section 2(a) hereof) shall satisfy such authentication and delivery requirement. The Exchange Offer and the Private Exchange shall not be subject to any conditions, other than that (i) the Exchange Offer or Private Exchange, as the case may be, does not violate applicable law or any applicable interpretation of the staff of the SEC, (ii) no action or proceeding shall have been instituted or threatened in any court or by any governmental agency with respect to the Exchange Offer or the Private Exchange, and no material adverse development shall have occurred with respect to the Company, (iii) all governmental approvals shall have been obtained, which approvals the Company deems necessary for the consummation of the Exchange Offer or Private Exchange, (iv) the conditions precedent to the Company's obligations under this Agreement shall have been fulfilled and (v) such other conditions as shall be agreed upon by the Company and the Placement Agents. (c) If (i) because of any change in law or in currently prevailing interpretations of the staff of the SEC, the Issuers are not permitted to effect the Exchange Offer, (ii) the Exchange Offer is not consummated on or prior to the 210th day after the Issue Date, (iii) any holder of Private Exchange Notes so requests in writing to the Company, on or prior to the 60th day after the consummation of the Exchange Offer, or (iv) in the case of any Holder that participates in the Exchange Offer, such Holder does not receive Exchange Notes on the date of the exchange that may be sold without restriction under state and federal securities laws (other than due solely to the status of such Holder as an affiliate of any of the Issuers or as an "underwriter" within the meaning of the Securities Act) and such Holder so requests by written notice to the Company on or prior to the 60th day after the consummation of the Exchange Offer, then in the case of each of clauses (i) to and including (iv) of this sentence, the Issuers shall promptly (and in any event within 20 days after the occurrence of any of the events described in such clauses (i) to and including (iv)) deliver to the Holders and the Trustee written -8- notice thereof (the "Shelf Notice") and the Issuers shall file a Shelf ------------ Registration pursuant to Section 3 hereof. 3. Shelf Registration ------------------ If at any time a Shelf Notice is delivered or required to be delivered as contemplated by Section 2(c) hereof, then: (a) Initial Shelf Registration. The Issuers shall file with the SEC a -------------------------- Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415 covering all of the Registrable Notes not exchanged in the Exchange Offer, Private Exchange Notes and Exchange Notes as to which Section 2(c)(iv) is applicable (the "Initial Shelf Registration"). The Issuers shall use their -------------------------- commercially reasonable efforts to file with the SEC the Initial Shelf Registration on or before the applicable Filing Date. The Initial Shelf Registration shall be on Form S-1 or another appropriate form permitting registration of such Registrable Notes for resale by Holders in the manner or manners designated by them (including, without limitation, one or more underwritten offerings). The Company shall not permit any securities other than the Registrable Notes to be included in the Initial Shelf Registration or any Subsequent Shelf Registration. In accordance with Section 5 hereof, the Issuers shall use their commercially reasonable efforts to cause the Initial Shelf Registration to be declared effective under the Securities Act on or prior to the applicable Effectiveness Date and to keep the Initial Shelf Registration continuously effective under the Securities Act until the date which is two years from the later of the Issue Date and the date which is two years after the date on which any affiliate of the Company ceased to hold Registrable Notes (the "Effectiveness Period") or such shorter period ending on the earliest to occur - --------------------- of (i) all Registrable Notes covered by the Initial Shelf Registration being sold in the manner set forth and as contemplated in the Initial Shelf Registration, (ii) a Subsequent Shelf Registration covering all of the Registrable Notes covered by and not sold under the Initial Shelf Registration or an earlier Subsequent Shelf Registration being declared effective under the Securities Act, or (iii) the date on which, in the written opinion of counsel to the Company, all outstanding Registrable Notes held by Persons that are not affiliates of the Company may be resold without registration under the Securities Act pursuant to Rule 144(k) under the Securities Act. (b) Subsequent Shelf Registrations. If the Initial Shelf Registration ------------------------------ or any Subsequent Shelf Registration ceases to be effective for any reason at any time during the Effectiveness Period (other than because of the sale of all of the Registrable Notes registered thereunder), the Issuers shall use their commercially reasonable efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof, and in any event shall within 45 -9- days of such cessation of effectiveness amend the Initial Shelf Registration in a manner to obtain the withdrawal of the order suspending the effectiveness thereof, or file an additional "shelf" Registration Statement pursuant to Rule 415 covering all of the Registrable Notes covered by and not sold under the Initial Shelf Registration or an earlier Subsequent Shelf Registration (each, a "Subsequent Shelf Registration"). If a Subsequent Shelf Registration is filed, ----------------------------- the Issuers shall use their commercially reasonable efforts to cause the Subsequent Shelf Registration to be declared effective under the Securities Act as soon as practicable after such filing and to keep such subsequent Shelf Registration continuously effective for a period equal to the number of days in the Effectiveness Period less the aggregate number of days during which the Initial Shelf Registration or any Subsequent Shelf Registration was previously continuously effective. As used herein the term "Shelf Registration" means the ------------------ Initial Shelf Registration and any Subsequent Shelf Registration. (c) Supplements and Amendments. The Company shall promptly supplement -------------------------- and amend any Shelf Registration if required by the rules, regulations or instructions applicable to the registration form used for such Shelf Registration, if required by the Securities Act or if reasonably requested by the Holders of a majority in aggregate principal amount of the Registrable Notes covered by such Registration Statement or by any underwriter of such Registrable Notes. (d) Provision by Holders of Certain Information in Connection with -------------------------------------------------------------- the Shelf Registration. No Holder of Registrable Notes may include any of its - ---------------------- Registrable Notes in any Shelf Registration unless and until such Holder furnishes to the Company, in writing within 30 days after receipt of a request therefor, the information specified in Items 507 and 508 (as applicable) of Regulation S-K under the Securities Act and any other applicable rules, regulations or policies of the SEC for use in connection with any Shelf Registration or Prospectus included therein, on a form to be provided by the Company. No Holder of Registrable Notes shall be entitled to Additional Interest pursuant to Section 4 hereof unless and until such Holder shall have provided all such information. Each selling Holder agrees to furnish promptly to the Company additional information to be disclosed so that the information previously furnished to the Company by such Holder does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. 4. Additional Interest ------------------- (a) The Issuers and the Placement Agents agree that the Holders will suffer damages if the Issuers fail to fulfill their obligations under Section 2 or Section 3 hereof and that it would not be feasible to ascertain the extent of such damages with precision. Accordingly, the Issuers, jointly and severally, agree to pay, as liquidated damages and as the sole -10- and exclusive remedy of the Holders should the Issuers fail to fulfill their obligations under Section 2 or Section 3 hereof, additional interest on the Securities ("Additional Interest ") under the circumstances and to the extent ------------------- set forth below (each of which shall be given independent effect): (i) if (A) neither the Exchange Offer Registration Statement nor the Initial Shelf Registration has been filed on or prior to the 120th day after the Issue Date or (B) notwithstanding that the Issuers have consummated or will consummate the Exchange Offer, the Issuers are required to file a Shelf Registration and such Shelf Registration is not filed on or prior to the Filing Date applicable thereto, then, commencing on the day after any such Filing Date, Additional Interest shall accrue on the principal amount of the Securities at a rate of 0.25% per annum for the first 90 days immediately following each such Filing Date, and such Additional Interest rate shall increase by an additional 0.25% per annum at the beginning of each subsequent 90-day period, or (ii) if (A) neither the Exchange Offer Registration Statement nor the Initial Shelf Registration is declared effective by the SEC on or prior to the 180th day after the Issue Date or (B) notwithstanding that the Issuers have consummated or will consummate the Exchange Offer, the Issuers are required to file a Shelf Registration and such Shelf Registration is not declared effective by the SEC on or prior to the Effectiveness Date in respect of such Shelf Registration, then, commencing on the day after such Effectiveness Date, Additional Interest shall accrue on the principal amount of the Securities at a rate of 0.25% per annum for the first 90 days immediately following the day after such Effectiveness Date, and such Additional Interest rate shall increase by an additional 0.25% per annum at the beginning of each subsequent 90-day period, or (iii) if (A) the Company has not exchanged Exchange Notes for all Securities validly tendered in accordance with the terms of the Exchange Offer on or prior to the 210th day after the Issue Date or (B) if applicable, a Shelf Registration has been declared effective and such Shelf Registration ceases to be effective at any time during the Effectiveness Period, then Additional Interest shall accrue on the principal amount of the Securities at a rate of 0.25% per annum for the first 90 days commencing on (x) the 211th day after the Issue Date with respect to Notes validly tendered and not exchanged by the Company, in the case of (A) above, or (y) the day such Shelf Registration ceases to be effective in the case of (B) above, and such Additional Inter- -11- est rate shall increase by an additional 0.25% per annum at the beginning of each such subsequent 90-day period (it being understood and agreed that, notwithstanding any provision to the contrary, so long as any Note that is the subject of a Shelf Notice is then covered by an effective Shelf Registration, no Additional Interest shall accrue on such Note); provided, however, that the Additional Interest rate on the Securities may not - -------- ------- exceed at any one time in the aggregate 1.00% per annum; provided, further, -------- ------- however, that in no event shall the Company be obligated to pay Additional - ------- Interest under more than one of the clauses in this Section 4(a) at any one time; provided, further, however, that (1) upon the filing of the applicable -------- ------- ------- Exchange Offer Registration Statement or the applicable Shelf Registration as required hereunder (in the case of clause (i) above of this Section 4(a)), (2) upon the effectiveness of the Exchange Offer Registration Statement or the applicable Shelf Registration as required hereunder (in the case of clause (ii) of this Section 4(a)), or (3) upon the exchange of the applicable Exchange Notes for all Securities validly tendered (in the case of clause (iii)(A) of this Section 4(a)), or upon the effectiveness of the applicable Shelf Registration which had ceased to remain effective (in the case of clause (iii)(B) of this Section 4(a)), Additional Interest on the Securities in respect of which such events relate as a result of such clause (or the relevant subclause thereof), as the case may be, shall cease to accrue. (b) Notification of Trustee. The Company shall notify the Trustee ----------------------- within three Business Days after each and every date on which an event occurs in respect of which Additional Interest is required to be paid (an "Event Date"). ---------- Any amounts of Additional Interest due pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section 4 will be payable in cash on the dates, and to the Persons, to whom interest on the Securities is payable. The amount of Additional Interest will be determined by multiplying the applicable Additional Interest rate by the principal amount of the outstanding Securities, multiplied by a fraction, the numerator of which is the number of days such Additional Interest rate was applicable during such period (determined on the basis of a 360-day year comprised of twelve 30-day months and, in the case of a partial month, the actual number of days elapsed), and the denominator of which is 360. (c) Suspension of Additional Interest for Good Cause. Additional ------------------------------------------------ Interest shall not accrue with respect to an event listed in Sections 4(a)(i)(B), (ii)(B) and (iii)(B) hereof (each, a "Registration Default") if (i) -------------------- such Registration Default under Section 4(a)(iii)(B) hereof occurs because of the filing of a post-effective amendment to such Registration Statement to incorporate annual audited financial information with respect to the Company where such post-effective amendment is not yet effective and needs to be declared effective to permit Holders to use the related Prospectus, (ii) such Registration Default occurs because of the occurrence of other material events or developments with respect to the Com- -12- pany that would need to be described in such Registration Statement or the related Prospectus, and the effectiveness of such Registration Statement is reasonably required to be suspended while such Registration Statement and related Prospectus are amended or supplemented to reflect such events or developments, (iii) such Registration Default results from the suspension of the effectiveness of such Registration Statement because of the existence of material events or developments with respect to the Company or any of its affiliates, the disclosure of which the Company determines in good faith would have a material adverse effect on the business, operations or prospects of the Company, or (iv) such Registration Default results from the suspension of the effectiveness of such Registration Statement because the Company does not wish to disclose publicly a pending material business transaction that has not yet been publicly disclosed; provided, however, that if any such Registration -------- ------- Default exists and continues on more than an aggregate of 60 days in any calendar year, Additional Interest shall accrue and be payable in accordance with Sections 4(a) and 4(b) hereof from the 61st day on which any such Registration Default exists, and they shall continue to accrue until the date on which such Registration Default is cured. 5. Registration Procedures ----------------------- In connection with the filing of any Registration Statement pursuant to Section 2 or 3 hereof, the Issuers shall effect such registrations to permit the sale of the Securities covered thereby in accordance with the intended method or methods of disposition thereof, and pursuant thereto and in connection with any Registration Statement filed by the Issuers hereunder, the Issuers shall: (a) Prepare and file with the SEC on or prior to the applicable Filing Date, a Registration Statement or Registration Statements as required by Section 2 or 3 hereof, and use their commercially reasonable efforts to cause each such Registration Statement to become effective and remain effective as provided herein; provided, however, that, if ------ -------- (1) such filing is pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period relating thereto and from whom the Company has received written notice that it will be a Participating Broker-Dealer in the Exchange Offer, -13- before filing any Registration Statement or Prospectus or any amendments or supplements thereto, the Company shall furnish to and afford the Holders of the Registrable Notes included in such Registration Statement (with respect to a Registration Statement filed pursuant to Section 3 hereof) or each such Participating Broker-Dealer (with respect to any such Registration Statement), as the case may be, their counsel and the managing underwriter or underwriters, if any, a reasonable opportunity to review copies of all such documents (including copies of any documents to be incorporated by reference therein and all exhibits thereto) proposed to be filed (in each case at least five days prior to such filing, or such later date as is reasonable under the circumstances). The Issuers shall not file any Registration Statement or Prospectus or any amendments or supplements thereto if the Holders of a majority in aggregate principal amount of the Registrable Notes included in such Registration Statement, or any such Participating Broker-Dealer, as the case may be, their counsel, or the managing underwriter or underwriters, if any, shall reasonably object on a timely basis, except for any Registration Statement or amendment thereto or related Prospectus or supplement thereto (a copy of which has been previously furnished as provided in the preceding sentence) which counsel to the Company has advised the Company in writing is required to be filed in order to comply with applicable law. (b) Prepare and file with the SEC such amendments and post-effective amendments to each Shelf Registration or Exchange Offer Registration Statement, as the case may be, as may be necessary to keep such Shelf Registration or Exchange Offer Registration Statement continuously effective for the Effectiveness Period or the Applicable Period, respectively, and in any case, except for such periods as to which Additional Interest does not accrue pursuant to Section 4(c) hereof, cause the related Prospectus to be supplemented by any Prospectus supplement required by applicable law, and as so supplemented to be filed pursuant to Rule 424; and comply with the provisions of the Securities Act and the Exchange Act applicable to each of them with respect to the disposition of all Securities covered by such Registration Statement as so amended or in such Prospectus as so supplemented and with respect to the subsequent resale of any securities being sold by a Participating Broker-Dealer covered by any such Prospectus. The Issuers shall be deemed not to have used their commercially reasonable efforts to keep a Registration Statement effective during the Effectiveness Period or the Applicable Period, as the case may be, relating thereto if any Issuer knowingly takes any action that would result in selling Holders of the Registrable Notes covered thereby or Participating Broker-Dealers seeking to sell Exchange Notes not being able to sell such Registrable Notes or such Exchange Notes during that period unless such action is required by applicable law or permitted by this Agreement. -14- (c) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period relating thereto from whom the Company has received written notice that it will be a Participating Broker-Dealer in the Exchange Offer, notify the selling Holders of Registrable Notes (with respect to a Shelf Registration filed pursuant to Section 3 hereof), or each such Participating Broker-Dealer (with respect to any such Registration Statement), as the case may be, their counsel and the managing underwriter or underwriters, if any, promptly (but in any event within one business day), and confirm such notice in writing, (i) when a Prospectus or any Prospectus supplement or post-effective amendment has been filed and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective under the Securities Act (including in such notice a written statement that any Holder may, upon request, obtain, at the sole expense of the Company, one conformed copy of such Registration Statement or post-effective amendment including financial statements and schedules thereto, documents incorporated or deemed to be incorporated therein by reference and exhibits thereto), (ii) of the issuance by the SEC of any stop order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of any Prospectus or preliminary Prospectus or the initiation of any proceedings for that purpose, (iii) if at any time when a Prospectus is required by the Securities Act to be delivered in connection with sales of the Registrable Notes or resales of Exchange Notes by Participating Broker-Dealers the representations and warranties of the Company contained in any agreement (including any underwriting agreement) contemplated by Section 5(m) hereof cease to be true and correct in all material respects, (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of a Registration Statement or any of the Registrable Notes or the Exchange Notes to be sold by any Participating Broker-Dealer for offer or sale in any jurisdiction, or the initiation or threatening of any proceeding for such purpose, (v) of the happening of any event, the existence of any condition or any information becoming known that makes any statement made in such Registration Statement or related Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in or amendments or supplements to such Registration Statement, Prospectus or documents so that in the case -15- of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and (vi) of the Company's determination that a post-effective amendment to a Registration Statement would be necessary or appropriate except, in the case of clauses (iii), (iv), (v) and (vi), with respect to any event, development or transaction permitted to be kept confidential without the accrual of Additional Interest under Section 4(c)(iii) hereof, the Company shall not be required to describe such event, development or transaction in the written notice provided. (d) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, use their commercially reasonable efforts to prevent the issuance of any order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of a Prospectus or suspending the qualification (or exemption from qualification) of any of the Registrable Notes or the Exchange Notes to be sold by any Participating Broker-Dealer, for sale in any jurisdiction, and, if any such order is issued, to use their commercially reasonable efforts to obtain the withdrawal of any such order at the earliest practicable moment. (e) If a Shelf Registration is filed pursuant to Section 3 and if requested during the Effectiveness Period by the managing underwriter or underwriters (if any), the Holders of a majority in aggregate principal amount of the Registrable Notes being sold in connection with an underwritten offering or any Participating Broker-Dealer, (i) as promptly as practicable incorporate in a Prospectus supplement or post-effective amendment such information as the managing underwriter or underwriters (if any), such Holders, any Participating Broker-Dealer or counsel for any of them reasonably request to be included therein and (ii) make all required filings of such Prospectus supplement or such post-effective amendment as soon as practicable after the Company has received notification of the matters to be incorporated in such prospectus supplement or post-effective amendment. -16- (f) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, furnish to each selling Holder of Registrable Notes (with respect to a Shelf Registration filed pursuant to Section 3 hereof) and to each such Participating Broker-Dealer who so requests (with respect to any such Registration Statement) and to their respective counsel and each managing underwriter (if any) at the sole expense of the Company, one conformed copy of the Registration Statement or Registration Statements and each post- effective amendment thereto, including financial statements and schedules thereto, and, if requested, all documents incorporated or deemed to be incorporated therein by reference and all exhibits thereto. (g) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, deliver to each selling Holder of Registrable Notes (with respect to a Shelf Registration filed pursuant to Section 3 hereof), or each such Participating Broker-Dealer (with respect to any such Registration Statement), as the case may be, their respective counsel, and the managing underwriter or underwriters, if any, at the sole expense of the Company, as many copies of the Prospectus or Prospectuses (including each form of preliminary Prospectus) and each amendment or supplement thereto and any documents incorporated therein by reference as such Persons may reasonably request; and, subject to the last paragraph of this Section 5, the Issuers hereby consent to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders of Registrable Notes or each such Participating Broker-Dealer, as the case may be, and the underwriters or agents, if any, and dealers (if any), in connection with the offering and sale of the Registrable Notes covered by, or the sale by Participating -17- Broker-Dealers of the Exchange Notes pursuant to, such Prospectus and any amendment or supplement thereto. (h) Prior to any public offering of Registrable Notes or any delivery of a Prospectus contained in the Exchange Offer Registration Statement by any Participating Broker-Dealer who seeks to sell Securities during the Applicable Period, use their commercially reasonable efforts to register or qualify, and to cooperate with the selling Holders of Registrable Notes or each such Participating Broker-Dealer, as the case may be, the managing underwriter or underwriters (if any) and their respective counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any selling Holder, Participating Broker-Dealer or the managing underwriter or underwriters (if any) reasonably request in writing; provided, however, that where Securities held by Participating Broker- -------- ------- Dealers or Registrable Notes are offered other than through an underwritten offering, the Company agrees to cause its counsel to perform Blue Sky investigations, and the Issuers agree to file registrations and qualifications required to be filed pursuant to this Section 5(h), keep each such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is required to be kept effective and do any and all other acts or things reasonably necessary or advisable to enable the disposition in such jurisdictions of the Securities held by Participating Broker-Dealers or the Registrable Notes covered by the applicable Registration Statement; provided, further, that none of the -------- ------- Issuers shall be required to (A) qualify generally to do business in any jurisdiction where it is not then so qualified, (B) take any action that would subject it to general service of process in any such jurisdiction where it is not then so subject, or (C) subject itself to taxation in excess of a nominal dollar amount in any such jurisdiction where it is not then so subject. (i) If a Shelf Registration is filed pursuant to Section 3 hereof, cooperate with the selling Holders of Registrable Notes and the managing underwriter or underwriters (if any) to facilitate the timely preparation and delivery of certificates representing Registrable Notes to be sold, which certificates shall not bear any restrictive legends and shall be in a form eligible for deposit with The Depository Trust Company; and enable such Registrable Notes to be in such denominations (subject to applicable requirements contained in the Indenture or the indenture under which the Registrable Notes were issued) and registered in such names as the managing underwriter or underwriters (if any) or Holders may request. (j) Subject to the last proviso in (h) above, use their commercially reasonable efforts to cause the Registrable Notes covered by the Registration Statement to be -18- registered with or approved by such other governmental agencies or authorities as may be reasonably necessary to enable the seller or sellers thereof or the underwriter or underwriters, if any, to consummate the disposition of such Registrable Notes, except as may be required solely as a consequence of the nature of such selling Holder's business, in which case the Company will cooperate in all reasonable respects with the filing of such Registration Statement and the granting of such approvals. (k) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, upon the occurrence of any event contemplated by paragraph 5(c)(v) or 5(c)(vi) hereof (except with respect to any event, development or transaction permitted to be kept confidential without the accrual of Additional Interest under Section 4(c)(iii) hereof for the period during which such Additional Interest does not accrue), as promptly as practicable prepare and (subject to Section 5(a) hereof) file with the SEC at the sole expense of the Company, a supplement or post-effective amendment to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Notes being sold thereunder (with respect to a Shelf Registration filed pursuant to Section 3 hereof) or to the purchasers of the Exchange Notes to whom such Prospectus will be delivered by a Participating Broker-Dealer (with respect to any such Registration Statement), any such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Notwithstanding the foregoing, the Company shall not be required to amend or supplement a Registration Statement, any related Prospectus or any document incorporated or deemed to be incorporated therein by reference in the event that, and for a period not to exceed an aggregate of 60 days in any calendar year if (i) an event occurs and is continuing as a result of which the Shelf Registration, any related Prospectus or any document incorporated or deemed to be incorporated therein by reference, would, in the Company's good faith judgment, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading (with respect to such a Prospectus only, in the light of the circumstances -19- under which they were made), and (ii) (a) the Company determines in its good faith judgment that the disclosure of such event at such time would have a material adverse effect on the business, operations or prospects of the Company, or (b) the disclosure otherwise relates to a pending material business transaction that has not yet been publicly disclosed. (l) Prior to the effective date of the first Registration Statement relating to the Securities, (i) provide the Trustee with certificates for the Exchange Notes and the Private Exchange Notes in a form eligible for deposit with The Depository Trust Company and (ii) provide a CUSIP number for the Exchange Notes and the Private Exchange Notes. (m) In connection with any underwritten offering of Registrable Notes pursuant to a Shelf Registration, enter into an underwriting agreement as is customary in underwritten offerings of debt securities similar to the Securities in form and substance reasonably satisfactory to the Company, and take all such other actions as are reasonably requested by the managing underwriter or underwriters (if any) in order to expedite or facilitate the registration or the disposition of such Registrable Notes, and in such connection (i) make such representations and warranties to, and covenants with, the underwriters with respect to the business of the Company and the subsidiaries of the Company (including any acquired business, properties or entity, if applicable), and the Registration Statement, Prospectus and documents, if any, incorporated or deemed to be incorporated therein by reference, in each case, as are customarily made by issuers to underwriters in underwritten offerings of debt securities similar to the Securities, and confirm the same in writing if and when requested in form and substance reasonably satisfactory to the underwriters; (ii) obtain the written opinions of counsel to the Company and written updates thereof in form, scope and substance reasonably satisfactory to the underwriters, addressed to the underwriters covering the matters customarily covered in opinions reasonably requested in underwritten offerings and such other matters as may be reasonably requested by the managing underwriter or underwriters; (iii) obtain "cold comfort" letters and updates thereof in form, scope and substance reasonably satisfactory to the underwriters from the independent public accountants of the Company (and, if necessary, any other independent public accountants of the Company, any subsidiary of the Company or of any business acquired by the Company, for which financial statements and financial data are, or are required to be, included or incorporated by reference in the Registration Statement), addressed to each of the underwriters, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with underwritten offerings of debt securities similar to the Securities and such other matters as reasonably requested by the underwriters as permitted by the Statement on Auditing Standards -20- No. 72; and (iv) if an underwriting agreement is entered into, include in such underwriting agreement indemnification provisions and procedures no less favorable to the sellers and underwriters, if any, than those set forth in Section 7 hereof (or such other provisions and procedures acceptable to Holders of a majority in aggregate principal amount of Registrable Notes covered by such Registration Statement and the underwriters (if any). The above shall be done at each closing under such underwriting agreement, or as and to the extent required thereunder. (n) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, make available for inspection by any selling Holder of such Registrable Notes being sold (with respect to a Shelf Registration filed pursuant to Section 3 hereof), or each such Participating Broker-Dealer, as the case may be, any underwriter participating in any such disposition of Registrable Notes, if any, and any attorney, accountant or other agent retained by any such selling Holder or each such Participating Broker- Dealer (with respect to any such Registration Statement), as the case may be, or underwriter (collectively, the "Inspectors"), upon written request, ---------- at the offices where normally kept, during reasonable business hours, all pertinent financial and other records, pertinent corporate documents and pertinent instruments of the Company and subsidiaries of the Company (collectively, the "Records"), as shall be reasonably necessary to enable ------- them to exercise any applicable due diligence responsibilities, and cause the officers, directors and employees of the Company and any of its subsidiaries to supply all information ("Information") reasonably requested ----------- by any such Inspector in connection with such due diligence responsibilities. Each Inspector shall agree in writing that it will keep the Records and Information confidential and that it will not disclose any of the Records that the Company determines, in good faith, to be confidential and notifies the Inspectors in writing are confidential unless (i) the disclosure of such Records or Information is necessary to avoid or correct a material misstatement or material omission in such Registration Statement or Prospectus, (ii) the release of such Records or Information is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, or (iii) the information in such Records or Information has been made generally available to the public other than by an Inspector or an affiliate of an Inspector; provided, however that prior notice shall be -------- provided as soon as practicable to -21- the Company of the potential disclosure of any information by such Inspector pursuant to clause (i) or (ii) of this sentence in order to permit the Company to obtain a protective order (or waive the provisions of this paragraph (n)). (o) Provide a trustee for the Exchange Notes and the Private Exchange Notes, as the case may be, and cause the Indenture or the trust indenture provided for in Section 2(a) hereof, as the case may be, to be qualified under the TIA not later than the effective date of the first Registration Statement relating to the Exchange Notes; and in connection therewith, cooperate with the trustee under any such indenture and the Holders of the Securities, to effect such changes (if any) to such indenture as may be required for such indenture to be so qualified in accordance with the terms of the TIA; and execute, and use their commercially reasonable efforts to cause such trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the SEC to enable such indenture to be so qualified in a timely manner. (p) Comply with all applicable rules and regulations of the SEC and make generally available to its securityholders with regard to any applicable Registration Statement, a consolidated earnings statement satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) no later than 45 days after the end of any fiscal quarter (or 90 days after the end of any 12-month period if such period is a fiscal year) (i) commencing at the end of any fiscal quarter in which Registrable Notes are sold to underwriters in a firm commitment or best efforts underwritten offering and (ii) if not sold to underwriters in such an offering, commencing on the first day of the first fiscal quarter of the Company, after the effective date of a Registration Statement, which statements shall cover said 12-month periods. (q) Upon consummation of the Exchange Offer or a Private Exchange, obtain an opinion or opinions of counsel to the Issuers, in a form customary for underwritten transactions, addressed to the Trustee for the benefit of all Holders of Securities participating in the Exchange Offer or the Private Exchange, as the case may be, that the Exchange Notes or Private Exchange Notes, as the case may be, the related Guarantees and the relevant indenture constitute legal, valid and binding obligations of the Company and/or the Guarantors, as applicable, enforceable against each of them in accordance with their respective terms, subject to customary exceptions and qualifications. (r) If the Exchange Offer or a Private Exchange is to be consummated, upon delivery of the Registrable Notes by Holders to the Company (or to such other -22- Person as directed by the Company), in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be, the Company shall mark, or cause to be marked, on such Registrable Notes that such Registrable Notes are being canceled in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be; in no event shall such Registrable Notes be marked as paid or otherwise satisfied. (s) Reasonably cooperate with each seller of Registrable Notes covered by any Registration Statement and each underwriter, if any, participating in the disposition of such Registrable Notes and their respective counsel in connection with any filings required to be made with the National Association of Securities Dealers, Inc. (the "NASD"). ---- (t) Use their commercially reasonable efforts to take all other steps reasonably necessary to effect the registration of the Exchange Notes and/or Registrable Notes covered by a Registration Statement contemplated hereby. The Company may require each seller of Registrable Notes as to which any registration is being effected to furnish to the Company such information regarding such seller and the distribution of such Registrable Notes as the Company may, from time to time, reasonably request. The Company may exclude from such registration the Registrable Notes of any seller so long as such seller fails to furnish such information within a reasonable time after receiving such request. Each seller as to which any Shelf Registration is being effected agrees to furnish promptly to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such seller not materially misleading. If any such Registration Statement refers to any holder by name or otherwise as the holder of any securities of the Company, then such Holder shall have the right to require (i) the insertion therein of language, in form and substance reasonably satisfactory to such Holder, to the effect that the holding by such Holder of such securities is not to be construed as a recommendation by such Holder of the investment quality of the securities covered thereby and that such holding does not imply that such Holder will assist in meeting any future financial requirements of the Company, or (ii) in the event that such reference to such Holder by name or otherwise is not required by the Securities Act or any similar federal statute then in force, the deletion of the reference to such Holder in any amendment or supplement to the Registration Statement filed or prepared subsequent to the time that such reference ceases to be required. Each Holder of Registrable Notes agrees by its acquisition of such Registrable Notes, and each Participating Broker-Dealer agrees by its acquisition of Registrable Notes or -23- Exchange Notes to be sold by such Participating Broker-Dealer that, upon actual receipt of any notice from the Company of the happening of any event of the kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v) or 5(c)(vi) hereof, such Holder or Participating Broker-Dealer will forthwith discontinue disposition of the Securities covered by such Registration Statement or Prospectus until such Holder or Participating Broker-Dealer receives copies of the supplemented or amended Prospectus contemplated by Section 5(k) hereof, or until it is advised in writing (the "Advice") by the Company that the use of the applicable ------ Prospectus may be resumed, and has received copies of any amendments or supplements thereto. In the event that the Company shall give any such notice, the Applicable Period shall be extended by the number of days during such periods from and including the date of the giving of such notice to and including the date when each seller of Registrable Notes covered by such Registration Statement or Exchange Notes to be sold by such Participating Broker-Dealer, as the case may be, shall have received (x) the copies of the supplemented or amended Prospectus contemplated by Section 5(k) hereof or (y) the Advice. 6. Registration Expenses --------------------- (a) All fees and expenses incident to the performance of or compliance with this Agreement by the Issuers (other than any underwriting discounts or commissions) shall be borne by the Company, whether or not the Exchange Offer Registration Statement or any Shelf Registration is filed or becomes effective or the Exchange Offer is consummated, including, without limitation, (i) all registration and filing fees (including, without limitation, (A) fees with respect to filings required to be made with the NASD in connection with an underwritten offering and (B) reasonable fees and expenses of compliance with state securities or Blue Sky laws (including, without limitation, fees and disbursements of counsel in connection with Blue Sky qualifications of the Securities and determination of the eligibility of the Securities for investment under the laws of such jurisdictions within the United States (x) where the Holders are located, in the case of the Exchange Notes, or (y) as provided in Section 5(h) hereof, in the case of Securities to be sold by a Participating Broker-Dealer during the Applicable Period)), (ii) printing expenses, including without limitation, expenses of printing certificates for Securities in a form eligible for deposit with The Depository Trust Company and of printing Prospectuses if the printing of Prospectuses is requested by the managing underwriter or underwriters (if any), or is reasonably requested by the Holders of a majority in aggregate principal amount of the Registrable Notes included in any Registration Statement or by any Participating Broker-Dealer in respect of Securities to be sold during the Applicable Period, as the case may be, (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company and, in case of a Shelf Registration, reasonable fees and disbursements of one special counsel for all of the sellers of Registrable Notes (exclusive of any counsel retained pursuant to Section 7 hereof), subject to Section 6(b) hereof, (v) fees and disbursements of all independent certified public accountants referred to -24- in Section 5(m)(iii) hereof (including, without limitation, the expenses of any special audit and "cold comfort" letters required by or incident to such performance), (vi) Securities Act liability insurance, if the Company desires such insurance, (vii) fees and expenses of all other Persons retained by the Company, including, without limitation, the Trustee, (viii) internal expenses of the Company (including, without limitation, all salaries and expenses of officers and employees of the Company performing legal or accounting duties), (ix) the expense of any annual audit, (x) any fees and expenses incurred in connection with the listing of the Securities to be registered on any securities exchange, and the obtaining of a rating of the Securities, in each case, if applicable, and (xi) the expenses relating to printing, word processing and distributing all Registration Statements. The Holders shall be responsible for all of their other out-of-pocket expenses incurred in connection with the registration of the Registrable Notes. The Issuers shall have no obligation to pay any underwriting fees, discounts or commissions attributable to the sale of any Registrable Notes. (b) In connection with any Shelf Registration hereunder, the Company shall reimburse the Holders of the Registrable Notes being registered in such registration for the reasonable fees and disbursements of not more than one counsel (in addition to appropriate local counsel) chosen by the Holders of a majority in aggregate principal amount of the Registrable Notes to be included in such Registration Statement. The Holders shall be responsible for all of their other out-of-pocket expenses incurred in connection with their registration of the Registrable Notes. The Issuers shall have no obligation to pay any underwriting fees, discounts or commissions attributable to the sale of any Registrable Notes. 7. Indemnification --------------- (a) The Company agrees to indemnify and hold harmless each Holder participating in a registration hereunder and each Participating Broker-Dealer selling Exchange Notes during the Applicable Period, and each Person, if any, who controls any such Holder or Participating Broker-Dealer within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, or is under common control with, or is controlled by, any such Holder or Participating Broker-Dealer, from and against all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred by any such Holder or Participating Broker-Dealer or any such controlling or affiliated Person in connection with defending or investigating any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment thereto), including all documents incorporated therein by reference, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or caused by any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supple- -25- ments thereto to such Holder or Participating Broker-Dealer), or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, -------- ------- that the Company will not be so liable (i) insofar as such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to any Holder furnished to the Company in writing by or on behalf of any selling Holder expressly for use therein or (ii) insofar as such losses, claims, damages or liabilities were caused by an untrue statement or omission that was contained or made in any preliminary Prospectus and corrected in the Prospectus or any amendment or supplement thereto if (x) the Prospectus does not contain any other untrue statement or omission of a material fact that was the subject matter of the related proceeding, (y) any such losses, claims, damages or liabilities resulted from an action, claim or suit by any Person who purchased Registrable Notes or Exchange Notes which are the subject thereof from the indemnified party (as defined) and (z) it is established in the related proceeding that such indemnified party failed to deliver or provide a copy of the Prospectus (as so amended or supplemented, if applicable) to such Person with or prior to the confirmation of the sale of such Registrable Notes or Exchange Notes to such Person if required by applicable law, unless such failure to deliver or provide a copy of such Prospectus (as so amended or supplemented, if applicable) was a result of non-compliance by the Company with Section 5 hereof. In connection with any underwritten offering, the Company will also indemnify the underwriters, if any, selling brokers, dealers and similar securities industry professionals participating in the distribution, their officers and directors and each Person who controls such Persons (within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act) to the same extent as provided above with respect to the indemnification of the Holders and the Participating Broker-Dealers, if requested in connection with any Registration Statement. (b) Each Holder participating in a registration hereunder and each Participating Broker-Dealer selling Exchange Notes during the Applicable Period, agrees, severally and not jointly, to indemnify and hold harmless the Company and the other Holders and Participating Broker-Dealers, and each of their respective directors, officers who sign the Registration Statement and each Person, if any, who controls the Company and any other Holder or Participating Broker-Dealer within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to the Holders and the Participating Broker-Dealers, but only with reference to information relating to such Holder furnished to the Company in writing by or on behalf of such Holder expressly for use in any Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto). -26- (c) In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to either paragraph (a) or paragraph (b) above, such Person (the "indemnified party") shall promptly notify the Person against whom such ----------------- indemnity may be sought (the "indemnifying party") in writing and the ------------------ indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the reasonable fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel and the indemnifying party has agreed to pay the fees and expenses of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for (a) the fees and expenses of more than one separate firm engaged in accordance with clause (ii) of the preceding sentence (in addition to any local counsel) for all indemnified parties, and that all such fees and expenses shall be reimbursed as they are incurred upon written request and presentation of invoices. In any case involving the Placement Agents and Persons who control the Placement Agents, such firm shall be designated in writing by the Placement Agents. In any other case involving the Holders and such Persons who control Holders, such firm shall be designated in writing by a majority of affected Holders (measured in terms of the principal amount of outstanding Securities). In all other cases, such firm shall be designated by the Company. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent but, if settled with such consent or if there be a final non-appealable judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by the second and third sentences of this paragraph, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party for such fees and expenses of counsel in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which such indemnified party is or could have been a party and indemnity could have been -27- sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. (d) If the indemnification provided for in paragraph (a) or paragraph (b) of this Section 7 is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages or liabilities, then each indemnifying party under such paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect the relative fault of the indemnifying party or parties on the one hand and of the indemnified party or parties on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault of the Company and the Holders shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Holders and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Holders' respective obligations to contribute pursuant to this Section 7(d) are several in proportion to the respective principal amount of Registrable Notes of such Holder that were registered pursuant to a Registration Statement. (e) The Company and each Holder agree that it would not be just or equitable if contribution pursuant to this Section 7 were determined by pro rata --- ---- allocation or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph (d) above. The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in paragraph (d) above shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 7, no Holder shall be required to indemnify or contribute any amount in excess of the amount by which the total price at which Registrable Notes were sold by such Holder exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. The remedies provided for in this Section 7 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. The indemnity and contribution provisions contained in this Section 7 shall remain operative and in full force and effect regardless of (i) any termination of this Agree- -28- ment, (ii) any investigation made by or on behalf of any Participating Broker- Dealer, any Holder or any Person controlling any Participating Broker-Dealer or any Holder, or by or on behalf of the Company, its officers or directors or any Person controlling the Company, (iii) acceptance of any of the Exchange Notes and (iv) any sale of Registrable Notes pursuant to a Shelf Registration. 8. Rules 144 and 144A ------------------ Each of the Issuers covenants and agrees that it will file the reports required to be filed by it under the Exchange Act and the rules and regulations adopted by the SEC thereunder in a timely manner in accordance with the requirements of the Exchange Act and, if at any time the Issuers are not required to file such reports, the Issuers will, upon the request of any Holder or beneficial owner of Registrable Notes, make available such information necessary to permit sales pursuant to Rule 144A. Each of the Issuers further covenants and agrees for so long as any Registrable Notes remain outstanding that it will take such further action as any Holder of Registrable Notes may reasonably request, all to the extent required from time to time to enable such holder to sell Registrable Notes without registration under the Securities Act within the limitation of the exemptions provided by Rule 144(k) under the Securities Act and Rule 144A. 9. Underwritten Registrations -------------------------- If any of the Registrable Notes covered by any Shelf Registration are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will manage the offering will be selected by the Holders of a majority in aggregate principal amount of such Registrable Notes included in such offering and will be reasonably acceptable to the Issuers and such Holders shall be responsible for all underwriting discounts and commissions in connection therewith. No Holder of Registrable Notes may participate in any underwritten registration hereunder unless such Holder (a) agrees to sell such Holder's Registrable Notes on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements. 10. Miscellaneous ------------- (a) No Inconsistent Agreements. None of the Issuers has, as of the -------------------------- date hereof, and none of the Issuers shall, after the date of this Agreement, enter into any agree- -29- ment with respect to any of its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of any of the Issuers' other issued and outstanding securities under any such agreements. None of the Issuers will enter into any agreement with respect to any of its securities which will grant to any Person piggyback registration rights with respect to any Registration Statement. (b) Adjustments Affecting Registrable Notes. None of the Issuers --------------------------------------- shall, directly or indirectly, take any action with respect to the Registrable Notes as a class that would adversely affect the ability of the Holders of Registrable Notes to include such Registrable Notes in a registration undertaken pursuant to this Agreement. (c) Amendments and Waivers. The provisions of this Agreement may not ---------------------- be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, otherwise than with the prior written consent of (I) the Company, and (II)(A) the Holders of not less than a majority in aggregate principal amount of the then outstanding Registrable Notes and (B) in circumstances that would adversely affect the Participating Broker-Dealers, the Participating Broker-Dealers holding not less than a majority in aggregate principal amount of the Exchange Notes held by all Participating Broker-Dealers; provided, however, that Section 7 and this Section 10(c) may not - -------- ------- be amended, modified or supplemented without the prior written consent of each Holder, each Placement Agent, and each Participating Broker-Dealer (including any person who was a Holder or Participating Broker-Dealer of Registrable Notes or Exchange Notes, as the case may be, disposed of pursuant to any Registration Statement) affected by any such amendment, modification or supplement. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders of Registrable Notes whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect, impair, limit or compromise the rights of other Holders of Registrable Notes may be given by Holders of at least a majority in aggregate principal amount of the Registrable Notes being sold pursuant to such Registration Statement. (d) Notices. All notices and other communications (including, without ------- limitation, any notices or other communications to the Trustee) provided for or permitted hereunder shall be made in writing by hand-delivery, registered first- class mail, next-day air courier or facsimile: (i) if to a Holder or any Participating Broker-Dealer, at the most current address of such Holder or Participating Broker-Dealer, as the case may be, set forth on the records of the registrar under the Indenture; -30- (ii) if to the Company, at the following address: Pacer International, Inc. 3746 Mt. Diablo Blvd. Suite 110 Lafayette, CA 94549 Attention: Donald C. Orris Telecopy: (925) 299-1939 with a copy to: Dewey Ballantine LLP 1301 Avenue of the Americas New York, New, York 10019 Attention: Morton A. Pierce, Esq. Douglas L. Getter, Esq. Telecopy: (212) 862-1093 (iii) If to a Placement Agent, at the following address: c/o Morgan Stanley & Co. Incorporated 1585 Broadway New York, NY 10036 Attention: Joel Feldmann Telecopy: (212) 761-0358 with a copy to: Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 Attention: John A. Tripodoro, Esq. Telecopy: (212) 269-5420 All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; one Business Day after being timely delivered to a next-day air courier, and when receipt is acknowledged by the addressee, if sent by facsimile. -31- Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address and in the manner specified in the Indenture. (e) Successor and Assigns. This Agreement shall inure to the benefit --------------------- of and be binding upon the successors and assigns of each of the parties hereto, the Holders and the Participating Broker-Dealers. (f) Counterparts. This Agreement may be executed in any number of ------------ counterparts, and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (g) Headings. The headings in this Agreement are for convenience of -------- reference only and shall not limit or otherwise affect the meaning hereof. (h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED ------------- IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. (i) Severability. If any term, provision, covenant or restriction of ------------ this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. (j) Securities Held by the Company or Its Affiliates. Whenever the ------------------------------------------------ consent or approval of Holders of a specified percentage of Registrable Notes is required hereunder, Registrable Notes held by the Company or its affiliates shall not be counted in determining whether such consented approval was given by the Holders of such required percentage. -32- (k) Third-Party Benificiaries. Holders of Registrable Notes and ------------------------- Participating Broker-Dealers are intended third-party beneficiaries of this Agreement, and this Agreement may be enforced by such Persons. (l) Entire Agreement. This Agreement, together with the Purchase ---------------- Agreement and the Indenture, is intended by the parties as a final and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein and any and all prior oral or written agreements, representations, or warranties, contracts, understandings, correspondence, conversations and memoranda between the Holders on the one hand and the Company on the other, or between or among any agents, representatives, parents, subsidiaries, affiliates, predecessors in interest or successors in interest with respect to the subject matter hereof and thereof are merged herein and replaced hereby. -33- IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. Company PACER INTERNATIONAL, INC. By: /s/ Donald C. Orris _____________________________________ Name: Donald C. Orris Title: Chairman, President and Chief Executive Officer Guarantors PACER LOGISTICS, INC. CROSS CON TRANSPORT, INC. CROSS CON TERMINALS, INC. PACIFIC MOTOR TRANSPORT COMPANY PACER EXPRESS, INC. PACER INTEGRATED LOGISTICS, INC. PLM ACQUISITION CORPORATION INTERSTATE CONSOLIDATION SERVICE, INC. INTERSTATE CONSOLIDATION, INC. MANUFACTURERS CONSOLIDATION SERVICE, INC. INTERMODAL CONTAINER SERVICE, INC. LEVCON, INC. MANUFACTURERS CONSOLIDATION SERVICE OF CANADA, INC. KEYSTONE TERMINALS ACQUISITION CORP. By: /s/ Lawrence C. Yarberry _____________________________________ Name: Lawrence C. Yarberry Title: Executive Vice President -34- PACER INTERNATIONAL RAIL SERVICES LLC PACER INTERNATIONAL CONSULTING LLC PACER RAIL SERVICES LLC By: PACER LOGISTICS, INC., as Manager By: /s/ Lawrence C. Yarberry _____________________________________ Name: Lawrence C. Yarberry Title: Executive Vice President -35- Confirmed and accepted as of the date first above written MORGAN STANLEY & CO. INCORPORATED By: /s/ Clifton E. Strain ________________________ Name: Clifton E. Strain Title: Principal BT ALEX. BROWN INCORPORATED By: /s/ Bruce Tully ________________________ Name: Bruce Tully Title: Managing Director CREDIT SUISSE FIRST BOSTON CORPORATION By: /s/ Jeffrey C. Home ________________________ Name: Jeffrey C. Home Title: Director CREDIT LYONNAIS SECURITIES (USA) INC. By: /s/ David C. Travis ________________________ Name: David C. Travis Title: Managing Director -36- Schedule A ---------- Guarantors - ---------- PACER LOGISTICS, INC. CROSS CON TRANSPORT, INC. CROSS CON TERMINALS, INC. PACER INTERNATIONAL RAIL SERVICES LLC PACER INTERNATIONAL CONSULTING LLC PACER RAIL SERVICES LLC PACIFIC MOTOR TRANSPORT COMPANY PACER EXPRESS, INC. PACER INTEGRATED LOGISTICS, INC. PLM ACQUISITION CORPORATION INTERSTATE CONSOLIDATION SERVICE, INC. INTERSTATE CONSOLIDATION, INC. MANUFACTURERS CONSOLIDATION SERVICE, INC. INTERMODAL CONTAINER SERVICE, INC. LEVCON, INC. MANUFACTURERS CONSOLIDATION SERVICE OF CANADA, INC. KEYSTONE TERMINALS ACQUISITION CORP. -37- EX-5.1 20 OPINION OF DEWEY BALLANTINE LLP EXHIBIT 5.1 [Letterhead of Dewey Ballantine LLP] August 11, 1999 Pacer International, Inc. 1340 Treat Boulevard Suite 200 Walnut Creek, CA 94596 Re: 11 3/4% Series B Senior Subordinated Notes due 2007 (the "Exchange Notes") Ladies and Gentlemen: We have acted as counsel for Pacer International, Inc., a Tennessee corporation (the "Company"), in connection with the Company's offer to exchange (the "Exchange Offer") up to $150,000,000 aggregate principal amount of Exchange Notes which have been registered under the Securities Act of 1933, as amended (the "Securities Act") for its existing 11 3/4% Senior Subordinated Notes due 2007 (the "Old Notes"), as described in the Prospectus (the "Prospectus") contained in the Registration Statement on Form S-4 (the "Registration Statement"), to be filed with the Securities and Exchange Commission. The Old Notes were issued, and the Exchange Notes are proposed to be issued, under an indenture dated as of May 28, 1999 (the "Indenture"), between the Company and Wilmington Trust Company, as Trustee. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Registration Statement. In arriving at the opinion expressed below, we have examined the Registration Statement, the Prospectus contained therein, the Indenture and Exchange Notes, which are filed as exhibits to the Registration Statement, and originals or copies, certified or otherwise identified to our satisfaction, of such other documents, records, certificates, agreements and other matters as we have deemed necessary for the purposes of this opinion. In such examination, we have assumed, without independent investigation, (i) the genuineness of all signatures; (ii) the legal capacity of all individuals who have executed any of the documents reviewed by us; (iii) the authenticity of all documents submitted to us as originals; (iv) the conformity to executed documents of all unexecuted copies submitted to us; and (v) the authenticity of, and the conformity to, original documents of all documents submitted to us as certified or photocopied copies. As to certain factual matters material to our opinion, we have relied upon oral statements, written information and certificates of officials and representatives of the Company and others, and we have not independently verified the accuracy of the statements contained therein. Based on the foregoing, and subject to the assumptions, exceptions and qualifications set forth herein, we are of the opinion that the Exchange Notes to be offered and issued by the Company have been duly authorized and, when executed and authenticated in accordance with the terms of the Indenture pursuant to which they will be issued and delivered in exchange for the applicable Old Notes in accordance with the Exchange Offer, will be validly issued and constitute binding obligations of the Company, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally or by general equitable principles. In rendering the foregoing opinion, our examination of matters of law has been limited to the laws of the State of New York, the laws of the State of Delaware and the federal laws of the United States of America, as in effect on the date hereof. We hereby consent to the filing of this opinion as Exhibit 5.1 to the Registration Statement and to the reference made to this firm under the caption "Legal Matters" in the Prospectus. In giving this consent, we do not thereby admit that we are included within the category of persons whose consent is required under Section 7 of the Securities Act, or the rules and regulations of the Securities and Exchange Commission promulgated thereunder. This opinion is rendered solely to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by or furnished to any other person without our prior written consent. Very truly yours, /s/ Dewey Ballantine LLP ------------------------------------- Dewey Ballantine LLP 2 EX-10.1 21 EMPLOYMENT AGREEMENT FOR DONALD C. ORRIS EXHIBIT 10.1 PACIFIC MOTOR TRANSPORT COMPANY 3746 MT. DIABLO BOULEVARD, SUITE 110 LAFAYETTE, CALIFORNIA 94549 March 31, 1997 Mr. Don C. Orris 10007 Oak Tree Court Littleton, Colorado 80124 Employment Agreement -------------------- Dear Don: This letter sets forth the terms of your continued employment with Pacific Motor Transport Company (the "Company"). 1. Duties. On the terms and subject to the conditions contained ------ in this Agreement, you will be employed as the President of the Company (the "Company"), and shall perform such duties and services consistent with such position as may reasonably be assigned to you from time to time by the Board of Directors. 2. Term. Unless sooner terminated in accordance with the ---- applicable provisions of this Agreement, your employment hereunder shall be for the period (including any extensions thereof, the "Employment Period") commencing on the date hereof (the "Commencement Date") and initially ending on the second anniversary of the date hereof. Subject to the applicable provisions of Section 8 of this Agreement regarding earlier termination, the Employment Period shall be extended automatically one day prior to each anniversary of the Commencement Date, beginning with the second anniversary thereof, for an additional period of one year. 3. Time to be Devoted to Employment. During the Employment Period, -------------------------------- you will devote your working energies, efforts, interest, abilities and time exclusively to the business and affairs of the Company. You will not engage in any other business or activity which, in the reasonable judgment of the Board of Directors of the Company, would conflict or interfere with the performance of your duties as Mr. Don C. Orris March 31, 1997 Page 2 set forth herein, whether or not such activity is pursued for gain, profit or other pecuniary advantage. 4. Base Salary; Bonus; Benefits. ---------------------------- (a) During the Employment Period, the Company (or any of its affiliates) shall pay you a minimum annual base salary (the "Base Salary") of $165,000, payable in such installments (but not less often than monthly) as is generally the policy of the Company with respect to the payment of regular compensation to its executive officers. On the first anniversary of the Commencement Date, the Base Salary will be increased to $225,000 per annum, and on the second anniversary of the Commencement Date, the Base Salary will be adjusted to an amount that reflects customary market compensation for a company in the same industry and of comparable size and income as the Company, which Base Salary, as adjusted, shall be agreed upon by you and the Board of Directors of the Company. At all times after the second anniversary of the Commencement Date, increases in the Base Salary, if any, will be determined by the Board of Directors in its sole discretion. During the Employment Period, you will also be entitled to four weeks vacation per year and such other benefits as may be made available to other executive officers of the Company generally, including, without limitation, (i) participation in such health, life and disability insurance programs and retirement or savings plans as the Company may from time to time maintain in effect and (ii) the use of a vehicle provided by the Company or an equivalent monthly car allowance in accordance with the Company's policy with respect to its senior executives. (b) In addition to the Base Salary and benefits set forth in paragraph (a) above, you will be entitled to receive a cash incentive bonus, if any, with respect to each fiscal year of the Company occurring during the Employment Period, as provided in this paragraph. The bonus, if any, for each fiscal year of the Company ending on or prior to December 31, 2001, shall be calculated in the manner set forth on Annex A attached to this Agreement and ------- shall be due and payable as soon as practicable, but in no event later than 30 days, following the Company's receipt from its public accountants of the audited financial statements of the Company. If your employment with the Company is terminated for any reason other than without "cause" pursuant to Section 8(b), the Company will not pay you a bonus with respect to the fiscal year in which your employment is terminated or thereafter. If your employment with the Company is terminated without "cause" as Mr. Don C. Orris March 31, 1997 Page 3 provided in Section 8(b) below, you will be entitled to receive that portion of the bonus payable for such fiscal year pro rated through the date of such termination based on the number of days elapsed through the termination date over 365 days, payable in accordance with the second sentence of this Section 4(b). For each fiscal year ending after December 31, 2001, the amount of the bonus and the criteria therefor shall be determined by the Board of Directors. In the event that the Company consummates any mergers or acquisitions (whether of assets, stock or other interests) or other extraordinary transactions, the Board of Directors shall in good faith make such adjustments to the targets set forth on Annex A for Operating Income (as defined on Annex A) to take into ------- ------- account the effects of any such acquisition or transaction. 5. Reimbursement of Expenses. During the Employment Period, the ------------------------- Company shall reimburse you in accordance with Company policy for all reasonable and necessary traveling expenses and other disbursements incurred by you for or on behalf of the Company in connection with the performance of your duties hereunder upon presentation of appropriate receipts or other documentation therefor, in accordance with all applicable policies of the Company. 6. Options. The Company will grant you options (the "Options") to ------- purchase shares of common stock, $.01 par value (the "Common Stock"), of the Company pursuant to the Company's 1997 Stock Option Plan (the "Option Plan"). The Options will be evidenced by a Stock Option Agreement between you and the Company. The Option Plan and the Stock Option Agreement will contain all of the terms and conditions of your Options. 7. Disability or Death. If, during the Employment Period, you are ------------------- incapacitated or disabled by accident, sickness or otherwise (hereinafter, a "Disability") so as to render you mentally or physically incapable of performing the services required to be performed by you under this Agreement for an aggregate of 210 days in any period of 360 consecutive days, the Company may, at any time thereafter, at its option, terminate your employment under this Agreement immediately upon giving you written notice to that effect. In the event of your death, your employment will be deemed terminated as of the date of death. 8. Termination. ----------- (a) The Company may terminate your employment hereunder at any time for "cause" by giving you written notice Mr. Don C. Orris March 31, 1997 Page 4 of such termination, with reasonable specificity of the grounds therefor. For purposes of this Section 8, "cause" shall mean (i) willful misconduct with respect to the business and affairs of the Company, PMT Holdings, Inc. ("PMT") or any of their respective subsidiaries, (ii) willful neglect of your duties or the failure to follow the lawful directions of the Board or more senior officers of the Company to whom you report, including, without limitation, the violation of any material policy of the Company, PMT or any of their respective subsidiaries applicable to you, (iii) the breach of Section 7 of the Subscription Agreement or the material breach of any of the provisions of this Agreement or any Related Agreement (as defined below) and if such breach is capable of being cured, your failure to cure such breach within 30 days of receipt of written notice thereof from the Company, (iv) the commission of a felony, (v) the commission of an act of fraud or financial dishonesty with respect to the Company, PMT or any of their respective subsidiaries or affiliates or (vi) any conviction for a crime involving moral turpitude or fraud. A termination pursuant to this Section 8(a) shall take effect immediately upon the giving of the notice contemplated hereby. In this Agreement, the term "Related Agreements" means (i) the Stock Subscription Agreement dated as of the date hereof between you and PMT (the "Subscription Agreement"), and (ii) the Stockholders Agreement dated as of the date hereof among PMT, you and the other stockholders named therein. (b) The Company may terminate your employment hereunder at any time without "cause" by giving you written notice of such termination, which termination shall be effective as of the date set forth in such notice, provided that such date shall not be earlier than the date of the notice. 9. Effect of Termination. --------------------- (a) Upon the effective date of a termination of your employment under this Agreement for any reason other than a termination without cause pursuant to Section 8(b), neither you nor your beneficiaries or estate shall have any further rights under this Agreement or any claims against the Company or any of its subsidiaries or affiliates arising out of this Agreement, except the right to receive, within 30 days after the effective date of such termination: (i) the unpaid portion of the Base Salary provided for in Section 4, computed on a pro rata basis to the effective date of such --- ---- termination; Mr. Don C. Orris March 31, 1997 Page 5 (ii) reimbursement for any expenses for which you shall not have theretofore been reimbursed, as provided in Section 5; and (iii) the unpaid portion of any amounts earned by you prior to the effective date of such termination pursuant to any benefit program in which you participated during the Employment Period; provided, however, you -------- ------- shall not be entitled to receive any benefits under any benefit program that have accrued during any period if the terms of such program require that the beneficiary be employed by the Company as of the end of such period. (b) Upon termination of your employment under this Agreement pursuant to Section 8(b), neither you nor your beneficiaries or estate shall have any further rights under this Agreement or any claims against the Company, PMT or any of their respective subsidiaries or affiliates arising out of this Agreement, except the right to receive, within 30 days after the effective date of such termination, in the case of amounts due pursuant to clause (i) below, and at such other times as provided in clause (ii) and (iii) below in the case of amounts due thereunder: (i) the payments, if any, referred to in Section 9(a) above, to the extent not covered by clause (ii) and (iii) of this Section 9(b); (ii) the right to continue to receive the Base Salary for a period equal to the greater of (A) the number of months remaining in the Employment Period on the effective date of termination or (B) twelve months, in either case commencing on the first month following the effective date of such termination, payable during such period in such manner as the Base Salary is payable pursuant to Section 4(a), reduced by 50% of any amounts you (or your beneficiaries or estate) receive or are entitled to receive as salary or other cash compensation from subsequent employment or for services rendered during such period, up to a maximum of 50% of all amounts due to you under this Section 9(b)(ii). In order to carry out the intent of the immediately preceding sentence, you agree, for yourself and your beneficiaries or estate, to provide the Company with such information as the Company may reasonably request regarding your receipt of salary and other cash compensation from subsequent employment or for services rendered or to be rendered during or with respect to such period. Mr. Don C. Orris March 31, 1997 Page 6 (iii) the right to receive any bonus payable in accordance with Section 4(b) with respect to the fiscal year in which such termination occurs. Notwithstanding anything in this Agreement to the contrary, your beneficiaries or estate will be entitled to continue to receive all payments specified in this Section 9(b) if you die after the date of a termination without "cause." 10. Disclosure of Information. ------------------------- (a) From and after the date hereof, you shall not at any time use or disclose to any person or entity (other than any officer, director, employee, affiliate or representative of the Company), except as required in connection with the performance of your duties under and in compliance with this Agreement and as required by law and judicial process, any Confidential Information (as hereinafter defined) heretofore acquired or acquired during the Employment Period for any reason or purpose whatsoever, nor shall you make use of any of the Confidential Information for your own purposes or for the benefit of any person or entity except the Company or any subsidiary thereof. (b) For purposes of this Agreement, "Confidential Information" shall mean (i) the Intellectual Property Rights (as hereinafter defined) of the Company and its subsidiaries and (ii) all other information of a proprietary or confidential nature relating to the Company or any subsidiary thereof, or the business or assets of the Company or any such subsidiary, including, without limitation, books, records, agent and independent contractor lists and related information, customer lists and related information, vendor lists and related information, supplier lists and related information, distribution channels, pricing information, cost information, marketing plans, strategies, forecasts, financial statements, budgets and projections, other than (i) information which is generally available to the public on the date hereof, or which becomes generally available to the public after the date hereof without action by you or (ii) information which you receive from a third party who does not have any independent obligation to the Company to keep such information confidential. (c) As used herein, the term "Intellectual Property Rights" means all industrial and intellectual property rights, including, without limitation, patents, patent applications, patent rights, trademarks, trademark Mr. Don C. Orris March 31, 1997 Page 7 applications, trade names, service marks, service mark applications, copyrights, copyright applications, know-how, certificates of public convenience and necessity, franchises, licenses, trade secrets, proprietary processes and formulae, inventions, development tools, marketing materials, instructions, confidential information, trade dress, logos and designs and all documentation and media constituting, describing or relating to the foregoing, including, without limitation, manuals, memoranda and records. 11. Noncompetition Covenant. ----------------------- (a) You acknowledge and recognize that during the Employment Period you will be privy to Confidential Information. You further acknowledge and recognize that the relationships with vendors, agents and customers of the Company that you have developed prior to the date hereof and those that you will maintain or develop during the Employment Period with the use and assistance of the Company and its properties and assets are of special and unique value to the Company and its affiliates and that the Company would find it extremely difficult to replace you. Accordingly, in consideration of the premises contained herein and the consideration you will receive hereunder (including, without limitation, the severance compensation described in Section 9(b)(ii), if applicable), without the prior written consent of the Company, you shall not, at any time during the Employment Period and the period beginning on the effective date of any termination of your employment with the Company and its subsidiaries and ending on the third anniversary thereof, (a) directly or indirectly engage in, represent in any way, or be connected with, any Competing Business (as defined below), whether such engagement shall be as an officer, director, owner, employee, partner, affiliate or other participant in any Competing Business, (b) assist others in engaging in any Competing Business in the manner described in clause (a) above, (c) induce other employees of the Company, PMT or any of their respective subsidiaries to terminate their employment with the Company or any of their respective subsidiaries or to engage in any Competing Business or (d) induce any customer, vendor or agent or any other person or entity with which the Company or any subsidiary or affiliate thereof has a business relationship, contractual or otherwise, to terminate or alter such business relationship. This covenant is considered an integral part of this Agreement. The foregoing restriction shall not apply to your ownership of publicly traded securities which represent not more than 5% of the ownership interests of the issuer. Mr. Don C. Orris March 31, 1997 Page 8 (b) You understand that the foregoing restrictions may limit your ability to earn a livelihood in a business similar to the business of the Company or any subsidiary or affiliate thereof, but you nevertheless believe that you have received and will receive sufficient consideration and other benefits as an employee of the Company and under the terms of this Agreement to justify clearly such restrictions which, in any event (given your education, skills and ability), you do not believe would prevent you from earning a living. (c) As used herein, the term "Competing Business" shall mean any business conducted in any city or county in any state of the United States which is engaged in (A) intermodal marketing or (B) providing flatbed specialized hauling services utilizing owner-operators or agents; provided, however, that an entity which has separate divisions or business units, one or more of which are engaged in a business described in clause (A) or (B) hereof, will not be deemed a Competing Business with respect to those portions of such entity which are not engaged in a business described in clause (A) or (B) above so long as the Employee's association with any such separate division or business unit (fully taking into account his functions and the nature of his work at such division or business unit) does not relate in any material respect to such portion of such business which would be a Competing Business hereunder. (d) Notwithstanding anything contained in this Agreement to the contrary, if, following the termination of your employment with the Company and/or its subsidiaries, the Company fails to pay to you any sums due under Section 9(b)(ii) hereof and (i) you have complied in all material respects with all of the provisions of the last sentence of Section 9(b)(ii) and (ii) such failure to pay continues for a period of fifteen (15) days following receipt by the Company of written notice thereof, the restrictions contained in this Section 11 shall terminate and be of no further force or effect. Any termination of the restrictions contained in this Section 11 pursuant to this subsection (d) shall not affect the Company's obligations under this Agreement or constitute a waiver by you of any other rights or remedies you may have against the Company for breach of any term hereof. 12. Inventions Assignment. During the Employment Period, you shall --------------------- promptly disclose, grant and assign to the Company for its sole use and benefit any and all inventions, improvements, technical information and suggestions reasonably Mr. Don C. Orris March 31, 1997 Page 9 relating to the business of the Company, PMT or any of their respective subsidiaries (collectively, the "Inventions") which you may develop or acquire during the Employment Period (whether or not during usual working hours), together with all patent applications, letters patent, copyrights and reissues thereof that may at any time be granted for or with respect to the Inventions. In connection therewith (a) you shall, at the expense of the Company (including a reasonable payment (based on your last per diem earnings) for the time involved if you are not then in the Company's employ or receiving severance payments from the Company pursuant to Section 9(b)(ii)), promptly execute and deliver such applications, assignments, descriptions and other instruments as may be necessary or proper in the opinion of the Company to vest title to the Inventions and any patent applications, patents, copyrights, reissues or other proprietary rights related thereto in the Company and to enable it to obtain and maintain the entire right and title thereto throughout the world; and (b) you shall render to the Company, at its expense (including a reasonable payment (based on your last per diem earnings) for the time involved if you are not then in the Company's employ or receiving severance payments from the Company pursuant to Section 9(b)(ii)), reasonable assistance as it may require in the prosecution of applications for said patents, copyrights, reissues or other proprietary rights, in the prosecution or defense of interference's which may be declared involving any said applications, patents, copyrights or other proprietary rights and in any litigation in which the Company may be involved relating to the Inventions. 13. Assistance in Litigation. At the request and expense of the ------------------------ Company (including a reasonable payment (based on your last per diem earnings) for the time involved if you are not then in the Company's employ or receiving severance payments from the Company pursuant to Section 9(b)(ii)) and upon reasonable notice, you shall, at all times during and after the Employment Period, furnish such information and assistance to the Company as it may reasonably require in connection with any issue, claim or litigation in which the Company may be involved. If such a request for assistance occurs after the expiration of the Employment Period, then you will only be required to render assistance to the Company to the extent that you can do so without materially affecting your other business obligations. 14. Entire Agreement; Amendment and Waiver. This agreement and the -------------------------------------- other writings referred to herein contain the entire agreement between the parties hereto with respect to the Mr. Don C. Orris March 31, 1997 Page 10 subject matter hereof and thereof and supersede any prior agreement between you and the Company or any predecessor of the Company or any of their respective affiliates (including, without limitation, that certain letter agreement dated January 29, 1997, among you, Eos Partners, L.P., and the other parties thereto). No waiver, amendment or modification of any provision of this Agreement shall be effective unless in writing and signed by each party hereto. The waiver by either party of a breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach by such other party. 15. Notices. All notices or other communications pursuant to this ------- Agreement shall be in writing and shall be deemed to be sufficient if delivered personally, telecopied, sent by nationally-recognized, overnight courier or mailed by registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) if to the Company, to: Pacific Motor Transport Company 10007 Oak Tree Court Littleton, CO 80124 Attention: President Telecopier: (303) 790-4685 Telephone: (303) 799-1443 with a copy to: Eos Partners, L.P. 320 Park Avenue 22nd Floor New York, NY 10022 Attention: Douglas R. Korn Telecopier: (212) 832-5805 Telephone: (212) 832-5800 Mr. Don C. Orris March 31, 1997 Page 11 (b) if to you, to: Mr. Don Orris 10007 Oak Tree Court Littleton, Colorado 80124 Telecopier: (303) 790-4685 Telephone: (303) 790-4160 16. Headings. The section headings in this Agreement are for -------- convenience only and shall not control or affect the meaning of any provision of this Agreement. 17. Severability. In the event that any provision of this ------------ Agreement is determined to be partially or wholly invalid, illegal or unenforceable in any jurisdiction, then such provision shall, as to such jurisdiction, be modified or restricted to the extent necessary to make such provision valid, binding and enforceable, or if such provision cannot be modified or restricted, then such provision shall, as to such jurisdiction, be deemed to be excised from this Agreement; provided, however, that the binding -------- ------- effect and enforceability of the remaining provisions of this Agreement, to the extent the economic benefits conferred upon the parties by virtue of this Agreement remain substantially unimpaired, shall not be affected or impaired in any manner, and any such invalidity, illegality or unenforceability with respect to such provisions shall not invalidate or render unenforceable such provision in any other jurisdiction. 18. Remedies. You acknowledge and understand that the provisions -------- of this Agreement are of a special and unique nature, the loss of which cannot be adequately compensated for in damages by an action at law, and thus, the breach or threatened breach of the provisions of this Agreement would cause the Company irreparable harm. You further acknowledge that in the event of a breach of any of the covenants contained in paragraphs 10, 11, or 12, the Company shall be entitled to immediate relief enjoining such violations in any court or before any judicial body having jurisdiction over such a claim. All remedies hereunder are cumulative, are in addition to any other remedies provided for by law and may, to the extent permitted by law, be exercised concurrently or separately, and the exercise of any one remedy shall not be deemed to be an election of such remedy or to preclude the exercise of any other remedy. Mr. Don C. Orris March 31, 1997 Page 12 19. Representation. You hereby represent and warrant to the Company -------------- that (a) the execution, delivery and performance of this Agreement by you does not breach, violate or cause a default under any agreement, contract or instrument to which you are a party or any judgment, order or decree to which you are subject and (b) you are not a party to or bound by any employment agreement, consulting agreement, noncompete agreement, confidentiality agreement or similar agreement with any other person or entity. 20. Benefits of Agreement; Assignment. The terms and provisions of --------------------------------- this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns, representatives, heirs and estate, as applicable. Anything contained herein to the contrary notwithstanding, this Agreement shall not be assignable by any party hereto without the consent of the other party hereto. 21. Counterparts. This Agreement may be executed in any number of ------------ counterparts, and each such counter part shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. 22. Governing Law. This Agreement shall be governed by and ------------- construed in accordance with the domestic laws of the State of California without giving effect to any choice or conflict of law provision or rule (whether of the State of California or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of California. Mr. Don C. Orris March 31, 1997 Page 13 23. Mutual Waiver of Jury Trial. BECAUSE DISPUTES ARISING IN --------------------------- CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS RELATED HERETO. If the above terms are satisfactory to you, please acknowledge our agreement by signing the enclosed copy of this letter in the space provided below and returning it to the undersigned. Very truly yours, PACIFIC MOTOR TRANSPORT COMPANY By:___________________________ Name: Title: Accepted and agreed to: _____________________________ [Name] ANNEX A ------- INCENTIVE BONUS PROGRAM ----------------------- The Company will pay a cash incentive bonus based upon the Operating Income (as hereinafter defined) of the Company for each fiscal year set forth below occurring during the Employment Period. The amount of the Bonus so payable will be based on the Company's achieving Operating Income (as defined below) targets set by the President of the Company (which will be identical for the President of the Company and the Presidents of the Company's PACER and ABL- TRANS divisions), but which in no event will be lower than the target amounts set forth below (with the amount of the Bonus payable being calculated accordingly at the rate of $6,000 of Bonus per $100,000 of Operating Income). For purposes of this Agreement, "Operating Income" means the operating income of the Company, determined on a consolidated basis (if applicable) and in accordance with generally accepted accounting principles consistently applied for the fiscal year in question, as set forth on the audited statement of income of the Company for the fiscal year in question; provided, however, Operating -------- ------- Income shall (x) exclude management fees, non-operating gains and losses as determined by the Board of Directors and such other non-cash items as shall be determined by the Board of Directors and (y) be determined after giving effect to any bonus payable by the Company to management or employees of the Company hereunder or otherwise. MINIMUM OPERATING INCOME TARGETS AND CORRESPONDING BONUS CALCULATION FISCAL YEAR 1997 ----------------
If Operating Income is: The Amount of Bonus will be: ----------------------- ---------------------------- less than $3,050,000 $ 0 equal to or greater than $35,000 $3,050,000 but less than $3,150,000 equal to or greater than $41,000 $3,150,000 but less than $3,250,000 equal to or greater than $47,000 $3,250,000 but less than $3,350,000 equal to or greater than $53,000 $3,350,000 but less than $3,450,000
equal to or greater than $59,000 $3,450,000 but less than $3,550,000 equal to or greater than $65,000 $3,550,000 but less than $3,650,000 equal to or greater than $71,000 $3,650,000 but less than $3,750,000 equal to or greater than $77,000 $3,750,000 but less than $3,850,000 equal to or greater than $83,000 $3,850,000
FISCAL YEAR 1998 ----------------
If Operating Income is: The Amount of Bonus will be: ----------------------- ---------------------------- less than $3,288,400 $ 0 equal to or greater than $35,000 $3,288,400 but less than $3,388,400 equal to or greater than $41,000 $3,388,400 but less than $3,488,400 equal to or greater than $47,000 $3,488,400 but less than $3,588,400 equal to or greater than $53,000 $3,588,400 but less than $3,688,400 equal to or greater than $59,000 $3,688,400 but less than $3,788,400 equal to or greater than $65,000 $3,788,400 but less than $3,888,400 equal to or greater than $71,000 $3,888,400 but less than $3,988,400 equal to or greater than $77,000 $3,988,400 but less than $4,088,400
equal to or greater than $83,000 $4,088,400
FISCAL YEAR 1999 ----------------
If Operating Income is: The Amount of Bonus will be: ----------------------- ---------------------------- less than $3,561,200 $ 0 equal to or greater than $35,000 $3,561,200 but less than $3,661,200 equal to or greater than $41,000 $3,661,200 but less than $3,761,200 equal to or greater than $47,000 $3,761,200 but less than $3,861,200 equal to or greater than $53,000 $3,861,200 but less than $3,961,200 equal to or greater than $59,000 $3,961,200 but less than $4,061,200 equal to or greater than $65,000 $4,061,200 but less than $4,161,200 equal to or greater than $71,000 $4,161,200 but less than $4,261,200 equal to or greater than $77,000 $4,261,200 but less than $4,361,200 equal to or greater than $83,000 $4,361,200
FISCAL YEAR 2000 ----------------
If Operating Income is: The Amount of Bonus will be: ----------------------- ---------------------------- less than $3,906,100 $ 0 equal to or greater than $35,000 $3,906,100 but less than $4,006,100
equal to or greater than $41,000 $4,006,100 but less than $4,106,100 equal to or greater than $47,000 $4,106,100 but less than $4,206,100 equal to or greater than $53,000 $4,206,100 but less than $4,306,100 equal to or greater than $59,000 $4,306,100 but less than $4,406,100 equal to or greater than $65,000 $4,406,100 but less than $4,506,100 equal to or greater than $71,000 $4,506,100 but less than $4,606,100 equal to or greater than $77,000 $4,606,100 but less than $4,706,100 equal to or greater than $83,000 $4,706,100
FISCAL YEAR 2001 ----------------
If Operating Income is: The Amount of Bonus will be: ----------------------- ---------------------------- less than $4,152,800 $ 0 equal to or greater than $35,000 $4,152,800 but less than $4,252,800 equal to or greater than $41,000 $4,252,800 but less than $4,352,800 equal to or greater than $47,000 $4,352,800 but less than $4,452,800 equal to or greater than $53,000 $4,452,800 but less than $4,552,800 equal to or greater than $59,000 $4,552,800 but less than $4,652,800 equal to or greater than $65,000 $4,652,800 but less than $4,752,800
equal to or greater than $71,000 $4,752,800 but less than $4,852,800 equal to or greater than $77,000 $4,852,800 but less than $4,952,800 equal to or greater than $83,000 $4,952,800
PACER INTERNATIONAL, INC. May 28, 1999 Donald C. Orris 10007 Oak Tree Court Littleton, Colorado 80124 Re: Amendment to Employment Agreement --------------------------------- Dear Don: Reference is made to the Employment Agreement, dated March 31, 1997, (the "Employment Agreement") between Pacific Motor Transport Company and you. This letter amendment (the "Letter Amendment") sets forth our agreement with respect to certain amendments to the Employment Agreement in connection with the merger (the "Merger") contemplated by the Agreement and Plan of Merger amongst Pacer International, Inc., a Delaware corporation, Mile High Acquisition Corp., a Delaware corporation ("Sub") and the shareholders of Pacer International, Inc., dated February 22, (the "Merger Agreement") for the purposes of assuring your continued employment with Pacer International, Inc., a Tennessee corporation, (the "Company") following the Merger and in order to assure Sub of the transfer of the goodwill of the Company pursuant to the Merger and to protect the trade secrets and other confidential information of the Company. For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company hereby agrees with you as follows: 1. The effectiveness of this Letter Agreement is contingent upon the closing of the Merger. In the event the Merger is not consummated, this Letter Agreement will be of no force or effect. 2. Section 2 of the Employment Agreement is hereby deleted in its entirety and the following provision is hereby substituted therefor: Term. Unless sooner terminated in accordance with the applicable ---- provisions of this Agreement, your employment hereunder shall be for the period (including any extensions thereof, the "Employment Period") commencing on the closing date of the Merger (the "Commencement Date") and initially ending on the second anniversary of the date hereof. Subject to the applicable provisions of Section 8 of this Agreement regarding earlier termination, the Employment Period shall be extended automatically on each anniversary of the Commencement Date, beginning with the first anniversary thereof for an additional period of one year. 3. Section 11 of the Employment Agreement is hereby deleted in its entirety and the following provision is hereby substituted therefor: (a) You will not during the Employment Period and for the period of three years following date of your termination of employment with the Company or any of its subsidiaries for any reason (the "Noncompetition -------------- Period") (i) in any geographic area where the Company conducts business ------ during the Noncompetition Period, engage or participate in directly or indirectly (whether as an officer, director, employee, partner, consultant, holder of an equity or debt investment, lender or in any other manner or capacity, including, without limitation, by the rendering of services or advice to any person), or lend your name (or any part or variant thereof) to, any Competing Business (as defined in below); (ii) deal, directly or indirectly, in a competitive manner with any customers doing business with the Company during the Noncompetition Period; (iii) solicit or employ any officer, director or agent of the Company to become an officer, director, or agent of you, your respective affiliates or anyone else; or (iv) engage in or participate in, directly or indirectly, any business conducted under any name that shall be the same as or similar to the name of the Company or any trade name used by it. Ownership by you for investment of less than 2% of the outstanding shares of capital stock or class of debt securities of any corporation with one or more classes of its capital stock listed on a national securities exchange or actively traded in the over-the-counter market shall not constitute a breach of the foregoing covenant. You are entering into the foregoing covenant to assure Sub of the transfer of the goodwill of the Company, and in order to induce Sub to consummate the purchase contemplated by the Merger Agreement. 2 (b) You will not at any time after the date hereof divulge, furnish to or make accessible to anyone any knowledge or information with respect to confidential or secret processes, inventions, discoveries, improvements, formulae, plans, material, devices or ideas or know-how, whether patentable or not, with respect to any confidential or secret aspects of the business of the Company (including, without limitation, customer lists, supplier lists and pricing arrangements with customers or suppliers); provided, -------- however, that nothing herein shall prohibit you from complying with any ------- order or decree of any court of competent jurisdiction or governmental entity or other requirements of law, but you will give the Company reasonably timely notice of the receipt of any such order or decree or legal requirement, and the foregoing provision shall not apply to (i) any information which is or becomes generally available to the public through no breach of this Agreement or (ii) is or becomes available to you on a non-confidential basis from a source who is not, to your knowledge, prohibited from disclosing the same by any legal or contractual obligation. (c) As used herein, the term "Competing Business" shall mean any transportation or other business that the Company or any of its affiliates has engaged in at any time during the Employment Period in any city or county in any state of the United States, Canada or Mexico including, without limitation, any business engaged in (i) intermodal marketing, (ii) flatbed specialized hauling services, (iii) less-then-truckload common carrier services, (iv) drayage, consolidation, deconsolidation or distribution services, (v) contract warehousing, freight handling or logistic services, (vi) comprehensive transportation management programs or services to third party customers, (vii) freight consolidation and deconsolidation, (viii) traffic management, and (ix) railroad signal project management. 4. Section 22 of the Employment Agreement is hereby deleted in its entirety and the following provision is hereby substituted therefor: This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Colorado without giving effect to any choice or conflict of law provision or rule (whether of the State of Colorado or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Colorado. Please acknowledge your agreement with this Letter Amendment by executing a counterpart of this Letter Agreement in the appropriate space and returning it to the Company. Very truly yours, PACER INTERNATIONAL, INC. 3 by __________________________ Acknowledged and Agreed to this __ day of ________ ___________________________ Donald C. Orris 4 EX-10.2 22 EMPLOYMENT AGREEMENT FOR GERRY ANGELI EXHIBIT 10.2 PACIFIC MOTOR TRANSPORT COMPANY 3746 MT. DIABLO BOULEVARD, SUITE 110 LAFAYETTE, CALIFORNIA 94549 March 31, 1997 Mr. Gerry Angeli 1245 Regents Park Court DeSoto, Texas 75115 Employment Agreement -------------------- Dear Gerry: This letter sets forth the terms of your continued employment with Pacific Motor Transport Company (the "Company"). 1. Duties. On the terms and subject to the conditions contained in ------ this Agreement, you will be employed as the President of PACER, a division of the Company (the "Company"), and shall perform such duties and services consistent with such position as may reasonably be assigned to you from time to time by the Board of Directors or by the President of the Company. 2. Term. Unless sooner terminated in accordance with the applicable ---- provisions of this Agreement, your employment hereunder shall be for the period (including any extensions thereof, the "Employment Period") commencing on the date hereof (the "Commencement Date") and initially ending on the second anniversary of the date hereof. Subject to the applicable provisions of Section 8 of this Agreement regarding earlier termination, the Employment Period shall be extended automatically on each anniversary of the Commencement Date, beginning with the first anniversary thereof, for an additional period of one year. 3. Time to be Devoted to Employment. During the Employment Period, -------------------------------- you will devote your working energies, efforts, interest, abilities and time exclusively to the business and affairs of the Company. You will not engage in any other business or activity which, in the reasonable judgment of the Board of Directors of the Company, would conflict or interfere with the performance of your duties as set forth herein, whether or not such activity is pursued for gain, profit or other pecuniary advantage. Mr. Gerry Angeli March 31, 1997 Page 2 4. Base Salary; Bonus; Benefits. ---------------------------- (a) During the Employment Period, the Company (or any of its affiliates) shall pay you a minimum annual base salary (the "Base Salary") of $225,000, payable in such installments (but not less often than monthly) as is generally the policy of the Company with respect to the payment of regular compensation to its executive officers. The Base Salary may be increased from time to time in the sole discretion of the Board of Directors of the Company. During the Employment Period, you will also be entitled to four weeks vacation per year and such other benefits as may be made available to other executive officers of the Company generally, including, without limitation, (i) participation in such health, life and disability insurance programs and retirement or savings plans as the Company may from time to time maintain in effect and (ii) the use of a vehicle provided by the Company or an equivalent monthly car allowance in accordance with the Company's policy with respect to its senior executives. (b) In addition to the Base Salary and benefits set forth in paragraph (a) above, you will be entitled to receive a cash incentive bonus, if any, with respect to each fiscal year of the Company occurring during the Employment Period, as provided in this paragraph. The bonus, if any, for each fiscal year of the Company ending on or prior to December 31, 2001, shall be calculated in the manner set forth on Annex A attached to this Agreement and ------- shall be due and payable as soon as practicable, but in no event later than 30 days, following the Company's receipt from its public accountants of the audited financial statements of the Company. If your employment with the Company is terminated for any reason other than without "cause" pursuant to Section 8(b), the Company will not pay you a bonus with respect to the fiscal year in which your employment is terminated or thereafter. If your employment with the Company is terminated without "cause" as provided in Section 8(b) below, you will be entitled to receive that portion of the bonus payable for such fiscal year pro rated through the date of such termination based on the number of days elapsed through the termination date over 365 days, payable in accordance with the second sentence of this Section 4(b). For each fiscal year ending after December 31, 2001, the amount of the bonus and the criteria therefor shall be determined by the Board of Directors. In the event that the Company consummates any mergers or acquisitions (whether of assets, stock or other interests) or other extraordinary transactions, the Board of Directors shall in good faith make such adjustments to the targets set forth on Mr. Gerry Angeli March 31, 1997 Page 3 Annex A for Operating Income (as defined on Annex A) to take into account the - ------- ------- effects of any such acquisition or transaction. 5. Reimbursement of Expenses. During the Employment Period, the ------------------------- Company shall reimburse you in accordance with Company policy for all reasonable and necessary traveling expenses and other disbursements incurred by you for or on behalf of the Company in connection with the performance of your duties hereunder upon presentation of appropriate receipts or other documentation therefor, in accordance with all applicable policies of the Company. 6. Options. The Company will grant you options (the "Options") to ------- purchase shares of common stock, $.01 par value (the "Common Stock"), of the Company pursuant to the Company's 1997 Stock Option Plan (the "Option Plan"). The Options will be evidenced by a Stock Option Agreement between you and the Company. The Option Plan and the Stock Option Agreement will contain all of the terms and conditions of your Options. 7. Disability or Death. If, during the Employment Period, you are ------------------- incapacitated or disabled by accident, sickness or otherwise (hereinafter, a "Disability") so as to render you mentally or physically incapable of performing the services required to be performed by you under this Agreement for an aggregate of 210 days in any period of 360 consecutive days, the Company may, at any time thereafter, at its option, terminate your employment under this Agreement immediately upon giving you written notice to that effect. In the event of your death, your employment will be deemed terminated as of the date of death. 8. Termination. ----------- (a) The Company may terminate your employment hereunder at any time for "cause" by giving you written notice of such termination, with reasonable specificity of the grounds therefor. For purposes of this Section 8, "cause" shall mean (i) willful misconduct with respect to the business and affairs of the Company, PMT Holdings, Inc. ("PMT") or any of their respective subsidiaries, (ii) willful neglect of your duties or the failure to follow the lawful directions of the Board or more senior officers of the Company to whom you report, including, without limitation, the violation of any material policy of the Company, PMT or any of their respective subsidiaries applicable to you, (iii) the breach of Section 6.2(h) of the Restricted Stock Agreement (as defined below) or the material breach of any of the provisions of this Agreement or any Related Agreement (as Mr. Gerry Angeli March 31, 1997 Page 4 defined below) and if such breach is capable of being cured, your failure to cure such breach within 30 days of receipt of written notice thereof from the Company, (iv) the commission of a felony, (v) the commission of an act of fraud or financial dishonesty with respect to the Company, PMT or any of their respective subsidiaries or affiliates or (vi) any conviction for a crime involving moral turpitude or fraud. A termination pursuant to this Section 8(a) shall take effect immediately upon the giving of the notice contemplated hereby. In this Agreement, the term "Related Agreements" means (i) the Restricted Stock Issuance and Stock Purchase Agreement dated as of the date hereof between you and PMT (the "Restricted Stock Agreement"), and (ii) the Stockholders Agreement dated as of the date hereof among PMT, you and the other stockholders named therein. (b) The Company may terminate your employment hereunder at any time without "cause" by giving you written notice of such termination, which termination shall be effective as of the date set forth in such notice, provided that such date shall not be earlier than the date of the notice. You will be employed by the Company at a facility located within a 50 mile radius of DeSoto, Texas. The Company may not require you to relocate from this location unless the Company moves all or substantially all of the Pacer division, in which case you may be required by the Company to work at such new location. 9. Effect of Termination. --------------------- (a) Upon the effective date of a termination of your employment under this Agreement for any reason other than a termination without cause pursuant to Section 8(b), neither you nor your beneficiaries or estate shall have any further rights under this Agreement or any claims against the Company or any of its subsidiaries or affiliates arising out of this Agreement, except the right to receive, within 30 days after the effective date of such termination: (i) the unpaid portion of the Base Salary provided for in Section 4, computed on a pro rata basis to the effective date of such --- ---- termination; (ii) reimbursement for any expenses for which you shall not have theretofore been reimbursed, as provided in Section 5; and Mr. Gerry Angeli March 31, 1997 Page 5 (iii) the unpaid portion of any amounts earned by you prior to the effective date of such termination pursuant to any benefit program in which you participated during the Employment Period; provided, however, you -------- ------- shall not be entitled to receive any benefits under any benefit program that have accrued during any period if the terms of such program require that the beneficiary be employed by the Company as of the end of such period. (b) Upon termination of your employment under this Agreement pursuant to Section 8(b), neither you nor your beneficiaries or estate shall have any further rights under this Agreement or any claims against the Company, PMT or any of their respective subsidiaries or affiliates arising out of this Agreement, except the right to receive, within 30 days after the effective date of such termination, in the case of amounts due pursuant to clause (i) below, and at such other times as provided in clause (ii) and (iii) below in the case of amounts due thereunder: (i) the payments, if any, referred to in Section 9(a) above, to the extent not covered by clause (ii) and (iii) of this Section 9(b); (ii) the right to continue to receive the Base Salary for a period of twenty-four months commencing on the first month following the effective date of such termination, payable during such period in such manner as the Base Salary is payable pursuant to Section 4(a), reduced by 50% of any amounts you (or your beneficiaries or estate) receive or are entitled to receive as salary or other cash compensation from subsequent employment or for services rendered during such period, up to a maximum of 50% of all amounts due to you under this Section 9(b)(ii). In order to carry out the intent of the immediately preceding sentence, you agree, for yourself and your beneficiaries or estate, to provide the Company with such information as the Company may reasonably request regarding your receipt of salary and other cash compensation from subsequent employment or for services rendered or to be rendered during or with respect to such period; and (iii) the right to receive any bonus payable in accordance with Section 4(b) with respect to the fiscal year in which such termination occurs. Notwithstanding anything in this Agreement to the contrary, your beneficiaries or estate will be entitled to Mr. Gerry Angeli March 31, 1997 Page 6 continue to receive all payments specified in this Section 9(b) if you die after the date of a termination without "cause." 10. Disclosure of Information. ------------------------- (a) From and after the date hereof, you shall not at any time use or disclose to any person or entity (other than any officer, director, employee, affiliate or representative of the Company), except as required in connection with the performance of your duties under and in compliance with this Agreement and as required by law and judicial process, any Confidential Information (as hereinafter defined) heretofore acquired or acquired during the Employment Period for any reason or purpose whatsoever, nor shall you make use of any of the Confidential Information for your own purposes or for the benefit of any person or entity except the Company or any subsidiary thereof. (b) For purposes of this Agreement, "Confidential Information" shall mean (i) the Intellectual Property Rights (as hereinafter defined) of the Company and its subsidiaries and (ii) all other information of a proprietary or confidential nature relating to the Company or any subsidiary thereof, or the business or assets of the Company or any such subsidiary, including, without limitation, books, records, agent and independent contractor lists and related information, customer lists and related information, vendor lists and related information, supplier lists and related information, distribution channels, pricing information, cost information, marketing plans, strategies, forecasts, financial statements, budgets and projections, other than (i) information which is generally available to the public on the date hereof, or which becomes generally available to the public after the date hereof without action by you or (ii) information which you receive from a third party who does not have any independent obligation to the Company to keep such information confidential. (c) As used herein, the term "Intellectual Property Rights" means all industrial and intellectual property rights, including, without limitation, patents, patent applications, patent rights, trademarks, trademark applications, trade names, service marks, service mark applications, copyrights, copyright applications, know-how, certificates of public convenience and necessity, franchises, licenses, trade secrets, proprietary processes and formulae, inventions, development tools, marketing materials, instructions, confidential information, trade dress, logos and designs and all documentation and media constituting, Mr. Gerry Angeli March 31, 1997 Page 7 describing or relating to the foregoing, including, without limitation, manuals, memoranda and records. 11. Noncompetition Covenant. ----------------------- (a) You acknowledge and recognize that during the Employment Period you will be privy to Confidential Information. You further acknowledge and recognize that the relationships with vendors, agents and customers of the Company that you have developed prior to the date hereof and those that you will maintain or develop during the Employment Period with the use and assistance of the Company and its properties and assets are of special and unique value to the Company and its affiliates and that the Company would find it extremely difficult to replace you. Accordingly, in consideration of the premises contained herein and the consideration you will receive hereunder (including, without limitation, the severance compensation described in Section 9(b)(ii), if applicable), without the prior written consent of the Company, you shall not, at any time during the Employment Period and the period beginning on the effective date of any termination of your employment with the Company and its subsidiaries and ending on the third anniversary thereof, (a) directly or indirectly engage in, represent in any way, or be connected with, any Competing Business (as defined below), whether such engagement shall be as an officer, director, owner, employee, partner, affiliate or other participant in any Competing Business, (b) assist others in engaging in any Competing Business in the manner described in clause (a) above, (c) induce other employees of the Company, PMT or any of their respective subsidiaries to terminate their employment with the Company or any of their respective subsidiaries or to engage in any Competing Business or (d) induce any customer, vendor or agent or any other person or entity with which the Company or any subsidiary or affiliate thereof has a business relationship, contractual or otherwise, to terminate or alter such business relationship. This covenant is considered an integral part of this Agreement. The foregoing restriction shall not apply to your ownership of publicly traded securities which represent not more than 5% of the ownership interests of the issuer. (b) You understand that the foregoing restrictions may limit your ability to earn a livelihood in a business similar to the business of the Company or any subsidiary or affiliate thereof, but you nevertheless believe that you have received and will receive sufficient consideration and other benefits as an employee of the Company and under the terms of Mr. Gerry Angeli March 31, 1997 Page 8 this Agreement to justify clearly such restrictions which, in any event (given your education, skills and ability), you do not believe would prevent you from earning a living. (c) As used herein, the term "Competing Business" shall mean any business conducted in any city or county in any state of the United States which is engaged in (A) intermodal marketing or (B) providing flatbed specialized hauling services utilizing owner-operators or agents; provided, however, that an entity which has separate divisions or business units, one or more of which are engaged in a business described in clause (A) or (B) hereof, will not be deemed a Competing Business with respect to those portions of such entity which are not engaged in a business described in clause (A) or (B) above so long as the Employee's association with any such separate division or business unit (fully taking into account his functions and the nature of his work at such division or business unit) does not relate in any material respect to such portion of such business which would be a Competing Business hereunder. (d) Notwithstanding anything contained in this Agreement to the contrary, if, following the termination of your employment with the Company and/or its subsidiaries, the Company fails to pay to you any sums due under Section 9(b)(ii) hereof and (i) you have complied in all material respects with all of the provisions of the last sentence of Section 9(b)(ii) and (ii) such failure to pay continues for a period of fifteen (15) days following receipt by the Company of written notice thereof, the restrictions contained in this Section 11 shall terminate and be of no further force or effect. Any termination of the restrictions contained in this Section 11 pursuant to this subsection (d) shall not affect the Company's obligations under this Agreement or constitute a waiver by you of any other rights or remedies you may have against the Company for breach of any term hereof. 12. Inventions Assignment. During the Employment Period, you shall --------------------- promptly disclose, grant and assign to the Company for its sole use and benefit any and all inventions, improvements, technical information and suggestions reasonably relating to the business of the Company, PMT or any of their respective subsidiaries (collectively, the "Inventions") which you may develop or acquire during the Employment Period (whether or not during usual working hours), together with all patent applications, letters patent, copyrights and reissues thereof that may at any time be granted for or with respect to the Inventions. In connection therewith (a) you shall, at the Mr. Gerry Angeli March 31, 1997 Page 9 expense of the Company (including a reasonable payment (based on your last per diem earnings) for the time involved if you are not then in the Company's employ or receiving severance payments from the Company pursuant to Section 9(b)(ii)), promptly execute and deliver such applications, assignments, descriptions and other instruments as may be necessary or proper in the opinion of the Company to vest title to the Inventions and any patent applications, patents, copyrights, reissues or other proprietary rights related thereto in the Company and to enable it to obtain and maintain the entire right and title thereto throughout the world; and (b) you shall render to the Company, at its expense (including a reasonable payment (based on your last per diem earnings) for the time involved if you are not then in the Company's employ or receiving severance payments from the Company pursuant to Section 9(b)(ii)), reasonable assistance as it may require in the prosecution of applications for said patents, copyrights, reissues or other proprietary rights, in the prosecution or defense of interference's which may be declared involving any said applications, patents, copyrights or other proprietary rights and in any litigation in which the Company may be involved relating to the Inventions. 13. Assistance in Litigation. At the request and expense of the ------------------------ Company (including a reasonable payment (based on your last per diem earnings) for the time involved if you are not then in the Company's employ or receiving severance payments from the Company pursuant to Section 9(b)(ii)) and upon reasonable notice, you shall, at all times during and after the Employment Period, furnish such information and assistance to the Company as it may reasonably require in connection with any issue, claim or litigation in which the Company may be involved. If such a request for assistance occurs after the expiration of the Employment Period, then you will only be required to render assistance to the Company to the extent that you can do so without materially affecting your other business obligations. 14. Entire Agreement; Amendment and Waiver. This agreement and the -------------------------------------- other writings referred to herein contain the entire agreement between the parties hereto with respect to the subject matter hereof and thereof and supersede any prior agreement between you and the Company or any predecessor of the Company or any of their respective affiliates (including, without limitation, that certain letter agreement dated January 29, 1997, among you, Eos Partners, L.P., and the other parties thereto). No waiver, amendment or modification of any provision of this Agreement shall be effective unless in writing and signed by each party hereto. The waiver by either party of a breach of any Mr. Gerry Angeli March 31, 1997 Page 10 provision of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach by such other party. 15. Notices. All notices or other communications pursuant to this ------- Agreement shall be in writing and shall be deemed to be sufficient if delivered personally, telecopied, sent by nationally-recognized, overnight courier or mailed by registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) if to the Company, to: Pacific Motor Transport Company 10007 Oak Tree Court Littleton, CO 80124 Attention: President Telecopier: (303) 790-4685 Telephone: (303) 799-1443 with a copy to: Eos Partners, L.P. 320 Park Avenue 22nd Floor New York, NY 10022 Attention: Douglas R. Korn Telecopier: (212) 832-5805 Telephone: (212) 832-5800 (b) if to you, to: Mr. Gerry Angeli 1245 Regents Park Court DeSoto, Texas 75115 Telephone: (972) 230-3840 Telecopier: (972) 230-3774 16. Headings. The section headings in this Agreement are for -------- convenience only and shall not control or affect the meaning of any provision of this Agreement. 17. Severability. In the event that any provision of this Agreement ------------ is determined to be partially or wholly invalid, illegal or unenforceable in any jurisdiction, then such provision shall, as to such jurisdiction, be modified or restricted to the Mr. Gerry Angeli March 31, 1997 Page 11 extent necessary to make such provision valid, binding and enforceable, or if such provision cannot be modified or restricted, then such provision shall, as to such jurisdiction, be deemed to be excised from this Agreement; provided, -------- however, that the binding effect and enforceability of the remaining provisions - ------- of this Agreement, to the extent the economic benefits conferred upon the parties by virtue of this Agreement remain substantially unimpaired, shall not be affected or impaired in any manner, and any such invalidity, illegality or unenforceability with respect to such provisions shall not invalidate or render unenforceable such provision in any other jurisdiction. 18. Remedies. You acknowledge and understand that the provisions of -------- this Agreement are of a special and unique nature, the loss of which cannot be adequately compensated for in damages by an action at law, and thus, the breach or threatened breach of the provisions of this Agreement would cause the Company irreparable harm. You further acknowledge that in the event of a breach of any of the covenants contained in paragraphs 10, 11, or 12, the Company shall be entitled to immediate relief enjoining such violations in any court or before any judicial body having jurisdiction over such a claim. All remedies hereunder are cumulative, are in addition to any other remedies provided for by law and may, to the extent permitted by law, be exercised concurrently or separately, and the exercise of any one remedy shall not be deemed to be an election of such remedy or to preclude the exercise of any other remedy. 19. Representation. You hereby represent and warrant to the Company -------------- that (a) the execution, delivery and performance of this Agreement by you does not breach, violate or cause a default under any agreement, contract or instrument to which you are a party or any judgment, order or decree to which you are subject and (b) you are not a party to or bound by any employment agreement, consulting agreement, noncompete agreement, confidentiality agreement or similar agreement with any other person or entity. 20. Benefits of Agreement; Assignment. The terms and provisions of --------------------------------- this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns, representatives, heirs and estate, as applicable. Anything contained herein to the contrary notwithstanding, this Agreement shall not be assignable by any party hereto without the consent of the other party hereto. Mr. Gerry Angeli March 31, 1997 Page 12 21. Counterparts. This Agreement may be executed in any number of ------------ counterparts, and each such counter part shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. 22. Governing Law. This Agreement shall be governed by and construed ------------- in accordance with the domestic laws of the State of California without giving effect to any choice or conflict of law provision or rule (whether of the State of California or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of California. Mr. Gerry Angeli March 31, 1997 Page 13 23. Mutual Waiver of Jury Trial. BECAUSE DISPUTES ARISING IN --------------------------- CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS RELATED HERETO. If the above terms are satisfactory to you, please acknowledge our agreement by signing the enclosed copy of this letter in the space provided below and returning it to the undersigned. Very truly yours, PACIFIC MOTOR TRANSPORT COMPANY By:_____________________________ Name: Title: Accepted and agreed to: _____________________________ [Name] ANNEX A ------- INCENTIVE BONUS PROGRAM ----------------------- The Company will pay a cash incentive bonus based upon the Operating Income (as hereinafter defined) of the Company for each fiscal year set forth below occurring during the Employment Period. The amount of the Bonus so payable will be based on the Company's achieving Operating Income (as defined below) targets set by the President of the Company (which will be identical for the President of the Company and the Presidents of the Company's PACER and ABL- TRANS divisions), but which in no event will be lower than the target amounts set forth below (with the amount of the Bonus payable being calculated accordingly at the rate of $6,000 of Bonus per $100,000 of Operating Income). For purposes of this Agreement, "Operating Income" means the operating income of the Company, determined on a consolidated basis (if applicable) and in accordance with generally accepted accounting principles consistently applied for the fiscal year in question, as set forth on the audited statement of income of the Company for the fiscal year in question; provided, however, Operating -------- ------- Income shall (x) exclude management fees, non-operating gains and losses as determined by the Board of Directors and such other non-cash items as shall be determined by the Board of Directors and (y) be determined after giving effect to any bonus payable by the Company to management or employees of the Company hereunder or otherwise. MINIMUM OPERATING INCOME TARGETS AND CORRESPONDING BONUS CALCULATION FISCAL YEAR 1997 ----------------
If Operating Income is: The Amount of Bonus will be: ----------------------- ---------------------------- less than $3,050,000 $0 equal to or greater than $35,000 $3,050,000 but less than $3,150,000 equal to or greater than $41,000 $3,150,000 but less than $3,250,000 equal to or greater than $47,000 $3,250,000 but less than $3,350,000 equal to or greater than $53,000 $3,350,000 but less than $3,450,000 equal to or greater than $59,000 $3,450,000 but less than $3,550,000
equal to or greater than $65,000 $3,550,000 but less than $3,650,000 equal to or greater than $71,000 $3,650,000 but less than $3,750,000 equal to or greater than $77,000 $3,750,000 but less than $3,850,000 equal to or greater than $83,000 $3,850,000
FISCAL YEAR 1998 ----------------
If Operating Income is: The Amount of Bonus will be: ----------------------- --------------------------------- less than $3,288,400 $0 equal to or greater than $35,000 $3,288,400 but less than $3,388,400 equal to or greater than $41,000 $3,388,400 but less than $3,488,400 equal to or greater than $47,000 $3,488,400 but less than $3,588,400 equal to or greater than $53,000 $3,588,400 but less than $3,688,400 equal to or greater than $59,000 $3,688,400 but less than $3,788,400 equal to or greater than $65,000 $3,788,400 but less than $3,888,400 equal to or greater than $71,000 $3,888,400 but less than $3,988,400 equal to or greater than $77,000 $3,988,400 but less than $4,088,400 equal to or greater than $83,000 $4,088,400
FISCAL YEAR 1999 ----------------
If Operating Income is: The Amount of Bonus will be: ----------------------- --------------------------------- less than $3,561,200 $0 equal to or greater than $35,000 $3,561,200 but less than $3,661,200 equal to or greater than $41,000 $3,661,200 but less than $3,761,200 equal to or greater than $47,000 $3,761,200 but less than $3,861,200 equal to or greater than $53,000 $3,861,200 but less than $3,961,200 equal to or greater than $59,000 $3,961,200 but less than $4,061,200 equal to or greater than $65,000 $4,061,200 but less than $4,161,200 equal to or greater than $71,000 $4,161,200 but less than $4,261,200 equal to or greater than $77,000 $4,261,200 but less than $4,361,200 equal to or greater than $83,000 $4,361,200
FISCAL YEAR 2000 ----------------
If Operating Income is: The Amount of Bonus will be: ----------------------- ---------------------------- less than $3,906,100 $0 equal to or greater than $35,000 $3,906,100 but less than $4,006,100 equal to or greater than $41,000 $4,006,100 but less than $4,106,100 equal to or greater than $47,000 $4,106,100 but less than $4,206,100
equal to or greater than $53,000 $4,206,100 but less than $4,306,100 equal to or greater than $59,000 $4,306,100 but less than $4,406,100 equal to or greater than $65,000 $4,406,100 but less than $4,506,100 equal to or greater than $71,000 $4,506,100 but less than $4,606,100 equal to or greater than $77,000 $4,606,100 but less than $4,706,100 equal to or greater than $83,000 $4,706,100
FISCAL YEAR 2001 ----------------
If Operating Income is: The Amount of Bonus will be: ----------------------- ---------------------------- less than $4,152,800 $0 equal to or greater than $35,000 $4,152,800 but less than $4,252,800 equal to or greater than $41,000 $4,252,800 but less than $4,352,800 equal to or greater than $47,000 $4,352,800 but less than $4,452,800 equal to or greater than $53,000 $4,452,800 but less than $4,552,800 equal to or greater than $59,000 $4,552,800 but less than $4,652,800 equal to or greater than $65,000 $4,652,800 but less than $4,752,800 equal to or greater than $71,000 $4,752,800 but less than $4,852,800 equal to or greater than $77,000 $4,852,800 but less than $4,952,800 equal to or greater than $83,000 $4,952,800
PACER INTERNATIONAL, INC. May 28, 1999 Gerry Angeli 1245 Regents Park Court Desoto, TX 75115 Re: Amendment to Employment Agreement --------------------------------- Dear Gerry: Reference is made to the Employment Agreement, dated March 31, 1997, (the "Employment Agreement") between Pacific Motor Transport Company and you. This letter amendment (the "Letter Amendment") sets forth our agreement with respect to certain amendments to the Employment Agreement in connection with the merger (the "Merger") contemplated by the Agreement and Plan of Merger amongst Pacer International, Inc., a Delaware corporation, Mile High Acquisition Corp., a Delaware corporation ("Sub") and the shareholders of Pacer International, Inc., dated February 22, (the "Merger Agreement") for the purposes of assuring your continued employment with Pacer International, Inc., a Tennessee corporation, (the "Company") following the Merger and in order to assure Sub of the transfer of the goodwill of the Company pursuant to the Merger and to protect the trade secrets and other confidential information of the Company. For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company hereby agrees with you as follows: 1. The effectiveness of this Letter Agreement is contingent upon the closing of the Merger. In the event the Merger is not consummated, this Letter Agreement will be of no force or effect. 2. Section 2 of the Employment Agreement is hereby deleted in its entirety and the following provision is hereby substituted therefor: Term. Unless sooner terminated in accordance with the applicable ---- provisions of this Agreement, your employment hereunder shall be for the period (including any extensions thereof, the "Employment Period") commencing on the closing date of the Merger (the "Commencement Date") and initially ending on the second anniversary of the date hereof. Subject to the applicable provisions of Section 8 of this Agreement regarding earlier termination, the Employment Period shall be extended automatically on each anniversary of the Commencement Date, beginning with the first anniversary thereof for an additional period of one year. 3. Section 11 of the Employment Agreement is hereby deleted in its entirety and the following provision is hereby substituted therefor: (a) You will not during the Employment Period and for the period of three years following date of your termination of employment with the Company or any of its subsidiaries for any reason (the "Noncompetition -------------- Period")(i) in any geographic area where the Company conducts business -------- during the Noncompetition Period, engage or participate in directly or indirectly (whether as an officer, director, employee, partner, consultant, holder of an equity or debt investment, lender or in any other manner or capacity, including, without limitation, by the rendering of services or advice to any person), or lend your name (or any part or variant thereof) to, any Competing Business (as defined in below); (ii) deal, directly or indirectly, in a competitive manner with any customers doing business with the Company during the Noncompetition Period; (iii) solicit or employ any officer, director or agent of the Company to become an officer, director, or agent of you, your respective affiliates or anyone else; or (iv) engage in or participate in, directly or indirectly, any business conducted under any name that shall be the same as or similar to the name of the Company or any trade name used by it. Ownership by you for investment of less than 2% of the outstanding shares of capital stock or class of debt securities of any corporation with one or more classes of its capital stock listed on a national securities exchange or actively traded in the over-the-counter market shall not constitute a breach of the foregoing covenant. You are entering into the foregoing covenant to assure Sub of the transfer of the goodwill of the Company, and in order to induce Sub to consummate the purchase contemplated by the Merger Agreement. (b) You will not at any time after the date hereof divulge, furnish to or make accessible to anyone any knowledge or information with respect to confidential or secret processes, inventions, discoveries, improvements, formulae, plans, material, devices or ideas or know-how, whether patentable or not, with respect to any confidential or secret aspects of the business of the Company (including, without limitation, customer lists, supplier lists and pricing arrangements with customers or suppliers); provided, -------- however, that nothing herein shall prohibit you from complying with any ------- order or decree of any court of competent jurisdiction or governmental entity or other requirements of law, but you will give the Company reasonably timely notice of the receipt of any such order or decree or legal requirement, and the foregoing provision shall not apply to (i) any information which is or becomes generally available to the public through no breach of this Agreement or (ii) is or becomes available to you on a non-confidential basis from a source who is not, to your knowledge, prohibited from disclosing the same by any legal or contractual obligation. 2 (c) As used herein, the term "Competing Business" shall mean any transportation or other business that the Company or any of its affiliates has engaged in at any time during the Employment Period in any city or county in any state of the United States, Canada or Mexico including, without limitation, any business engaged in (i) intermodal marketing, (ii) flatbed specialized hauling services, (iii) less-then-truckload common carrier services, (iv) drayage, consolidation, deconsolidation or distribution services, (v) contract warehousing, freight handling or logistic services, (vi) comprehensive transportation management programs or services to third party customers, (vii) freight consolidation and deconsolidation, (viii) traffic management, and (ix) railroad signal project management. 4. Section 22 of the Employment Agreement is hereby deleted in its entirety and the following provision is hereby substituted therefor: This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Texas without giving effect to any choice or conflict of law provision or rule (whether of the State of Texas or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Texas. Please acknowledge your agreement with this Letter Amendment by executing a counterpart of this Letter Agreement in the appropriate space and returning it to the Company. Very truly yours, PACER INTERNATIONAL, INC. by _____________________________ Acknowledged and Agreed to this __ day of ________ ________________________________ Gerry Angeli 3 EX-10.3 23 EMPLOYMENT AGREEMENT FOR GARY I. GOLDFEIN EXHIBIT 10.3 PMT HOLDINGS, INC. 3746 MT. DIABLO BOULEVARD, SUITE 110 LAFAYETTE, CALIFORNIA 94549 December 16, 1997 Mr. Gary I. Goldfein 229 N. Cliffwood Ave. Los Angeles, CA 90049 Employment Agreement -------------------- Dear Gary: This letter sets forth the terms of your employment with PMT Holdings, Inc. ("Holdings"), Interstate Consolidation, Inc. ("ICI"), and Interstate -------- --- Consolidation Service, Inc. ("ICSI"). ICI and ICSI (together, "Interstate") are ---- wholly owned subsidiaries of Holdings. Holdings, ICI and ICSI are each herein referred to as a "Company" and collectively as the "Companies". ------- --------- Section 1. Duties. On the terms and subject to the conditions ------ contained in this Agreement, you will be employed as the Executive Vice President of Holdings and as the President and Chief Executive Officer of each of ICI and ICSI, and will have complete authority and responsibility for ICI's and ICSI's international and domestic consolidation, drayage and related intermodal marketing operations (including the operations of ABL-TRANS), reporting to and subject to the supervision and direction of the Board of Directors and the Chairman of the Board of each Company (provided, however, that -------- ------- you will not be required to relocate your principal office to any location outside a 50 mile radius from your current principal office located at 5800 East Sheila Street, Los Angeles, California). Section 2. Term. Unless sooner terminated in accordance with the ---- applicable provisions of this Agreement, your employment hereunder shall be for the period (the "Employment Period") commencing on the date hereof (the ----------------- "Commencement Date") and ending on December 31, 2000. ----------------- Section 3. Time to be Devoted to Employment. During the Employment -------------------------------- Period, you will devote substantially all of your working energies, efforts, interest, abilities and time during normal business hours exclusively to the business and affairs of the Companies (except for reasonable time devoted to the procedures contemplated by Article III of the Purchase Agreement (as defined in Section 9(a) below) on your own behalf). You will not engage in any other business or activity which, in the 1 reasonable judgment of the Board or the Chairman of each Company, as applicable, would conflict or interfere, in any material respect, with the performance of your duties as set forth herein, whether or not such activity is pursued for gain, profit or other pecuniary advantage. Section 4. Base Salary; Bonus; Benefits. ---------------------------- (a) During the Employment Period, you will be entitled to a minimum annual base salary (the "Base Salary") of $235,000, payable by Interstate in such installments (but not less often than bi-weekly) as is generally the policy of the Companies with respect to the payment of regular compensation to its executive officers. The Base Salary may be increased from time to time in the sole discretion of Holdings' Board. During the Employment Period, you will also be entitled to the benefits set forth in Part I on Schedule 4(a) attached ------ ------------- hereto, which include four weeks vacation per year and such other benefits as may from time to time be made available to other executive officers of the Companies generally, including, without limitation, (i) participation in such health, life and disability insurance programs and retirement or savings plans as the Companies may from time to time maintain in effect (provided, however, -------- ------- that, during the period ending on the first anniversary of the date hereof (or April 1, 1999, in the case of group health plans), the Companies will not amend or modify, in any manner that would have a materially adverse effect on the benefits made available thereunder, any of the employee benefit plans and programs set forth in Part II on Schedule 4(a) attached hereto that are ------- ------------- maintained by ICI and ICSI required to be maintained by Section 7.6 of the Purchase Agreement; provided further, however, that you may elect to not be -------- ------- ------- covered by the Companies benefit plans by so notifying the Companies, and the Companies shall pay you an amount equal to the benefits cost savings realized by the Company, as reasonably determined by the Companies and you in consultation with the Companies' benefits consultants), (ii) participation in such stock option plans of Holdings as may be adopted from time to time for the executive officers of the Companies on terms determined by the Board of Holdings and (iii) during the Employment Period and for a period of six years thereafter, with respect to your position as a director or officer (as the case may be), directors' and officers' liability insurance. Part III of Schedule 4(a) attached hereto sets forth the benefits made available on the date hereof to the other executive officers of Holdings and its subsidiaries generally. (b) In addition to the Base Salary and benefits set forth in paragraph (a) above, during the Employment Period you will be entitled to receive a bonus, if any, with respect to each full calendar year occurring during the Employment Period, commencing with the calendar year ending December 31, 1998, such bonus to be paid in a lump sum following the end of the calendar year with respect to which such bonus is payable (such payment to be made at the same time performance bonuses are paid to the other senior managers of Holdings and its subsidiaries). If your employment with the Companies is terminated for any reason other than without "cause" pursuant to Section 8(b), the Companies will not pay you a bonus with respect to the calendar year in which your employment is terminated or thereafter. If your employment with the Companies is terminated without "cause" pursuant to Section 6(b) below, you will be entitled to receive that portion of the bonus payable for the calendar year during which such termination occurs pro rated through the date of such termination based on the number of days 2 elapsed through the termination date over 365 days, payable in accordance with first sentence of this Section 4(b). The bonus payable for each such calendar year shall be subject to and determined based on the achievement by Holdings and its subsidiaries of specified performance targets applicable to the other senior managers of Holdings and its subsidiaries, such bonus to range from $35,000 upon the achievement of the minimum specified targets to $90,000 upon the achievement of the maximum specified targets. The minimum specified target for the year ending December 31, 1998, is $9.0 million in Operating Income (as defined on Schedule 4(b)) and the maximum specified target for the year ending December 31, 1998, is $9.9 million in Operating Income (as defined on Schedule 4(b)), subject in each case to the adjustment of such targets pursuant to Schedule 4(b). Section 5. Reimbursement of Expenses. During the Employment Period, ------------------------- the Companies shall reimburse you in accordance with their policies for all reasonable and necessary traveling expenses and other disbursements incurred by you for or on behalf of the Companies in connection with the performance of your duties hereunder upon presentation of appropriate receipts or other documentation therefor, in accordance with all applicable policies of the Companies. Section 6. Termination. ----------- (a) Holdings may terminate your employment hereunder at any time for "cause" by giving you written notice of such termination, with reasonable specificity of the grounds therefor. For purposes of this Section 6, "cause" shall mean any of the following (whether occurring before or after the date hereof): (i) willful misconduct with respect to the business and affairs of the Companies or any of their respective subsidiaries, (ii) willful neglect of your duties or the failure to follow the lawful and reasonable directions of the Board or the Chairman of each Company, including, without limitation, the violation of any material written policy (or oral policy of which you are aware) of the Companies or any of their respective subsidiaries applicable to you, and, if such neglect or failure is capable of being cured, your failure to cure the same as soon as practicable, but in any event within 30 days of receipt of written notice thereof from Holdings, (iii) the material breach of any of the provisions of this Agreement, and, if such breach is capable of being cured, your failure to cure such breach as soon as practicable, but in any event within 30 days of receipt of written notice thereof from Holdings, (iv) the commission of a felony, (v) the commission of an act of fraud or financial dishonesty with respect to any of the Companies or their respective subsidiaries or affiliates or (vi) any conviction for a crime involving moral turpitude or fraud. A termination pursuant to this Section 6(a) shall take effect immediately upon the giving of notice contemplated hereby (subject to any applicable cure period). (b) Holdings may terminate your employment hereunder at any time without "cause" by giving you written notice of such termination, which termination shall be effective as of the date set forth in such notice, provided that such date shall not be earlier than the date of such notice (provided that you shall be afforded a reasonable period of time after such termination to remove your personal effects from the Companies' premises). Any material breach of Section 1 of this Agreement by any of the 3 Companies that remains uncured for more than 30 days after your delivery to the Companies of written notice of such breach shall be deemed to be a termination without "cause" for purposes of this Agreement. For purposes of the immediately preceding sentence, a substantial reduction of your duties, responsibilities and status set forth in Section 1 of this Agreement shall be deemed to be a "material breach" of such Section 1. (c) If, during the Employment Period, you are incapacitated or disabled by accident, sickness or otherwise so as to render you mentally or physically incapable of performing substantially all of the services required to be performed by you under this Agreement for an aggregate of 210 days in any period of 360 consecutive days (hereinafter, a "Disability"), the Companies may, at any time thereafter, at their option, terminate your employment under this Agreement immediately upon giving you written notice to that effect. In the event of your death, your employment will be deemed terminated as of the date of your death. Section 7. Effect of Termination. --------------------- (a) Upon the effective date of a termination of your employment under this Agreement for any reason other than a termination without cause pursuant to Section 6(b), neither you nor your beneficiaries or estate shall have any further rights under this Agreement or any claims against the Companies or any of their respective subsidiaries or affiliates arising out of this Agreement, except the right to receive the following as soon as reasonably practicable following the effective date of such termination (but in any event within the applicable time period (if any) mandated by applicable law): (i) the unpaid portion of the Base Salary payable pursuant to Section 4, computed on a pro rata basis to the effective date of such --- ---- termination; (ii) reimbursement for any expenses for which you shall not have theretofore been reimbursed, as provided in Section 5; and (iii) the unpaid portion of any amounts earned by you prior to the effective date of such termination pursuant to any benefit program in which you participated during the Employment Period; provided, however, that you -------- ------- shall not be entitled to receive any benefits under any benefit program that have accrued during any period if the terms of such program require that the beneficiary be employed by a Company as of the end of such period. (b) Upon termination of your employment under this Agreement pursuant to Section 6(b), neither you nor your beneficiaries or estate shall have any further rights under this Agreement or any claims against the Companies or any of their respective subsidiaries or affiliates arising out of this Agreement, except the right to receive the following, as soon as reasonably practicable following the effective date of such termination (but in any event within the applicable time period (if any) mandated by applicable law in the case of amounts due pursuant to clause (i) below, and at such other times as provided in clauses (ii) and (iii) below in the case of amounts due thereunder): 4 (i) the payments, if any, referred to in Section 7(a) above, to the extent not covered by clause (ii) of this Section 7(b); (ii) the right to continue to receive the Base Salary from the effective date of such termination until December 31, 2000, payable during such period in such manner as the Base Salary is payable pursuant to Section 4(a), reduced by 50% of any amounts you (or your beneficiaries or estate) receive or are entitled to receive as salary or other cash compensation from your subsequent employment or for services rendered by you for one or more other parties (other than such services that are rendered by you in the aggregate for less than 20 hours per calendar week and less than 260 hours per calendar quarter) during such period (other than such compensation earned by you from a business controlled by you), up to a maximum of 50% of all amounts due to you under this Section 7(b)(ii) (in order to carry out the intent of the immediately preceding sentence, you agree, for yourself and your beneficiaries or estate, to provide the Companies with such information as the Companies may reasonably request regarding your receipt of salary and other cash compensation from subsequent employment or for services rendered or to be rendered during or with respect to such period); and (iii) the right to receive any bonus payable in accordance with Section 4(b) with respect to the fiscal year in which such termination occurs. Notwithstanding anything contained in this Agreement to the contrary, your beneficiaries or estate will be entitled to continue to receive all payments specified in this Section 7(b) if you die after the date of a termination without "cause." Section 8. Disclosure of Information. ------------------------- (a) From and after the date hereof, you shall not at any time use or disclose to any person or entity (other than any officer, director, employee, affiliate or representative of the Companies), except as required in connection with the performance of your duties under and in compliance with this Agreement and as required by law and judicial process, any Confidential Information (as hereinafter defined) heretofore acquired or acquired during the Employment Period for any reason or purpose whatsoever, nor shall you make use of any of the Confidential Information for your own purposes or for the benefit of any person or entity except the Companies or their respective subsidiaries. (b) For purposes of this Agreement, "Confidential Information" shall mean (i) the Intellectual Property Rights (as hereinafter defined) of the Companies and their respective subsidiaries and affiliates and (ii) all other information of a proprietary or confidential nature relating to the Companies or their respective subsidiaries and affiliates, or the business or assets of the Companies or their respective subsidiaries and affiliates, including, without limitation, books, records, agent and independent contractor lists and related information, customer lists and related information, vendor lists and related information, supplier lists and related information, distribution channels, pricing information, cost information, marketing plans, strategies, forecasts, financial statements, 5 budgets and projections, other than, with respect to both clauses (i) and (ii), (x) information which is generally available to the public on the date hereof, or which becomes generally available to the public after the date hereof without action by you, or (y) information which you receive from a third party who does not have any independent obligation to any of the Companies or their respective subsidiaries or affiliates to keep such information confidential. (c) As used herein, the term "Intellectual Property Rights" means all industrial and intellectual property rights, including, without limitation, patents, patent applications, patent rights, trademarks, trademark applications, trade names, service marks, service mark applications, copyrights, copyright applications, know-how, certificates of public convenience and necessity, franchises, licenses, trade secrets, proprietary processes and formulae, inventions, development tools, marketing materials, instructions, confidential information, trade dress, logos and designs and all documentation and media constituting, describing or relating to the foregoing, including, without limitation, manuals, memoranda and records. Section 9. Noncompetition Covenant. ----------------------- (a) You acknowledge and recognize that during the Employment Period you will be privy to Confidential Information. You further acknowledge and recognize that the relationships with vendors, agents and customers of the Companies and their respective subsidiaries that you have developed prior to the date hereof and those that you will maintain or develop during the Employment Period with the use and assistance of the Companies and their respective subsidiaries, and their respective properties and assets, are of special and unique value to the Companies and their affiliates and that the Companies would find it extremely difficult to replace you. In addition, you acknowledge and agree that this Agreement is being executed and delivered in connection with, and as a mutual condition to the respective obligations of the parties at the closing on the date hereof under, the Stock Purchase Agreement dated as of the date hereof (the "Purchase Agreement") between each of the Companies, you and the other seller thereunder; provided, however, that the Companies agree that a -------- ------- breach by you of this Section 9 shall in no event constitute a breach under the Purchase Agreement (it being acknowledged by you, however, that this proviso shall in no way limit or affect the separate and independent provisions of Section 7.4 of the Purchase Agreement). As a material inducement to Holdings to enter into and perform its obligations under the Purchase Agreement, and in consideration of the payments and other benefits (including the further experience and expertise to be gained during your employment hereunder) to be received by you under the Purchase Agreement and this Agreement (including, without limitation, the severance compensation described in Section 7(b)(ii), if applicable), you shall not, without the prior written consent of the Companies, at any time during the Employment Period and the period beginning on the effective date of any termination of your employment with the Companies and their respective subsidiaries or affiliates and ending on the later of (i) the second anniversary thereof and (ii) the fifth anniversary of the Commencement Date, (a) directly or indirectly engage in, represent in any way, or be connected with, any Competing Business (as defined below), whether such engagement shall be as an officer, director, owner, employee, partner, affiliate or 6 other participant in any Competing Business, (b) assist others in engaging in any Competing Business in any manner described in clause (a) above, (c) induce other employees of the Companies or any of their respective subsidiaries or affiliates to terminate their employment with any of the Companies or any of their respective subsidiaries or affiliates or to engage in any Competing Business or in any manner described in clause (a) above or (d) induce any customer, vendor or agent or any other person or entity with which any of the Companies or their respective subsidiaries or affiliates has a business relationship to terminate or alter such business relationship. This covenant is considered an integral part of this Agreement. The foregoing restriction shall not apply to your ownership of publicly traded securities which represent not more than 5% of the ownership interests of the issuer. (b) You understand that the foregoing restrictions may limit your ability to earn a livelihood in a business similar to the business of any of the Companies or any subsidiary or affiliate thereof, but you nevertheless believe that you have received and will receive sufficient consideration and other benefits under the Purchase Agreement and as an employee of the Companies and under the terms of this Agreement to justify clearly such restrictions which, in any event (given your education, skills and ability), you do not believe would prevent you from earning a living. (c) As used herein, the term "Competing Business" shall mean any ------------------ business engaged in providing any of the following transportation services to third party customers: (i) intermodal marketing or transportation services in any city or county in any state or province located in the continental United States, Canada or Mexico; (ii) less-then-truckload common carrier services in any city or county in any state or province located in the continental United States, Canada or Mexico; (iii) intra-state trucking of truckload or less-than-truckload freight in any city or county located in the state of California; (iv) drayage, consolidation, deconsolidation or distribution services in any city or county in any state or province located in the continental United States, Canada or Mexico where any of the Companies conducts business or provides any drayage, consolidation, deconsolidation or distribution services at the time of, or where there are fixed plans for any of the Companies to conduct business or provide any drayage, consolidation, deconsolidation or distribution services at any time within 12 months after, the termination of your employment with the Companies; or (v) contract warehousing, freight handling or logistics services in any city or county in any state or province located in the continental United States, Canada or Mexico where any of the Companies conducts business or 7 provides such services at the time of, or where there are fixed plans for any of the Companies to conduct business or provide such services at any time within 12 months after, the termination of your employment with the Companies. Anything contained in the immediately preceding sentence to the contrary notwithstanding, (A) any entity which has separate divisions or business units, one or more of which are engaged in a business described in the immediately preceding sentence, will not be deemed to be a Competing Business with respect to those separate divisions or business units of such entity that are not engaged in a business described in the immediately preceding sentence so long as your association with any such separate division or business unit (fully taking into account your functions and the nature of your work at such division or business unit) does not (1) involve existing customers of any of the Companies at the time of the termination of your employment with the Companies or former customers of any of the Companies at any time during the 12 months preceding such termination or (2) relate in any material respect to such portion of such business which would be a Competing Business hereunder; (B) the provision of consulting services to a direct shipper who is not a customer of any of the Companies at the time of the termination of your employment with the Companies, or a former customer of any of the Companies at any time during the 12 months preceding such termination, shall not be deemed to be "engaging in a Competing Business" for purposes of this SECTION 9; and --------- (C) the provision of any drayage, consolidation, deconsolidation, distribution, contract warehousing, freight handling or logistics services in any location described in clause (iv) or (v) of the immediately preceding sentence shall only be deemed to be a "Competing Business" if (1) you were the President or Chief Executive Officer of any Company (or any of its separate divisions or business units), that was engaged in providing any drayage, consolidation, deconsolidation, distribution, contract warehousing, freight handling or logistics services at the time of (or at any time within the 12 months prior to) the termination of your employment with the Companies or where such Company (or such division or business unit) had fixed plans at the time of such termination to provide any drayage, consolidation, deconsolidation, distribution, contract warehousing, freight handling or logistics services at any time within 12 months after such termination, or (2) any drayage, consolidation, deconsolidation, distribution, contract warehousing, freight handling or logistics services are being provided to any Person who was a customer of the Company at the time of the termination of your employment with the Companies or at any time during the 12 months prior to such termination. Section 10. Inventions Assignment. During the Employment Period, you --------------------- shall promptly disclose, grant and assign to the Companies for their sole use and benefit 8 any and all inventions, improvements, technical information and suggestions reasonably relating to the business of the Companies or any of their respective subsidiaries or affiliates (collectively, the "Inventions") which you may develop or acquire during the Employment Period (whether or not during usual working hours), together with all patent applications, letters patent, copyrights and reissues thereof that may at any time be granted for or with respect to the Inventions. In connection therewith (a) you shall, at the expense of the Companies (including a reasonable payment (based on your last per diem earnings) for the time involved if you are not then in the employ of any of the Companies or receiving severance payments from the Companies pursuant to Section 7(b)(ii)), promptly execute and deliver such applications, assignments, descriptions and other instruments as may be necessary or proper in the opinion of the Companies to vest title to the Inventions and any patent applications, patents, copyrights, reissues or other proprietary rights related thereto in the Companies and to enable them to obtain and maintain the entire right and title thereto throughout the world; and (b) you shall render to the Companies, at their expense (including a reasonable payment (based on your last per diem earnings) for the time involved if you are not then in the employ of any of the Companies or receiving severance payments from the Companies pursuant to Section 7(b)(ii)), such reasonable assistance as they may require in the prosecution of applications for said patents, copyrights, reissues or other proprietary rights, in the prosecution or defense of interferences which may be declared involving any said applications, patents, copyrights or other proprietary rights and in any litigation in which any of the Companies may be involved relating to the Inventions. Section 11. Assistance in Litigation. ------------------------ (a) At all times during the Employment Period, and thereafter upon reasonable notice from the Board or the Chairman of Holdings you shall furnish such information and assistance to the Companies as any of them may reasonably require in connection with the actions entitled Irwin Albillo et. al. v. ------------------------ Intermodal Container Service, Inc. et. al. (Case No. B0174508), and Paul - ------------------------------------------ ---- Cardoza, et al., vs. Air Rail Truck Service-Air Cargo, et al. (Case No. BC 153 - ------------------------------------------------------------------------------ 522), as any such action may be amended, modified, restated or refiled, whether - ------ by the plaintiffs Albillo, Cardoza or one or more other independent contractor drivers against one or more of the Companies and the Subsidiary asserting claims based on the facts alleged in the Albillo action or the Cardoza action cited ------- ------- above. Such information and assistance shall include, but not be limited to, appearing from time to time at the offices of the Companies or Companies' counsel for conferences and interviews and in general providing the officers of the Companies, the Companies and Companies' counsel with the full benefit of your knowledge with respect to such actions. The Companies shall pay or reimburse you for all reasonable out-of-pocket expense incurred by you in connection with your furnishing such information and assistance upon presentation of appropriate receipts or other documentation therefor. (b) At all times during the Employment Period, and thereafter upon reasonable notice from the Board or the Chairman and at the expense of the Companies (including a reasonable payment (based on your last per diem earnings) for the time involved if you are not then in the employ of any of the Companies or collecting payments pursuant to Section 7(b)), you shall furnish such information and assistance to 9 the Companies as any of them may reasonably require in connection with any issue, claim or litigation in which any of the Companies may be involved (excluding the matters covered by Section 11(a) above). Such information and assistance shall include, but not be limited to, appearing from time to time at the offices of the Companies or Companies' counsel for conferences and interviews and in general providing the officers of the Companies, the Companies and Companies' counsel with the full benefit of your knowledge with respect to such issue, claim or litigation. Section 12. Entire Agreement; Amendment and Waiver. This Agreement -------------------------------------- embodies the entire agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes and preempts any and all prior and contemporaneous understandings, agreements, arrangements or representations by or among the parties, written or oral, which may relate to the subject matter hereof in any way. Other than this Agreement, there are no other agreements continuing in effect relating to the subject matter hereof (except that the parties acknowledge the existence of the separate and independent provisions contained in Section.7.4 of the Purchase Agreement). No waiver, amendment or modification of any provision of this Agreement shall be effective unless in writing and signed by each party hereto. The waiver by either party of a breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach by such other party. Section 13. Notices. All notices or other communications pursuant to ------- this Agreement shall be in writing and shall be deemed to be sufficient if delivered personally, telecopied, sent by nationally-recognized, overnight courier or mailed by registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): if to any Company, to: PMT Holdings, Inc. 3746 Mt. Diablo Boulevard, Suite 100 Lafayette, CA 94549 Attention: Chairman of the Board Telecopier: (510) 299- Telephone: (510) 283-1938 with a copy to: Eos Partners, L.P. 320 Park Avenue 22nd Floor New York, NY 10022 Attention: Douglas R. Korn Telecopier: (212) 832-5815 Telephone: (212) 832-5803 10 if to you, to: Mr. Gary I. Goldfein 229 N. Cliffwood Ave. Los Angeles, CA 90049 Telephone: (310) 471-2974 Telecopier: (310) 471-7483 with copies to: Manatt, Phelps & Phillips, LLP 11355 W. Olympic Blvd. Los Angeles, CA 90064 Attention: Ronald S. Barak Telecopier: (310) 312-4224 Telephone: (310) 312-4000 Mr. Allen E. Steiner 1537 Amalfi Drive Pacific Palisades, CA 90272-2754 Telephone: (310) 459-3926 Telecopier: (310) 459-8124 Section 14. Headings. The section headings in this Agreement are for -------- convenience only and shall not control or affect the meaning of any provision of this Agreement. Section 15. Severability. In the event that any provision of this ------------ Agreement is determined to be partially or wholly invalid, illegal or unenforceable in any jurisdiction, then such provision shall, as to such jurisdiction, be modified or restricted to the extent necessary to make such provision valid, binding and enforceable, or if such provision cannot be modified or restricted, then such provision shall, as to such jurisdiction, be deemed to be excised from this Agreement; provided, however, that the binding -------- ------ effect and enforceability of the remaining provisions of this Agreement, to the extent the economic benefits conferred upon the parties by virtue of this Agreement remain substantially unimpaired, shall not be affected or impaired in any manner, and any such invalidity, illegality or unenforceability with respect to such provisions shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 16. Remedies. You acknowledge and understand that the -------- provisions of this Agreement are of a special and unique nature, the loss of which cannot be adequately compensated for in damages by an action at law, and thus, the breach or threatened breach of the provisions of this Agreement would cause the Companies irreparable harm. You further acknowledge that in the event of a breach of any of the covenants contained in paragraphs 8, 9, or 10, the Companies shall be entitled to immediate relief enjoining such violations in any court or before any judicial body having jurisdiction over such a claim. All remedies hereunder are cumulative, are in addition to 11 any other remedies provided for by law and may, to the extent permitted by law, be exercised concurrently or separately, and the exercise of any one remedy shall not be deemed to be an election of such remedy or to preclude the exercise of any other remedy. Section 17. Representation. -------------- (a) You hereby represent and warrant to Holdings that (i) the execution, delivery and performance of this Agreement by you and ICI and ICSI does not breach, violate or cause a default under any agreement, contract or instrument to which any of you, ICI or ICSI is a party or any judgment, order or decree to which any of you, ICI OR ICSI is subject, and (ii) none of you, ICI or ICSI is a party to or bound by any employment agreement, consulting agreement, noncompete agreement, confidentiality agreement or similar agreement regarding your employment or retention with or by any other person or entity. (b) Holdings hereby represents and warrants to you that the execution, delivery and performance of this Agreement by Holdings does not breach, violate or cause a default under any agreement, contract or instrument to which Holdings is a party or any judgment, order or decree to which Holdings is subject. Section 18. Benefits of Agreement; Assignment. The terms and --------------------------------- provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns, representatives, heirs and estate, as applicable. Anything contained herein to the contrary notwithstanding, this Agreement shall not be assignable by any party hereto without the consent of the other parties hereto. Section 19. Counterparts. This Agreement may be executed in any ------------ number of counterparts, and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. Section 20. Governing Law. This Agreement shall be governed by and ------------- construed in accordance with the domestic laws of the State of California without giving effect to any choice or conflict of law provision or rule (whether of the State of California or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of California. SECTION 21. MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN --------------------------- CONNECTION WITH COMPLEX TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE 12 OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS RELATED HERETO. * * * * 13 If the above terms are satisfactory to you, please acknowledge our agreement by signing the enclosed copy of this letter in the space provided below and returning it to the undersigned. Very truly yours, PMT HOLDINGS, INC. By:_____________________ Name: Title: INTERSTATE CONSOLIDATION, INC. By:_____________________ Name: Title: INTERSTATE CONSOLIDATION SERVICE, INC. By:_____________________ Name: Title: Accepted and agreed to: ________________________ Gary I. Goldfein 14 SCHEDULE 4(A) PART I ------ . One German Luxury Company Car each including gasoline, repairs, maintenance, insurance, taxes, etc. (to be replaced not less often than once every three years after the date of acquisition of such vehicle) . Country Club Dues (approx. $475/mo.) . WPO\YPO Dues (approx. $5,000/yr.) . YPO Seminars . Membership in Trade and Business Organizations and airline and automobile club memberships . Misc. Business Tools including computer links, cell phones, car phones, etc. . Health Insurance . Disability Pay as per standard for employees with 25 years service . Sick Leave as per standard for employees with 25 years service . Vacation time as per standard for employees with 25 years Service PART II ------- The following are the employee benefits for senior executive officers of Holdings as of the date hereof: Group Health Insurance Connecticut General Life Insurance Company - Policy 2233560-01 Coverage: standard group plan Group Term Life Insurance Fortis Benefits Insurance Company - Policy 4009662 Coverage: $350,000 Additional Term Life Insurance CNA/Valley Forge Life Insurance Coverage: $700,000 Accidental Death and Dismemberment Fortis Benefits Insurance Company - Policy 4009662 Coverage: standard group plan Short Term Disability Fortis Benefits Insurance Company - Policy 4009662 Coverage: standard group plan Long Term Disability 15 Fortis Benefits Insurance Company - Policy 4009662 Coverage: standard group plan Massachusetts Casualty Insurance Company Gerry Angeli - $6,200 per month Robert Cross - $4,750 per month Group Dental Insurance Fortis Benefits Insurance Company - Policy 4009662 Coverage: standard group plan Pacific Motor Transport 401(k) Plan Merrill Lynch Company matching contribution: 3% of first 100% if participant's contribution Company Automobiles Gerry Angeli - Buick Park Avenue Bob Cross - Buick Park Avenue Don Orris - Car Allowance of $1,076 per month 16 SCHEDULE 4(B) OPERATING INCOME ---------------- For purposes of Section 4(b) of this Agreement, "Operating Income" ---------------- means, for any calendar year, the earnings before interest expense and interest income, income taxes and amortization of goodwill and acquisition and financing fees of Holdings and its subsidiaries, determined on a consolidated basis and in accordance with generally accepted accounting principles consistently applied for the calendar year in question, as set forth on the audited consolidated statement of income of Holdings and its subsidiaries for the fiscal year in question; provided, however, that Operating Income shall (x) exclude management -------- ------- fees, transaction expenses, non-operating gains and losses as determined by the Board of Directors of Holdings and such other non-cash items as shall be determined by the Board of Directors of Holdings (provided that, with regard to recognition of income due to customer credit balances and the reversal of prior period accounts payable, such recognition will be made on a basis consistent with past practice as to amount and timing of such recognition) and (y) be determined after giving effect to any and all bonuses payable by Holdings and/or any of its subsidiaries to management or employees of Holdings and/or any of its subsidiaries hereunder or otherwise. In the event that Holdings and/or any of its subsidiaries consummate any mergers or acquisitions (whether of assets, stock or other interests) or other extraordinary transactions, the Board of Directors of Holdings shall in good faith make such adjustments to the targets set forth in Section 4(b) for Operating Income (as defined above) to take into account the effects of any such acquisition or other extraordinary transaction. 17 PACER INTERNATIONAL, INC. May 28, 1999 Gary I. Goldfein 229 N. Cliffwood Ave. Los Angeles, CA 90049 Re: Amendment to Employment Agreement --------------------------------- Dear Gary: Reference is made to the Employment Agreement, dated December 16, 1997, (the "Employment Agreement") between Pacific Motor Transport Company and you. This letter amendment (the "Letter Amendment") sets forth our agreement with respect to certain amendments to the Employment Agreement in connection with the merger (the "Merger") contemplated by the Agreement and Plan of Merger amongst Pacer International, Inc., a Delaware corporation, Mile High Acquisition Corp., a Delaware corporation ("Sub") and the shareholders of Pacer International, Inc., dated February 22, (the "Merger Agreement") for the purposes of assuring your continued employment with Pacer International, Inc., a Tennessee corporation, (the "Company") following the Merger and in order to assure Sub of the transfer of the goodwill of the Company pursuant to the Merger and to protect the trade secrets and other confidential information of the Company. For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company hereby agrees with you as follows: 1. The effectiveness of this Letter Agreement is contingent upon the closing of the Merger. In the event the Merger is not consummated, this Letter Agreement will be of no force or effect. 2. Section 2 of the Employment Agreement is hereby deleted in its entirety and the following provision is hereby substituted therefor: Term. Unless sooner terminated in accordance with the applicable provisions of this Agreement, your employment hereunder shall be for the period (including any extensions thereof, the "Employment Period") commencing on the closing date of the Merger (the "Commencement Date") and initially ending on the second anniversary of the date hereof. Subject to the applicable provisions of Section 6 of this Agreement regarding earlier termination, the Employment Period shall be extended automatically on each anniversary of the Commencement Date, beginning with the first anniversary thereof for an additional period of one year. 3. Section 9 of the Employment Agreement is hereby deleted in its entirety and the following provision is hereby substituted therefor: (a) You will not during the Employment Period and for the period of two years following date of your termination of employment with the Company or any of its subsidiaries for any reason (the "Noncompetition Period") (i) ----------------------- in any geographic area where the Company conducts business during the Noncompetition Period, engage or participate in directly or indirectly (whether as an officer, director, employee, partner, consultant, holder of an equity or debt investment, lender or in any other manner or capacity, including, without limitation, by the rendering of services or advice to any person), or lend your name (or any part or variant thereof) to, any Competing Business (as defined in below); (ii) deal, directly or indirectly, in a competitive manner with any customers doing business with the Company during the Noncompetition Period; (iii) solicit or employ any officer, director or agent of the Company to become an officer, director, or agent of you, your respective affiliates or anyone else; or (iv) engage in or participate in, directly or indirectly, any business conducted under any name that shall be the same as or similar to the name of the Company or any trade name used by it. Ownership by you for investment of less than 2% of the outstanding shares of capital stock or class of debt securities of any corporation with one or more classes of its capital stock listed on a national securities exchange or actively traded in the over-the-counter market shall not constitute a breach of the foregoing covenant. You are entering into the foregoing covenant to assure Sub of the transfer of the goodwill of the Company, and in order to induce Sub to consummate the purchase contemplated by the Merger Agreement. (b) You will not at any time after the date hereof divulge, furnish to or make accessible to anyone any knowledge or information with respect to confidential or secret processes, inventions, discoveries, improvements, formulae, plans, material, devices or ideas or know-how, whether patentable or not, with respect to any confidential or secret aspects of the business of the Company (including, without limitation, customer lists, supplier lists and pricing arrangements with customers or suppliers); provided, -------- however, that nothing herein shall prohibit you from complying with any ------- order or decree of any court of competent jurisdiction or governmental entity or other requirements of law, but you will give the Company reasonably timely notice of the receipt of any such order or decree or legal requirement, and the foregoing provision shall not apply to (i) any information which is or becomes generally available to the public through no breach of this Agreement or (ii) is or becomes available to you on a non-confidential basis from a source who is not, to your knowledge, prohibited from disclosing the same by any legal or contractual obligation. 2 (c) As used herein, the term "Competing Business" shall mean any transportation or other business that the Company or any of its affiliates has engaged in at any time during the Employment Period in any city or county in any state of the United States, Canada or Mexico including, without limitation, any business engaged in (i) intermodal marketing, (ii) flatbed specialized hauling services, (iii) less-then-truckload common carrier services, (iv) drayage, consolidation, deconsolidation or distribution services, (v) contract warehousing, freight handling or logistic services, (vi) comprehensive transportation management programs or services to third party customers, (vii) freight consolidation and deconsolidation, (viii) traffic management, and (ix) railroad signal project management. 4. Section 7(b)(ii) of the Employment Agreement is hereby modified by deleting the reference to "December 31, 2000" and substituting therefor the language "end of the Employment Period." 5. Notwithstanding anything in this Letter Agreement to the contrary, nothing herein shall affect the validity of any restrictive covenant you are bound to pursuant to the Stock Purchase Agreement among you, Allen E. Steiner, PMT Holdings, Inc., Interstate Consolidation, Inc., and Interstate Consolidation Service, Inc., dated as of December 16, 1997. Please acknowledge your agreement with this Letter Amendment by executing a counterpart of this Letter Agreement in the appropriate space and returning it to the Company. Very truly yours, PACER INTERNATIONAL, INC. by _____________________________ Acknowledged and Agreed to this __ day of ________ ________________________________ Gary I. Goldfein 3 EX-10.4 24 EMPLOYMENT AGREEMENT FOR ROBERT L. CROSS EXHIBIT 10.4 PACIFIC MOTOR TRANSPORT COMPANY 3746 MT. DIABLO BOULEVARD, SUITE 110 LAFAYETTE, CALIFORNIA 94549 March 31, 1997 Mr. Robert L. Cross 2061 Casa Nuestra Diablo, California 94528 Employment Agreement -------------------- Dear Mr. Robert: This letter sets forth the terms of your continued employment with Pacific Motor Transport Company (the "Company"). 1. Duties. On the terms and subject to the conditions contained in ------ this Agreement, you will be employed as the President of ABL-TRANS, a division of the Company (the "Company"), and shall perform such duties and services consistent with such position as may reasonably be assigned to you from time to time by the Board of Directors or by the President of the Company. 2. Term. Unless sooner terminated in accordance with the applicable ---- provisions of this Agreement, your employment hereunder shall be for the period (including any extensions thereof, the "Employment Period") commencing on the date hereof (the "Commencement Date") and initially ending on the second anniversary of the date hereof. Subject to the applicable provisions of Section 8 of this Agreement regarding earlier termination, the Employment Period shall be extended automatically one day prior to each anniversary of the Commencement Date, beginning with the second anniversary thereof, for an additional period of one year. 3. Time to be Devoted to Employment. During the Employment Period, -------------------------------- you will devote your working energies, efforts, interest, abilities and time exclusively to the business and affairs of the Company. You will not engage in any other business or activity which, in the reasonable judgment of the Board of Directors of the Company, would conflict or interfere with the performance of your duties as set forth herein, whether Mr. Robert Cross March 31, 1997 Page 2 or not such activity is pursued for gain, profit or other pecuniary advantage. 4. Base Salary; Bonus; Benefits. ---------------------------- (a) During the Employment Period, the Company (or any of its affiliates) shall pay you a minimum annual base salary (the "Base Salary") of $200,000, payable in such installments (but not less often than monthly) as is generally the policy of the Company with respect to the payment of regular compensation to its executive officers. The Base Salary may be increased from time to time in the sole discretion of the Board of Directors of the Company. During the Employment Period, you will also be entitled to four weeks vacation per year and such other benefits as may be made available to other executive officers of the Company generally, including, without limitation, (i) participation in such health, life and disability insurance programs and retirement or savings plans as the Company may from time to time maintain in effect and (ii) the use of a vehicle provided by the Company or an equivalent monthly car allowance in accordance with the Company's policy with respect to its senior executives. (b) In addition to the Base Salary and benefits set forth in paragraph (a) above, you will be entitled to receive a cash incentive bonus, if any, with respect to each fiscal year of the Company occurring during the Employment Period, as provided in this paragraph. The bonus, if any, for each fiscal year of the Company ending on or prior to December 31, 2001, shall be calculated in the manner set forth on Annex A attached to this Agreement and ------- shall be due and payable as soon as practicable, but in no event later than 30 days, following the Company's receipt from its public accountants of the audited financial statements of the Company. If your employment with the Company is terminated for any reason other than without "cause" pursuant to Section 8(b), the Company will not pay you a bonus with respect to the fiscal year in which your employment is terminated or thereafter. If your employment with the Company is terminated without "cause" as provided in Section 8(b) below, you will be entitled to receive that portion of the bonus payable for such fiscal year pro rated through the date of such termination based on the number of days elapsed through the termination date over 365 days, payable in accordance with the second sentence of this Section 4(b). For each fiscal year ending after December 31, 2001, the amount of the bonus and the criteria therefor shall be determined by the Board of Directors. In the event that the Company consummates any mergers or Mr. Robert Cross March 31, 1997 Page 3 acquisitions (whether of assets, stock or other interests) or other extraordinary transactions, the Board of Directors shall in good faith make such adjustments to the targets set forth on Annex A for Operating Income (as ------- defined on Annex A) to take into account the effects of any such acquisition ------- or transaction. 5. Reimbursement of Expenses. During the Employment Period, the ------------------------- Company shall reimburse you in accordance with Company policy for all reasonable and necessary traveling expenses and other disbursements incurred by you for or on behalf of the Company in connection with the performance of your duties hereunder upon presentation of appropriate receipts or other documentation therefor, in accordance with all applicable policies of the Company. 6. Options. The Company will grant you options (the "Options") to ------- purchase shares of common stock, $.01 par value (the "Common Stock"), of the Company pursuant to the Company's 1997 Stock Option Plan (the "Option Plan"). The Options will be evidenced by a Stock Option Agreement between you and the Company. The Option Plan and the Stock Option Agreement will contain all of the terms and conditions of your Options. 7. Disability or Death. If, during the Employment Period, you are ------------------- incapacitated or disabled by accident, sickness or otherwise (hereinafter, a "Disability") so as to render you mentally or physically incapable of performing the services required to be performed by you under this Agreement for an aggregate of 210 days in any period of 360 consecutive days, the Company may, at any time thereafter, at its option, terminate your employment under this Agreement immediately upon giving you written notice to that effect. In the event of your death, your employment will be deemed terminated as of the date of death. Mr. Robert Cross March 31, 1997 Page 4 8. Termination. ----------- (a) The Company may terminate your employment hereunder at any time for "cause" by giving you written notice of such termination, with reasonable specificity of the grounds therefor. For purposes of this Section 8, "cause" shall mean (i) willful misconduct with respect to the business and affairs of the Company, PMT Holdings, Inc. ("PMT") or any of their respective subsidiaries, (ii) willful neglect of your duties or the failure to follow the lawful directions of the Board or more senior officers of the Company to whom you report, including, without limitation, the violation of any material policy of the Company, PMT or any of their respective subsidiaries applicable to you, (iii) the breach of Section 6.2(h) of the Restricted Stock Agreement (as defined below) or the material breach of any of the provisions of this Agreement or any Related Agreement (as defined below) and if such breach is capable of being cured, your failure to cure such breach within 30 days of receipt of written notice thereof from the Company, (iv) the commission of a felony, (v) the commission of an act of fraud or financial dishonesty with respect to the Company, PMT or any of their respective subsidiaries or affiliates or (vi) any conviction for a crime involving moral turpitude or fraud. A termination pursuant to this Section 8(a) shall take effect immediately upon the giving of the notice contemplated hereby. In this Agreement, the term "Related Agreements" means (i) the Restricted Stock Issuance and Stock Purchase Agreement dated as of the date hereof between you and PMT (the "Restricted Stock Agreement"), and (ii) the Stockholders Agreement dated as of the date hereof among PMT, you and the other stockholders named therein. (b) The Company may terminate your employment hereunder at any time without "cause" by giving you written notice of such termination, which termination shall be effective as of the date set forth in such notice, provided that such date shall not be earlier than the date of the notice. You will be employed by the Company at a facility located within a 50 mile radius of Diablo, California. The Company may not require you to relocate from this location unless the Company moves all or substantially all of the ABL-TRANS division, in which case you may be required by the Company to work at such new location. 9. Effect of Termination. --------------------- (a) Upon the effective date of a termination of your employment under this Agreement for any reason other than a termination without cause pursuant to Section 8(b), neither you nor your beneficiaries or estate shall have any further rights under this Agreement or any claims against the Company or any of its subsidiaries or affiliates arising out of this Agreement, except the right to receive, within 30 days after the effective date of such termination: (i) the unpaid portion of the Base Salary provided for in Section 4, computed on a pro rata basis to the effective date of such --- ---- termination: Mr. Robert Cross March 31, 1997 Page 5 (ii) reimbursement for any expenses for which you shall not have theretofore been reimbursed, as provided in Section 5; and (iii) the unpaid portion of any amounts earned by you prior to the effective date of such termination pursuant to any benefit program in which you participated during the Employment Period; provided, however, you -------- ------- shall not be entitled to receive any benefits under any benefit program that have accrued during any period if the terms of such program require that the beneficiary be employed by the Company as of the end of such period. (b) Upon termination of your employment under this Agreement pursuant to Section 8(b), neither you nor your beneficiaries or estate shall have any further rights under this Agreement or any claims against the Company, PMT or any of their respective subsidiaries or affiliates arising out of this Agreement, except the right to receive, within 30 days after the effective date of such termination, in the case of amounts due pursuant to clause (i) below, and at such other times as provided in clause (ii) and (iii) below in the case of amounts due thereunder: (i) the payments, if any, referred to in Section 9(a) above, to the extent not covered by clause (ii) and (iii) of this Section 9(b); (ii) the right to continue to receive the Base Salary for a period equal to the greater of (A) the number of months remaining in the Employment Period on the effective date of termination or (B) twelve months, in either case commencing on the first month following the effective date of such termination, payable during such period in such manner as the Base Salary is payable pursuant to Section 4(a), reduced by 50% of any amounts you (or your beneficiaries or estate) receive or are entitled to receive as salary or other cash compensation from subsequent employment or for services rendered during such period, up to a maximum of 50% of all amounts due to you under this Section 9(b)(ii). In order to carry out the intent of the immediately preceding sentence, you agree, for yourself and your beneficiaries or estate, to provide the Company with such information as the Company may reasonably request regarding your receipt of salary and other cash compensation from subsequent employment or for services rendered or to be rendered during or with respect to such period; and (iii) the right to receive any bonus payable in accordance with Section 4(b) with respect to the fiscal year in which such termination occurs. Notwithstanding anything in this Agreement to the contrary, your beneficiaries or estate will be entitled to continue to receive all payments specified in this Section 9(b) if you die after the date of a termination without "cause." 10. Disclosure of Information. ------------------------- (a) From and after the date hereof, you shall not at any time use or disclose to any person or entity (other than any officer, director, employee, affiliate or representative of the Company), except as required in connection with the performance of your duties under and in compliance with this Agreement and as required by law and judicial process, any Confidential Information (as hereinafter defined) heretofore acquired or acquired during the Employment Period for any reason or purpose whatsoever, nor shall you make use of any of the Mr. Robert Cross March 31, 1997 Page 6 Confidential Information for your own purposes or for the benefit of any person or entity except the Company or any subsidiary thereof. (b) For purposes of this Agreement, "Confidential Information" shall mean (i) the Intellectual Property Rights (as hereinafter defined) of the Company and its subsidiaries and (ii) all other information of a proprietary or confidential nature relating to the Company or any subsidiary thereof, or the business or assets of the Company or any such subsidiary, including, without limitation, books, records, agent and independent contractor lists and related information, customer lists and related information, vendor lists and related information, supplier lists and related information, distribution channels, pricing information, cost information, marketing plans, strategies, forecasts, financial statements, budgets and projections, other than (i) information which is generally available to the public on the date hereof, or which becomes generally available to the public after the date hereof without action by you or (ii) information which you receive from a third party who does not have any independent obligation to the Company to keep such information confidential. (c) As used herein, the term "Intellectual Property Rights" means all industrial and intellectual property rights, including, without limitation, patents, patent applications, patent rights, trademarks, trademark applications, trade names, service marks, service mark applications, copyrights, copyright applications, know-how, certificates of public convenience and necessity, franchises, licenses, trade secrets, proprietary processes and formulae, inventions, development tools, marketing materials, instructions, confidential information, trade dress, logos and designs and all documentation and media constituting, describing or relating to the foregoing, including, without limitation, manuals, memoranda and records. 11. Noncompetition Covenant. ----------------------- (a) You acknowledge and recognize that during the Employment Period you will be privy to Confidential Information. You further acknowledge and recognize that the relationships with vendors, agents and customers of the Company that you have developed prior to the date hereof and those that you will maintain or develop during the Employment Period with the use and assistance of the Company and its properties and assets are of special and unique value to the Company and its affiliates and that the Company would find it extremely difficult to Mr. Robert Cross March 31, 1997 Page 7 replace you. Accordingly, in consideration of the premises contained herein and the consideration you will receive hereunder (including, without limitation, the severance compensation described in Section 9(b)(ii), if applicable), without the prior written consent of the Company, you shall not, at any time during the Employment Period and the period beginning on the effective date of any termination of your employment with the Company and its subsidiaries and ending on the third anniversary thereof, (a) directly or indirectly engage in, represent in any way, or be connected with, any Competing Business (as defined below), whether such engagement shall be as an officer, director, owner, employee, partner, affiliate or other participant in any Competing Business, (b) assist others in engaging in any Competing Business in the manner described in clause (a) above, (c) induce other employees of the Company, PMT or any of their respective subsidiaries to terminate their employment with the Company or any of their respective subsidiaries or to engage in any Competing Business or (d) induce any customer, vendor or agent or any other person or entity with which the Company or any subsidiary or affiliate thereof has a business relationship, contractual or otherwise, to terminate or alter such business relationship. This covenant is considered an integral part of this Agreement. The foregoing restriction shall not apply to your ownership of publicly traded securities which represent not more than 5% of the ownership interests of the issuer. (b) You understand that the foregoing restrictions may limit your ability to earn a livelihood in a business similar to the business of the Company or any subsidiary or affiliate thereof, but you nevertheless believe that you have received and will receive sufficient consideration and other benefits as an employee of the Company and under the terms of this Agreement to justify clearly such restrictions which, in any event (given your education, skills and ability), you do not believe would prevent you from earning a living. (c) As used herein, the term "Competing Business" shall mean any business conducted in any city or county in any state of the United States which is engaged in (A) intermodal marketing or (B) providing flatbed specialized hauling services utilizing owner-operators or agents; provided, however, that an entity which has separate divisions or business units, one or more of which are engaged in a business described in clause (A) or (B) hereof, will not be deemed a Competing Business with respect to those portions of such entity which are not engaged in a business described in clause (A) or (B) above so long as Mr.Robert Cross March 31, 1997 Page 8 the Employee's association with any such separate division or business unit (fully taking into account his functions and the nature of his work at such division or business unit) does not relate in any material respect to such portion of such business which would be a Competing Business hereunder. (d) Notwithstanding anything contained in this Agreement to the contrary, if, following the termination of your employment with the Company and/or its subsidiaries, the Company fails to pay to you any sums due under Section 9(b)(ii) hereof and (i) you have complied in all material respects with all of the provisions of the last sentence of Section 9(b)(ii) and (ii) such failure to pay continues for a period of fifteen (15) days following receipt by the Company of written notice thereof, the restrictions contained in this Section 11 shall terminate and be of no further force or effect. Any termination of the restrictions contained in this Section 11 pursuant to this subsection (d) shall not affect the Company's obligations under this Agreement or constitute a waiver by you of any other rights or remedies you may have against the Company for breach of any term hereof. 12. Inventions Assignment. During the Employment Period, you shall --------------------- promptly disclose, grant and assign to the Company for its sole use and benefit any and all inventions, improvements, technical information and suggestions reasonably relating to the business of the Company, PMT or any of their respective subsidiaries (collectively, the "Inventions") which you may develop or acquire during the Employment Period (whether or not during usual working hours), together with all patent applications, letters patent, copyrights and reissues thereof that may at any time be granted for or with respect to the Inventions. In connection therewith (a) you shall, at the expense of the Company (including a reasonable payment (based on your last per diem earnings) for the time involved if you are not then in the Company's employ or receiving severance payments from the Company pursuant to Section 9(b)(ii)), promptly execute and deliver such applications, assignments, descriptions and other instruments as may be necessary or proper in the opinion of the Company to vest title to the Inventions and any patent applications, patents, copyrights, reissues or other proprietary rights related thereto in the Company and to enable it to obtain and maintain the entire right and title thereto throughout the world; and (b) you shall render to the Company, at its expense (including a reasonable payment (based on your last per diem earnings) for the time involved if you are not then in the Company's employ or receiving severance payments from the Company Mr. Robert Cross March 31, 1997 Page 9 pursuant to Section 9(b)(ii)), reasonable assistance as it may require in the prosecution of applications for said patents, copyrights, reissues or other proprietary rights, in the prosecution or defense of interference's which may be declared involving any said applications, patents, copyrights or other proprietary rights and in any litigation in which the Company may be involved relating to the Inventions. 13. Assistance in Litigation. At the request and expense of the ------------------------ Company (including a reasonable payment (based on your last per diem earnings) for the time involved if you are not then in the Company's employ or receiving severance payments from the Company pursuant to Section 9(b)(ii)) and upon reasonable notice, you shall, at all times during and after the Employment Period, furnish such information and assistance to the Company as it may reasonably require in connection with any issue, claim or litigation in which the Company may be involved. If such a request for assistance occurs after the expiration of the Employment Period, then you will only be required to render assistance to the Company to the extent that you can do so without materially affecting your other business obligations. 14. Entire Agreement; Amendment and Waiver. This agreement and the -------------------------------------- other writings referred to herein contain the entire agreement between the parties hereto with respect to the subject matter hereof and thereof and supersede any prior agreement between you and the Company or any predecessor of the Company or any of their respective affiliates (including, without limitation, that certain letter agreement dated January 29, 1997, among you, Eos Partners, L.P., and the other parties thereto). No waiver, amendment or modification of any provision of this Agreement shall be effective unless in writing and signed by each party hereto. The waiver by either party of a breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach by such other party. 15. Notices. All notices or other communications pursuant to this ------- Agreement shall be in writing and shall be deemed to be sufficient if delivered personally, telecopied, sent by nationally-recognized, overnight courier or mailed by registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): Mr. Robert Cross March 31, 1997 Page 10 (a) if to the Company, to: Pacific Motor Transport Company 10007 Oak Tree Court Littleton, CO 80124 Attention: President Telecopier: (303) 790-4685 Telephone: (303) 799-1443 with a copy to: Eos Partners, L.P. 320 Park Avenue 22nd Floor New York, NY 10022 Attention: Douglas R. Korn Telecopier: (212) 832-5805 Telephone: (212) 832-5800 (b) if to you, to: Mr. Robert L. Cross 2061 Casa Nuestra Diablo, California 94528 Telecopier: (510) 743-8975 Telephone: (510) 743-8552 16. Headings. The section headings in this Agreement are for -------- convenience only and shall not control or affect the meaning of any provision of this Agreement. 17. Severability. In the event that any provision of this Agreement ------------ is determined to be partially or wholly invalid, illegal or unenforceable in any jurisdiction, then such provision shall, as to such jurisdiction, be modified or restricted to the extent necessary to make such provision valid, binding and enforceable, or if such provision cannot be modified or restricted, then such provision shall, as to such jurisdiction, be deemed to be excised from this Agreement; provided, however, that the binding effect and enforceability of the -------- ------- remaining provisions of this Agreement, to the extent the economic benefits conferred upon the parties by virtue of this Agreement remain substantially unimpaired, shall not be affected or impaired in any manner, and any such invalidity, illegality or unenforceability with respect to such provisions shall not Mr. Robert Cross March 31, 1997 Page 11 invalidate or render unenforceable such provision in any other jurisdiction. 18. Remedies. You acknowledge and understand that the provisions of -------- this Agreement are of a special and unique nature, the loss of which cannot be adequately compensated for in damages by an action at law, and thus, the breach or threatened breach of the provisions of this Agreement would cause the Company irreparable harm. You further acknowledge that in the event of a breach of any of the covenants contained in paragraphs 10, 11, or 12, the Company shall be entitled to immediate relief enjoining such violations in any court or before any judicial body having jurisdiction over such a claim. All remedies hereunder are cumulative, are in addition to any other remedies provided for by law and may, to the extent permitted by law, be exercised concurrently or separately, and the exercise of any one remedy shall not be deemed to be an election of such remedy or to preclude the exercise of any other remedy. 19. Representation. You hereby represent and warrant to the Company -------------- that (a) the execution, delivery and performance of this Agreement by you does not breach, violate or cause a default under any agreement, contract or instrument to which you are a party or any judgment, order or decree to which you are subject and (b) you are not a party to or bound by any employment agreement, consulting agreement, noncompete agreement, confidentiality agreement or similar agreement with any other person or entity. 20. Benefits of Agreement; Assignment. The terms and provisions of --------------------------------- this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns, representatives, heirs and estate, as applicable. Anything contained herein to the contrary notwithstanding, this Agreement shall not be assignable by any party hereto without the consent of the other party hereto. 21. Counterparts. This Agreement may be executed in any number of ------------ counterparts, and each such counter part shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. 22. Governing Law. This Agreement shall be governed by and construed ------------- in accordance with the domestic laws of the State of California without giving effect to any choice or conflict of law provision or rule (whether of the State of California or any Mr, Robert Cross March 31, 1997 Page 12 other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of California. Mr. Robert Cross March 31, 1997 Page 13 23. Mutual Waiver of Jury Trial. BECAUSE DISPUTES ARISING IN --------------------------- CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS RELATED HERETO. If the above terms are satisfactory to you, please acknowledge our agreement by signing the enclosed copy of this letter in the space provided below and returning it to the undersigned. Very truly yours, PACIFIC MOTOR TRANSPORT COMPANY By:_____________________________ Name: Title: Accepted and agreed to: _____________________________ [Name] ANNEX A ------- INCENTIVE BONUS PROGRAM ----------------------- The Company will pay a cash incentive bonus based upon the Operating Income (as hereinafter defined) of the Company for each fiscal year set forth below occurring during the Employment Period. The amount of the Bonus so payable will be based on the Company's achieving Operating Income (as defined below) targets set by the President of the Company (which will be identical for the President of the Company and the Presidents of the Company's PACER and ABL- TRANS divisions), but which in no event will be lower than the target amounts set forth below (with the amount of the Bonus payable being calculated accordingly at the rate of $6,000 of Bonus per $100,000 of Operating Income). For purposes of this Agreement, "Operating Income" means the operating income of the Company, determined on a consolidated basis (if applicable) and in accordance with generally accepted accounting principles consistently applied for the fiscal year in question, as set forth on the audited statement of income of the Company for the fiscal year in question; provided, however, Operating -------- ------- Income shall (x) exclude management fees, non-operating gains and losses as determined by the Board of Directors and such other non-cash items as shall be determined by the Board of Directors and (y) be determined after giving effect to any bonus payable by the Company to management or employees of the Company hereunder or otherwise. MINIMUM OPERATING INCOME TARGETS AND CORRESPONDING BONUS CALCULATION FISCAL YEAR 1997 ----------------
If Operating Income is: The Amount of Bonus will be: ------------------------- ---------------------------- less than $3,050,000 $ 0 equal to or greater than $35,000 $3,050,000 but less than $3,150,000 equal to or greater than $41,000 $3,150,000 but less than $3,250,000 equal to or greater than $47,000 $3,250,000 but less than $3,350,000 equal to or greater than $53,000 $3,350,000 but less than $3,450,000 equal to or greater than $59,000 $3,450,000 but less than $3,550,000
equal to or greater than $65,000 $3,550,000 but less than $3,650,000 equal to or greater than $71,000 $3,650,000 but less than $3,750,000 equal to or greater than $77,000 $3,750,000 but less than $3,850,000 equal to or greater than $83,000 $3,850,000
FISCAL YEAR 1998 ----------------
If Operating Income is: The Amount of Bonus will be: ---------------------- ---------------------------- less than $3,288,400 $ 0 equal to or greater than $35,000 $3,288,400 but less than $3,388,400 equal to or greater than $41,000 $3,388,400 but less than $3,488,400 equal to or greater than $47,000 $3,488,400 but less than $3,588,400 equal to or greater than $53,000 $3,588,400 but less than $3,688,400 equal to or greater than $59,000 $3,688,400 but less than $3,788,400 equal to or greater than $65,000 $3,788,400 but less than $3,888,400 equal to or greater than $71,000 $3,888,400 but less than $3,988,400 equal to or greater than $77,000 $3,988,400 but less than $4,088,400 equal to or greater than $83,000 $4,088,400
FISCAL YEAR 1999 ----------------
If Operating Income is: The Amount of Bonus will be: ----------------------- --------------------------- less than $3,561,200 $ 0 equal to or greater than $35,000 $3,561,200 but less than $3,661,200 equal to or greater than $41,000 $3,661,200 but less than $3,761,200 equal to or greater than $47,000 $3,761,200 but less than $3,861,200 equal to or greater than $53,000 $3,861,200 but less than $3,961,200 equal to or greater than $59,000 $3,961,200 but less than $4,061,200 equal to or greater than $65,000 $4,061,200 but less than $4,161,200 equal to or greater than $71,000 $4,161,200 but less than $4,261,200 equal to or greater than $77,000 $4,261,200 but less than $4,361,200 equal to or greater than $83,000 $4,361,200
FISCAL YEAR 2000 ----------------
If Operating Income is: The Amount of Bonus will be: ----------------------- ---------------------------- less than $3,906,100 $ 0 equal to or greater than $35,000 $3,906,100 but less than $4,006,100 equal to or greater than $41,000 $4,006,100 but less than $4,106,100 equal to or greater than $47,000 $4,106,100 but less than $4,206,100 equal to or greater than $53,000 $4,206,100 but less than $4,306,100
equal to or greater than $59,000 $4,306,100 but less than $4,406,100 equal to or greater than $65,000 $4,406,100 but less than $4,506,100 equal to or greater than $71,000 $4,506,100 but less than $4,606,100 equal to or greater than $77,000 $4,606,100 but less than $4,706,100 equal to or greater than $83,000 $4,706,100
FISCAL YEAR 2001 ----------------
If Operating Income is: The Amount of Bonus will be: ----------------------- ---------------------------- less than $4,152,800 $ 0 equal to or greater than $35,000 $4,152,800 but less than $4,252,800 equal to or greater than $41,000 $4,252,800 but less than $4,352,800 equal to or greater than $47,000 $4,352,800 but less than $4,452,800 equal to or greater than $53,000 $4,452,800 but less than $4,552,800 equal to or greater than $59,000 $4,552,800 but less than $4,652,800 equal to or greater than $65,000 $4,652,800 but less than $4,752,800 equal to or greater than $71,000 $4,752,800 but less than $4,852,800 equal to or greater than $77,000 $4,852,800 but less than $4,952,800 equal to or greater than $83,000 $4,952,800
PACER INTERNATIONAL, INC. May 28, 1999 Robert L. Cross 2061 Casa Nuestra Diablo, CA 94528 Re: Amendment to Employment Agreement --------------------------------- Dear Robert: Reference is made to the Employment Agreement, dated March 31, 1997, (the "Employment Agreement") between Pacific Motor Transport Company and you. This letter amendment (the "Letter Amendment") sets forth our agreement with respect to certain amendments to the Employment Agreement in connection with the merger (the "Merger") contemplated by the Agreement and Plan of Merger amongst Pacer International, Inc., a Delaware corporation, Mile High Acquisition Corp., a Delaware corporation ("Sub") and the shareholders of Pacer International, Inc., dated February 22, (the "Merger Agreement") for the purposes of assuring your continued employment with Pacer International, Inc., a Tennessee corporation, (the "Company") following the Merger and in order to assure Sub of the transfer of the goodwill of the Company pursuant to the Merger and to protect the trade secrets and other confidential information of the Company. For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company hereby agrees with you as follows: 1. The effectiveness of this Letter Agreement is contingent upon the closing of the Merger. In the event the Merger is not consummated, this Letter Agreement will be of no force or effect. 2. Section 2 of the Employment Agreement is hereby deleted in its entirety and the following provision is hereby substituted therefor: Term. Unless sooner terminated in accordance with the applicable ---- provisions of this Agreement, your employment hereunder shall be for the period (including any extensions thereof, the "Employment Period") commencing on the closing date of the Merger (the "Commencement Date") and initially ending on the second anniversary of the date hereof. Subject to the applicable provisions of Section 7 of this Agreement regarding earlier termination, the Employment Period shall be extended automatically on each anniversary of the Commencement Date, beginning with the first anniversary thereof for an additional period of one year. 3. Section 9 of the Employment Agreement is hereby deleted in its entirety and the following provision is hereby substituted therefor: (a) You will not during the Employment Period and for the period of three years following date of your termination of employment with the Company or any of its subsidiaries for any reason (the "Noncompetition --------------- Period") (i) in any geographic area where the Company conducts business ------- during the Noncompetition Period, engage or participate in directly or indirectly (whether as an officer, director, employee, partner, consultant, holder of an equity or debt investment, lender or in any other manner or capacity, including, without limitation, by the rendering of services or advice to any person), or lend your name (or any part or variant thereof) to, any Competing Business (as defined in below); (ii) deal, directly or indirectly, in a competitive manner with any customers doing business with the Company during the Noncompetition Period; (iii) solicit or employ any officer, director or agent of the Company to become an officer, director, or agent of you, your respective affiliates or anyone else; or (iv) engage in or participate in, directly or indirectly, any business conducted under any name that shall be the same as or similar to the name of the Company or any trade name used by it. Ownership by you for investment of less than 2% of the outstanding shares of capital stock or class of debt securities of any corporation with one or more classes of its capital stock listed on a national securities exchange or actively traded in the over-the-counter market shall not constitute a breach of the foregoing covenant. You are entering into the foregoing covenant to assure Sub of the transfer of the goodwill of the Company, and in order to induce Sub to consummate the purchase contemplated by the Merger Agreement. (b) You will not at any time after the date hereof divulge, furnish to or make accessible to anyone any knowledge or information with respect to confidential or secret processes, inventions, discoveries, improvements, formulae, plans, material, devices or ideas or know-how, whether patentable or not, with respect to any confidential or secret aspects of the business of the Company (including, without limitation, customer lists, supplier lists and pricing arrangements with customers or suppliers); provided, -------- however, that nothing herein shall prohibit you from complying with any ------- order or decree of any court of competent jurisdiction or governmental entity or other requirements of law, but you will give the Company reasonably timely notice of the receipt of any such order or decree or legal requirement, and the foregoing provision shall not apply to (i) any information which is or becomes generally available to the public through no breach of this Agreement or (ii) is or becomes available to you on a non-confidential basis from a source who is not, to your knowledge, prohibited from disclosing the same by any legal or contractual obligation. 2 (c) As used herein, the term "Competing Business" shall mean any transportation or other business that the Company or any of its affiliates has engaged in at any time during the Employment Period in any city or county in any state of the United States, Canada or Mexico including, without limitation, any business engaged in (i) intermodal marketing, (ii) flatbed specialized hauling services, (iii) less-then-truckload common carrier services, (iv) drayage, consolidation, deconsolidation or distribution services, (v) contract warehousing, freight handling or logistic services, (vi) comprehensive transportation management programs or services to third party customers, (vii) freight consolidation and deconsolidation, (viii) traffic management, and (ix) railroad signal project management. Please acknowledge your agreement with this Letter Amendment by executing a counterpart of this Letter Agreement in the appropriate space and returning it to the Company. Very truly yours, PACER INTERNATIONAL, INC. by _____________________________ Acknowledged and Agreed to this __ day of ________ ________________________________ Robert L. Cross 3 EX-10.5 25 EMPLOYMENT AGREEMENT FOR ALLEN E. STEINER EXHIBIT 10.5 PMT HOLDINGS, INC. 3746 MT. DIABLO BOULEVARD, SUITE 110 LAFAYETTE, CALIFORNIA 94549 December __16, 1997 Mr. Allen E. Steiner 1537 Amalfi Drive Pacific Palisades, CA 90272-2754 Employment Agreement -------------------- Dear Allen: This letter sets forth the terms of your employment with PMT Holdings, Inc. ("Holdings"), Interstate Consolidation, Inc. ("ICI"), and Interstate -------- --- Consolidation Service, Inc. ("ICSI"). ICI and ICSI (together, "Interstate") are ---- wholly owned subsidiaries of Holdings. Holdings, ICI and ICSI are each herein referred to as a "Company" and collectively as the "Companies". ------- --------- Section 1. Duties. On the terms and subject to the conditions ------ contained in this Agreement, you will be employed as an Executive Vice President of each of Holdings, ICI and ICSI (and one or more of Holdings' other subsidiaries as the Board of Directors of Holdings may reasonably determine), and will have such duties and responsibilities consistent with such positions as may reasonably be assigned to you from time to time by the President, the Chairman of the Board or the Board of Directors of each Company, as applicable, regarding the following areas: general corporate administration, including some or all of the following: human resources, employment benefits, finance, management information systems, contracts and insurance (provided, however, that -------- ------- you will not be required to relocate your principal office to any location outside a 50 mile radius from your current principal office located at 5800 East Sheila Street, Los Angeles, California). Section 2. Term. Unless sooner terminated in accordance with the ---- applicable provisions of this Agreement, your employment hereunder shall be for the period (the "Employment Period") commencing on the date hereof (the ----------------- "Commencement Date") and ending on December 31, 2000. ----------------- Section 3. Time to be Devoted to Employment. During the Employment -------------------------------- Period, you will devote substantially all of your working energies, efforts, interest, abilities and time during normal business hours exclusively to the business and affairs of the Companies (except for reasonable time devoted to the procedures contemplated by Article III of the Purchase Agreement (as defined in Section 9(a) below) on your own behalf). You will not engage in any other business or activity which, in the reasonable judgment of the Board, the Chairman or the President of each Company, as applicable, would conflict or interfere, in any material respect, with the performance of your duties as set forth herein, whether or not such activity is pursued for gain, profit or other pecuniary advantage. Section 4. Base Salary; Bonus; Benefits. ---------------------------- (a) During the Employment Period, you will be entitled to a minimum annual base salary (the "Base Salary") of $220,000 payable by Interstate in such installments (but not less often than bi-weekly) as is generally the policy of the Companies with respect to the payment of regular compensation to its executive officers. The Base Salary may be increased from time to time in the sole discretion of Holdings' Board. During the Employment Period, you will also be entitled to the benefits set forth in Part I on Schedule 4(a) attached hereto, which include four weeks vacation per year and such other benefits as may from time to time be made available to other executive officers of the Companies generally, including, without limitation, (i) participation in such health, life and disability insurance programs and retirement or savings plans as the Companies may from time to time maintain in effect (provided, however, -------- ------- that, during the period ending on the first anniversary of the date hereof (or April 1, 1999, in the case of group health plans), the Companies will not amend or modify, in any manner that would have a materially adverse effect on the benefits made available thereunder, any of the employee benefit plans and programs required to be maintained by Section 7.6 of the Purchase Agreement set forth in Part II on Schedule 4(a) attached hereto that are maintained by ICI and ------- ------------- ICSI; provided further however, that you may elect to not be covered by the -------- ------- ------- Companies' benefit plans by so notifying the Companies, and the Companies shall pay you an amount equal to the benefits cost savings realized by the Company, as reasonably determined by the Companies and you in consultation with the Companies' benefits consultants), (ii) participation in such stock option plans of Holdings as may be adopted from time to time for the executive officers of the Companies on terms determined by the Board of Holdings and (iii) during the Employment Period and for a period of six years thereafter, with respect to your position as a director or officer (as the case may be), directors' and officers' liability insurance. Part III of Schedule 4(a) attached hereto sets forth the benefits made available on the date hereof to the other executive officers of Holdings and its subsidiaries generally. (b) In addition to the Base Salary and benefits set forth in paragraph (a) above, during the Employment Period you will be entitled to receive a bonus, if any, with respect to each full calendar year occurring during the Employment Period, commencing with the calendar year ending December 31, 1998, such bonus to be paid in a lump sum following the end of the calendar year with respect to which such bonus is payable (such payment to be made at the same time performance bonuses are paid to the other senior managers of Holdings and its subsidiaries). If your employment with the Companies is terminated for any reason other than without "cause" pursuant to Section 8(b), the Companies will not pay you a bonus with respect to the calendar year in which your employment is terminated or thereafter. If your employment with the Companies is terminated without "cause" pursuant to Section 6(b) below, you will be entitled to receive that portion of the bonus payable for the calendar year during which such termination occurs pro rated through the date of such termination based on the number of days elapsed through the termination date over 365 days, payable in accordance with the first sentence of this Section 4(b). The bonus payable for each such calendar year shall be subject to and determined based on the achievement by Holdings and its subsidiaries of specified performance targets applicable to the other senior managers of Holdings and its subsidiaries, such bonus to range from $35,000 upon the achievement of the minimum specified targets to $90,000 upon the achievement of the maximum specified targets. The minimum specified target for the year ending December 31, 1998, is $9.0 million in Operating Income (as defined in Schedule 4(b)) and the maximum specified target for the year ending December 31, 1998, is $9.9 million in Operating Income (as defined in Schedule 4(b)), subject in each case to the adjustment of such targets pursuant to Schedule 4(b). ------------- Section 5. Reimbursement of Expenses. During the Employment Period, ------------------------- the Companies shall reimburse you in accordance with their policies for all reasonable and necessary traveling expenses and other disbursements incurred by you for or on behalf of the Companies in connection with the performance of your duties hereunder upon presentation of appropriate receipts or other documentation therefor, in accordance with all applicable policies of the Companies. Section 6. Termination. ----------- (a) Holdings may terminate your employment hereunder at any time for "cause" by giving you written notice of such termination, with reasonable specificity of the grounds therefor. For purposes of this Section 6, "cause" shall mean any of the following (whether occurring before or after the date hereof): (i) willful misconduct with respect to the business and affairs of the Companies or any of their respective subsidiaries, (ii) willful neglect of your duties or the failure to follow the lawful and reasonable directions of the Board, the Chairman or the President of each Company, including, without limitation, the violation of any material written policy (or oral policy of which you are aware) of the Companies or any of their respective subsidiaries applicable to you, and, if such neglect or failure is capable of being cured, your failure to cure the same as soon as practicable, but in any event within 30 days of receipt of written notice thereof from Holdings, (iii) the material breach of any of the provisions of this Agreement), and, if such breach is capable of being cured, your failure to cure such breach as soon as practicable, but in any event within 30 days of receipt of written notice thereof from Holdings, (iv) the commission of a felony, (v) the commission of an act of fraud or financial dishonesty with respect to any of the Companies or their respective subsidiaries or affiliates or (vi) any conviction for a crime involving moral turpitude or fraud. A termination pursuant to this Section 6(a) shall take effect immediately upon the giving of notice contemplated hereby (subject to any applicable cure period). (b) Holdings may terminate your employment hereunder at any time without "cause" by giving you written notice of such termination, which termination shall be effective as of the date set forth in such notice, provided that such date shall not be earlier than the date of such notice (provided that you shall be afforded a reasonable period of time after such termination to remove your personal effects from the Companies' premises). Any material breach of Section 1 of this Agreement by any of the Companies that remains uncured for more than 30 days after your delivery to the Companies of written notice of such breach shall be deemed to be a termination without "cause" for purposes of this Agreement. For purposes of the immediately preceding sentence, a substantial reduction of your duties, responsibilities and status set forth in Section 1 of this Agreement shall be deemed to be a "material breach" of such Section 1. In connection with the foregoing, however, you acknowledge that the Companies intend to and may hire a Chief Financial Officer. (c) If, during the Employment Period, you are incapacitated or disabled by accident, sickness or otherwise so as to render you mentally or physically incapable of performing substantially all of the services required to be performed by you under this Agreement for an aggregate of 210 days in any period of 360 consecutive days (hereinafter, a "Disability"), the Companies may, at any time thereafter, at their option, terminate your employment under this Agreement immediately upon giving you written notice to that effect. In the event of your death, your employment will be deemed terminated as of the date of your death. Section 7. Effect of Termination. --------------------- (a) Upon the effective date of a termination of your employment under this Agreement for any reason other than a termination without cause pursuant to Section 6(b), neither you nor your beneficiaries or estate shall have any further rights under this Agreement or any claims against the Companies or any of their respective subsidiaries or affiliates arising out of this Agreement, except the right to receive the following as soon as reasonably practicable following the effective date of such termination (but in any event within the applicable time period (if any) mandated by applicable law): (i) the unpaid portion of the Base Salary payable pursuant to Section 4, computed on a pro rata basis to the effective date of --- ---- such termination; (ii) reimbursement for any expenses for which you shall not have theretofore been reimbursed, as provided in Section 5; and (iii) the unpaid portion of any amounts earned by you prior to the effective date of such termination pursuant to any benefit program in which you participated during the Employment Period; provided, however, that -------- ------- you shall not be entitled to receive any benefits under any benefit program that have accrued during any period if the terms of such program require that the beneficiary be employed by a Company as of the end of such period. (b) Upon termination of your employment under this Agreement pursuant to Section 6(b), neither you nor your beneficiaries or estate shall have any further rights under this Agreement or any claims against the Companies or any of their respective subsidiaries or affiliates arising out of this Agreement, except the right to receive the following as soon as reasonably practicable following the effective date of such termination (but in any event within the applicable time period (if any) mandated by applicable law in the case of amounts due pursuant to clause (i) below, and at such other times as provided in clauses (ii) and (iii) below in the case of amounts due thereunder): (i) the payments, if any, referred to in Section 7(a) above, to the extent not covered by clause (ii) of this Section 7(b); (ii) the right to continue to receive the Base Salary from the effective date of such termination until December 31, 2000, payable during such period in such manner as the Base Salary is payable pursuant to Section 4(a), reduced by 50% of any amounts you (or your beneficiaries or estate) receive or are entitled to receive as salary or other cash compensation from your subsequent employment or for services rendered by you for one or more other parties (other than such services that are rendered by you in the aggregate for less than 20 hours per calendar week and less than 260 hours per calendar quarter) during such period (other than such compensation earned by you from a business controlled by you), up to a maximum of 50% of all amounts due to you under this Section 7(b)(ii) (in order to carry out the intent of the immediately preceding sentence, you agree, for yourself and your beneficiaries or estate, to provide the Companies with such information as the Companies may reasonably request regarding your receipt of salary and other cash compensation from subsequent employment or for services rendered or to be rendered during or with respect to such period); and (iii) the right to receive any bonus payable in accordance with Section 4(b) with respect to the fiscal year in which such termination occurs. Notwithstanding anything contained in this Agreement to the contrary, your beneficiaries or estate will be entitled to continue to receive all payments specified in this Section 7(b) if you die after the date of a termination without "cause." Section 8. Disclosure of Information. ------------------------- (a) From and after the date hereof, you shall not at any time use or disclose to any person or entity (other than any officer, director, employee, affiliate or representative of the Companies), except as required in connection with the performance of your duties under and in compliance with this Agreement and as required by law and judicial process, any Confidential Information (as hereinafter defined) heretofore acquired or acquired during the Employment Period for any reason or purpose whatsoever, nor shall you make use of any of the Confidential Information for your own purposes or for the benefit of any person or entity except the Companies or their respective subsidiaries. (b) For purposes of this Agreement, "Confidential Information" shall mean (i) the Intellectual Property Rights (as hereinafter defined) of the Companies and their respective subsidiaries and affiliates and (ii) all other information of a proprietary or confidential nature relating to the Companies or their respective subsidiaries and affiliates, or the business or assets of the Companies or their respective subsidiaries and affiliates, including, without limitation, books, records, agent and independent contractor lists and related information, customer lists and related information, vendor lists and related information, supplier lists and related information, distribution channels, pricing information, cost information, marketing plans, strategies, forecasts, financial statements, budgets and projections, other than, with respect to both clauses (i) and (ii), (x) information which is generally available to the public on the date hereof, or which becomes generally available to the public after the date hereof without action by you, or (y) information which you receive from a third party who does not have any independent obligation to any of the Companies or their respective subsidiaries or affiliates to keep such information confidential. (c) As used herein, the term "Intellectual Property Rights" means all industrial and intellectual property rights, including, without limitation, patents, patent applications, patent rights, trademarks, trademark applications, trade names, service marks, service mark applications, copyrights, copyright applications, know-how, certificates of public convenience and necessity, franchises, licenses, trade secrets, proprietary processes and formulae, inventions, development tools, marketing materials, instructions, confidential information, trade dress, logos and designs and all documentation and media constituting, describing or relating to the foregoing, including, without limitation, manuals, memoranda and records. Section 9. Noncompetition Covenant. ----------------------- (a) You acknowledge and recognize that during the Employment Period you will be privy to Confidential Information. You further acknowledge and recognize that the relationships with vendors, agents and customers of the Companies and their respective subsidiaries that you have developed prior to the date hereof and those that you will maintain or develop during the Employment Period with the use and assistance of the Companies and their respective subsidiaries, and their respective properties and assets, are of special and unique value to the Companies and their affiliates and that the Companies would find it extremely difficult to replace you. In addition, you acknowledge and agree that this Agreement is being executed and delivered in connection with, and as a mutual condition to the respective obligations of the parties at the closing on the date hereof under, the Stock Purchase Agreement dated as of the date hereof (the "Purchase Agreement") between each of the Companies, you and the other seller thereunder; provided, however, that the Companies agree that a -------- ------- breach by you of this Section 9 shall in no event constitute a breach under the Purchase Agreement (it being acknowledged by you, however, that this proviso shall in no way limit or affect the separate and independent provisions of Section 7.4 of the Purchase Agreement). As a material inducement to Holdings to enter into and perform its obligations under the Purchase Agreement, and in consideration of the payments and other benefits (including the further experience and expertise to be gained during your employment hereunder) to be received by you under the Purchase Agreement and this Agreement (including, without limitation, the severance compensation described in Section 7(b)(ii), if applicable), you shall not, without the prior written consent of the Companies, at any time during the Employment Period and the period beginning on the effective date of any termination of your employment with the Companies and their respective subsidiaries or affiliates and ending on the later of (i) the second anniversary thereof and (ii) the fifth anniversary of the Commencement Date, (a) directly or indirectly engage in, represent in any way, or be connected with, any Competing Business (as defined below), whether such engagement shall be as an officer, director, owner, employee, partner, affiliate or other participant in any Competing Business, (b) assist others in engaging in any Competing Business in any manner described in clause (a) above, (c) induce other employees of the Companies or any of their respective subsidiaries or affiliates to terminate their employment with any of the Companies or any of their respective subsidiaries or affiliates or to engage in any Competing Business or in any manner described in clause (a) above or (d) induce any customer, vendor or agent or any other person or entity with which any of the Companies or their respective subsidiaries or affiliates has a business relationship to terminate or alter such business relationship. This covenant is considered an integral part of this Agreement. The foregoing restriction shall not apply to your ownership of publicly traded securities which represent not more than 5% of the ownership interests of the issuer. (b) You understand that the foregoing restrictions may limit your ability to earn a livelihood in a business similar to the business of any of the Companies or any subsidiary or affiliate thereof, but you nevertheless believe that you have received and will receive sufficient consideration and other benefits under the Purchase Agreement and as an employee of the Companies and under the terms of this Agreement to justify clearly such restrictions which, in any event (given your education, skills and ability), you do not believe would prevent you from earning a living. (c) As used herein, the term "Competing Business" shall mean ------------------ any business engaged in providing any of the following transportation services to third party customers: (i) intermodal marketing or transportation services in any city or county in any state or province located in the continental United States, Canada or Mexico; (ii) less-then-truckload common carrier services in any city or county in any state or province located in the continental United States, Canada or Mexico; (iii) intra-state trucking of truckload or less-than- truckload freight in any city or county located in the state of California; (iv) drayage, consolidation, deconsolidation or distribution services in any city or county in any state or province located in the continental United States, Canada or Mexico where any of the Companies conducts business or provides any drayage, consolidation, deconsolidation or distribution services at the time of, or where there are fixed plans any of the Companies to conduct business or provide any drayage, consolidation, deconsolidation or distribution services at any time within 12 months after, the termination of your employment with the Companies; or (v) contract warehousing, freight handling or logistics services in any city or county in any state or province located in the continental United States, Canada or Mexico where any of the Companies conducts business or provides such services at the time of, or where there are fixed plans for any of the Companies to conduct business or provide such services at any time within 12 months after, the termination of your employment with the Companies. Anything contained in the immediately preceding sentence to the contrary notwithstanding, A. any entity which has separate divisions or business units, one or more of which are engaged in a business described in the immediately preceding sentence, will not be deemed to be a Competing Business with respect to those separate divisions or business units of such entity that are not engaged in a business described in the immediately preceding sentence so long as your association with any such separate division or business unit (fully taking into account your functions and the nature of your work at such division or business unit) does not (1) involve existing customers of any of the Companies at the time of the termination of your employment with the Companies or former customers of any of the Companies at any time during the 12 months preceding such termination or (2) relate in any material respect to such portion of such business which would be a Competing Business hereunder; B. the provision of consulting services to a direct shipper who is not a customer of any of the Companies at the time of the termination of your employment with the Companies, or a former customer of any of the Companies at any time during the 12 months preceding such termination, shall not be deemed to be "engaging in a Competing Business" for purposes of this SECTION 9; and --------- C. the provision of any drayage, consolidation, deconsolidation, distribution, contract warehousing, freight handling or logistics services in any location described in clause (iv) or (v) of the immediately preceding sentence shall only be deemed to be a "Competing Business" if (1) you had direct managerial authority at any Company (or any of its separate divisions or business units), or otherwise had ongoing contact with the customers of such Company (or division or business unit), that was engaged in providing any drayage, consolidation, deconsolidation, distribution, contract warehousing, freight handling or logistics services at the time of (or at any time within the 12 months prior to) the termination of your employment with the Companies or where such Company (or such division or business unit) had fixed plans at the time of such termination to provide any drayage, consolidation, deconsolidation, distribution, contract warehousing, freight handling or logistics services at any time within 12 months after such termination, or (2) any drayage, consolidation, deconsolidation, distribution, contract warehousing, freight handling or logistics services are being provided to any Person who was a customer of the Company at the time of the termination of your employment with the Companies or at any time during the 12 months prior to such termination. Section 10. As used herein, the term "Competing Business" shall mean ------------------ any business engaged in providing any of the following transportation services to third party customers: (i) intermodal marketing or transportation services in any city or county in any state or province located in the continental United States, Canada or Mexico; (ii) less-than-truckload common carrier services in any city or county in any state or province located in the continental United States, Canada or Mexico; (iii) intra-state trucking of truckload or less-than- truckload freight in any city or county located in the state of California; (iv) drayage, consolidation, deconsolidation or distribution services in any city or county in any state or province located in the continental United States, Canada or Mexico where the Business is conducted or provides such services, or where there are fixed plans for the Business to be conducted or to provide such services within 12 months of the time in question; or (v) contract warehousing, freight handling or logistics services in any city or county in any state or province located in the continental United States, Canada or Mexico where the Business is conducted or provides such services, or where there are fixed plans for the Business to be conducted or to provide such services within 12 months of the time in question; provided, however, that (A) any entity which has separate -------- ------- divisions or business units, one or more of which are engaged in a business described above in this sentence, will not be deemed a Competing Business with respect to those portions of such entity which are not engaged in a business described above in this sentence so long as a Seller's association with any such separate division or business unit (fully taking into account his functions and the nature of his work at such division or business unit) does not hereunder; and (B) providing consulting services to direct shippers who are not customers of the Companies at the time in question shall not be deemed to be "engaging in a Competing Business" for purposes of this Section. For purposes of the foregoing clauses (iv) and(v), the services described therein shall only be deemed to be a "Competing Business" if you had direct managerial authority at the Company or its division that was providing such services to customers at the time in question or which provided such services to persons who were customers of the Company or such division at any time in the preceding twelve months, or if you otherwise had ongoing contact with such customers or other persons. Inventions Assignment. During the Employment Period, you shall promptly - --------------------- disclose, grant and assign to the Companies for their sole use and benefit any and all inventions, improvements, technical information and suggestions reasonably relating to the business of the Companies or any of their respective subsidiaries or affiliates (collectively, the "Inventions") which you may develop or acquire during the Employment Period (whether or not during usual working hours), together with all patent applications, letters patent, copyrights and reissues thereof that may at any time be granted for or with respect to the Inventions. In connection therewith (a) you shall, at the expense of the Companies (including a reasonable payment (based on your last per diem earnings) for the time involved if you are not then in the employ of any of the Companies or receiving severance payments from the Companies pursuant to Section 7(b)(ii)), promptly execute and deliver such applications, assignments, descriptions and other instruments as may be necessary or proper in the opinion of the Companies to vest title to the Inventions and any patent applications, patents, copyrights, reissues or other proprietary rights related thereto in the Companies and to enable them to obtain and maintain the entire right and title thereto throughout the world; and (b) you shall render to the Companies, at their expense (including a reasonable payment (based on your last per diem earnings) for the time involved if you are not then in the employ of any of the Companies or receiving severance payments from the Companies pursuant to Section 7(b)(ii)), such reasonable assistance as they may require in the prosecution of applications for said patents, copyrights, reissues or other proprietary rights, in the prosecution or defense of interferences which may be declared involving any said applications, patents, copyrights or other proprietary rights and in any litigation in which any of the Companies may be involved relating to the Inventions. Section 11. Assistance in Litigation. ------------------------ (a) At all times during the Employment Period, and thereafter upon reasonable notice from the Board or the Chairman of Holdings you shall furnish such information and assistance to the Companies as any of them may reasonably require in connection with the actions entitled Irwin Albillo et. al. -------------------- v. Intermodal Container Service, Inc. et. al. (Case No. B0174508), and Paul - -------------------------------------------- ---- Cardoza, et al., vs. Air Rail Truck Service-Air Cargo, et al. (Case No. BC 153 - ------------------------------------------------------------------------------ 522), any other related case contemplated by the Cardoza Court's Ruling on - -------------------------------------------------------------------------- Submitted Matter entered on October 31, 1997, or any other action, federal or - -------------------------------------------- state, arising from the facts alleged in the Albillo case referred to above, as any such action may beamended, modified, restated or refiled, whether by the plaintiffs Albillo, Cardoza or one or more other independent contractor drivers against one or more of the Companies and the Subsidiary asserting claims based on the facts alleged in the Albillo action or the Cardoza action cited above. ------- ------- Such information and assistance shall include, but not be limited to, appearing from time to time at the offices of the Companies or Companies' counsel for conferences and interviews and in general providing the officers of the Companies, the Companies and Companies' counsel with the full benefit of your knowledge with respect to such actions. The Companies shall pay or reimburse you for all reasonable out-of-pocket expense incurred by you in connection with your furnishing such information and assistance upon presentation of appropriate receipts or other documentation therefor. (b) At all times during the Employment Period, and thereafter upon reasonable notice from the Board or the Chairman and at the expense of the Companies (including a reasonable payment (based on your last per diem earnings) for the time involved if you are not then in the employ of any of the Companies or collecting payments pursuant to Section 7(b)), you shall furnish such information and assistance to the Companies as any of them may reasonably require in connection with any issue, claim or litigation in which any of the Companies may be involved (excluding the matters covered by Section 11(a) above). Such information and assistance shall include, but not be limited to, appearing from time to time at the offices of the Companies or Companies' counsel for conferences and interviews and in general providing the officers of the Companies, the Companies and Companies' counsel with the full benefit of your knowledge with respect to such issue, claim or litigation. Section 12. Entire Agreement; Amendment and Waiver. This Agreement -------------------------------------- embodies the entire agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes and preempts any and all prior and contemporaneous understandings, agreements, arrangements or representations by or among the parties, written or oral, which may relate to the subject matter hereof in any way. Other than this Agreement, there are no other agreements continuing in effect relating to the subject matter hereof (except that the parties acknowledge the existence of the separate and independent provisions contained in Section 7.4 of the Purchase Agreement). No waiver, amendment or modification of any provision of this Agreement shall be effective unless in writing and signed by each party hereto. The waiver by either party of a breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach by such other party. Section 13. Notices. All notices or other communications pursuant to ------- this Agreement shall be in writing and shall be deemed to be sufficient if delivered personally, telecopied, sent by nationally-recognized, overnight courier or mailed by registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) if to any Company, to: PMT Holdings, Inc. 3746 Mt. Diablo Boulevard, Suite 100 Lafayette, CA 94549 Attention: Chairman of the Board Telecopier: (510) 299- Telephone: (510) 283-1938 with a copy to: Eos Partners, L.P. 320 Park Avenue 22nd Floor New York, NY 10022 Attention: Douglas R. Korn Telecopier: (212) 832-5815 Telephone: (212) 832-5803 (b) if to you, to: Mr. Allen E. Steiner 1537 Amalfi Drive Pacific Palisades, CA 90272-2754 Telephone: (310) 459-3926 Telecopier: (310) 459-8124 with copies to: Manatt, Phelps & Phillips, LLP 11355 W. Olympic Blvd. Los Angeles, CA 90064 Attention: Ronald S. Barak Telecopier: (310) 312-4224 Telephone: (310) 312-4000 Mr. Gary I. Goldfein 229 N. Clifford Avenue Los Angeles, CA 90049 Telephone: (310) 471-2974 Telecopier: (310) 471-7438 Section 14. Headings. The section headings in this Agreement are for -------- convenience only and shall not control or affect the meaning of any provision of this Agreement. Section 15. Severability. In the event that any provision of this ------------ Agreement is determined to be partially or wholly invalid, illegal or unenforceable in any jurisdiction, then such provision shall, as to such jurisdiction, be modified or restricted to the extent necessary to make such provision valid, binding and enforceable, or if such provision cannot be modified or restricted, then such provision shall, as to such jurisdiction, be deemed to be excised from this Agreement; provided, however, that the binding -------- ------ effect and enforceability of the remaining provisions of this Agreement, to the extent the economic benefits conferred upon the parties by virtue of this Agreement remain substantially unimpaired, shall not be affected or impaired in any manner, and any such invalidity, illegality or unenforceability with respect to such provisions shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 16. Remedies. You acknowledge and understand that the -------- provisions of this Agreement are of a special and unique nature, the loss of which cannot be adequately compensated for in damages by an action at law, and thus, the breach or threatened breach of the provisions of this Agreement would cause the Companies irreparable harm. You further acknowledge that in the event of a breach of any of the covenants contained in paragraphs 8, 9, or 10, the Companies shall be entitled to immediate relief enjoining such violations in any court or before any judicial body having jurisdiction over such a claim. All remedies hereunder are cumulative, are in addition to any other remedies provided for by law and may, to the extent permitted by law, be exercised concurrently or separately, and the exercise of any one remedy shall not be deemed to be an election of such remedy or to preclude the exercise of any other remedy. Section 17. Representation. -------------- (a) You hereby represent and warrant to Holdings that (i) the execution, delivery and performance of this Agreement by you and ICI and ICSI does not breach, violate or cause a default under any agreement, contract or instrument to which any of you, ICI or ICSI is a party or any judgment, order or decree to which any of you, ICI OR ICSI is subject, and (ii) none of you, ICI or ICSI is a party to or bound by any employment agreement, consulting agreement, noncompete agreement, confidentiality agreement or similar agreement regarding your employment or retention with or by any other person or entity. (b) Holdings hereby represents and warrants to you that the execution, delivery and performance of this Agreement by Holdings does not breach, violate or cause a default under any agreement, contract or instrument to which Holdings is a party or any judgment, order or decree to which Holdings is subject. Section 18. Benefits of Agreement; Assignment. The terms and --------------------------------- provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns, representatives, heirs and estate, as applicable. Anything contained herein to the contrary notwithstanding, this Agreement shall not be assignable by any party hereto without the consent of the other parties hereto. Section 19. Counterparts. This Agreement may be executed in any ------------ number of counterparts, and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. Section 20. Governing Law. This Agreement shall be governed by and ------------- construed in accordance with the domestic laws of the State of California without giving effect to any choice or conflict of law provision or rule (whether of the State of California or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of California. Section 21. Mutual Waiver of Jury Trial. BECAUSE DISPUTES ARISING IN --------------------------- CONNECTION WITH COMPLEX TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS RELATED HERETO. If the above terms are satisfactory to you, please acknowledge our agreement by signing the enclosed copy of this letter in the space provided below and returning it to the undersigned. Very truly yours, PMT HOLDINGS, INC. By:_____________________ Name: Title: INTERSTATE CONSOLIDATION, INC. By:_____________________ Name: Title: INTERSTATE CONSOLIDATION SERVICE, INC. By:_____________________ Name: Title: Accepted and agreed to: ________________________ Allen E. Steiner SCHEDULE 4(A) PART I ------ . One German Luxury Company Car each including gasoline, repairs, maintenance, insurance, taxes, etc. (to be replaced not less often than once every three years after the date of acquisition of such vehicle) . Country Club Dues (approx. $475/mo.) . WPO\YPO Dues (approx. $5,000/yr.) . YPO Seminars . Membership in Trade and Business Organizations and airline and automobile club memberships . Misc. Business Tools including computer links, cell phones, car phones, etc. . Health Insurance . Disability Pay as per standard for employees with 25 years service . Sick Leave as per standard for employees with 25 years service . Vacation time as per standard for employees with 25 years Service PART II ------- The following are the employee benefits for senior executive officers of Holdings as of the date hereof: Group Health Insurance Connecticut General Life Insurance Company - Policy 2233560-01 Coverage: standard group plan Group Term Life Insurance Fortis Benefits Insurance Company - Policy 4009662 Coverage: $350,000 Additional Term Life Insurance CNA/Valley Forge Life Insurance Coverage: $700,000 Accidental Death and Dismemberment Fortis Benefits Insurance Company - Policy 4009662 Coverage: standard group plan Short Term Disability Fortis Benefits Insurance Company - Policy 4009662 Coverage: standard group plan Long Term Disability Fortis Benefits Insurance Company - Policy 4009662 Coverage: standard group plan Massachusetts Casualty Insurance Company Gerry Angeli - $6,200 per month Robert Cross - $4,750 per month Group Dental Insurance Fortis Benefits Insurance Company - Policy 4009662 Coverage: standard group plan Pacific Motor Transport 401(k) Plan Merrill Lynch Company matching contribution: 3% of first 100% if participant's contribution Company Automobiles Gerry Angeli - Buick Park Avenue Bob Cross - Buick Park Avenue Don Orris - Car Allowance of $1,076 per month SCHEDULE 4(B) OPERATING INCOME ---------------- For purposes of Section 4(b) of this Agreement, "Operating Income" ---------------- means, for any calendar year, the earnings before interest expense and interest income, income taxes and amortization of goodwill and acquisition and financing fees of Holdings and its subsidiaries, determined on a consolidated basis and in accordance with generally accepted accounting principles consistently applied for the calendar year in question, as set forth on the audited consolidated statement of income of Holdings and its subsidiaries for the fiscal year in question; provided, however, that Operating Income shall (x) exclude management -------- ------- fees, transaction expenses, non-operating gains and losses as determined by the Board of Directors of Holdings and such other non-cash items as shall be determined by the Board of Directors of Holdings (provided that, with regard to recognition of income due to customer credit balances and the reversal of prior period accounts payable, such recognition will be made on a basis consistent with past practice as to amount and timing of such recognition) and (y) be determined after giving effect to any and all bonuses payable by Holdings and/or any of its subsidiaries to management or employees of Holdings and/or any of its subsidiaries hereunder or otherwise. In the event that Holdings and/or any of its subsidiaries consummate any mergers or acquisitions (whether of assets, stock or other interests) or other extraordinary transactions, the Board of Directors of Holdings shall in good faith make such adjustments to the targets set forth in Section 4(b) for Operating Income (as defined above) to take into account the effects of any such acquisition or other extraordinary transaction. PACER INTERNATIONAL, INC. May 28, 1999 Allen E. Steiner 1537 Amalfi Dr. Pacific Palisades, CA 90272-2754 Re: Amendment to Employment Agreement --------------------------------- Dear Allen: Reference is made to the Employment Agreement, dated December 16, 1997, (the "Employment Agreement") between Pacific Motor Transport Company and you. This letter amendment (the "Letter Amendment") sets forth our agreement with respect to certain amendments to the Employment Agreement in connection with the merger (the "Merger") contemplated by the Agreement and Plan of Merger amongst Pacer International, Inc., a Delaware corporation, Mile High Acquisition Corp., a Delaware corporation ("Sub") and the shareholders of Pacer International, Inc., dated February 22, (the "Merger Agreement") for the purposes of assuring your continued employment with Pacer International, Inc., a Tennessee corporation, (the "Company") following the Merger and in order to assure Sub of the transfer of the goodwill of the Company pursuant to the Merger and to protect the trade secrets and other confidential information of the Company. For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company hereby agrees with you as follows: 1. The effectiveness of this Letter Agreement is contingent upon the closing of the Merger. In the event the Merger is not consummated, this Letter Agreement will be of no force or effect. 2. Section 2 of the Employment Agreement is hereby deleted in its entirety and the following provision is hereby substituted therefor: Term. Unless sooner terminated in accordance with the applicable ---- provisions of this Agreement, your employment hereunder shall be for the period (including any extensions thereof, the "Employment Period") commencing on the closing date of the Merger (the "Commencement Date") and initially ending on the second anniversary of the date hereof. Subject to the applicable provisions of Section 6 of this Agreement regarding earlier termination, the Employment Period shall be extended automatically on each anniversary of the Commencement Date, beginning with the first anniversary thereof for an additional period of one year. 3. Section 9 of the Employment Agreement is hereby deleted in its entirety and the following provision is hereby substituted therefor: (a) You will not during the Employment Period and for the period of two years following date of your termination of employment with the Company or any of its subsidiaries for any reason (the "Noncompetition Period") (i) ----------------------- in any geographic area where the Company conducts business during the Noncompetition Period, engage or participate in directly or indirectly (whether as an officer, director, employee, partner, consultant, holder of an equity or debt investment, lender or in any other manner or capacity, including, without limitation, by the rendering of services or advice to any person), or lend your name (or any part or variant thereof) to, any Competing Business (as defined in below); (ii) deal, directly or indirectly, in a competitive manner with any customers doing business with the Company during the Noncompetition Period; (iii) solicit or employ any officer, director or agent of the Company to become an officer, director, or agent of you, your respective affiliates or anyone else; or (iv) engage in or participate in, directly or indirectly, any business conducted under any name that shall be the same as or similar to the name of the Company or any trade name used by it. Ownership by you for investment of less than 2% of the outstanding shares of capital stock or class of debt securities of any corporation with one or more classes of its capital stock listed on a national securities exchange or actively traded in the over-the-counter market shall not constitute a breach of the foregoing covenant. You are entering into the foregoing covenant to assure Sub of the transfer of the goodwill of the Company, and in order to induce Sub to consummate the purchase contemplated by the Merger Agreement. (b) You will not at any time after the date hereof divulge, furnish to or make accessible to anyone any knowledge or information with respect to confidential or secret processes, inventions, discoveries, improvements, formulae, plans, material, devices or ideas or know-how, whether patentable or not, with respect to any confidential or secret aspects of the business of the Company (including, without limitation, customer lists, supplier lists and pricing arrangements with customers or suppliers); provided, -------- however, that nothing herein shall prohibit you from complying with any ------- order or decree of any court of competent jurisdiction or governmental entity or other requirements of law, but you will give the Company reasonably timely notice of the receipt of any such order or decree or legal requirement, and the foregoing provision shall not apply to (i) any information which is or becomes generally available to the public through no breach of this Agreement or (ii) is or becomes available to you on a non-confidential basis from a source who is not, to your knowledge, prohibited from disclosing the same by any legal or contractual obligation. (c) As used herein, the term "Competing Business" shall mean any transportation or other business that the Company or any of its affiliates has engaged in at any time during the Employment Period in any city or county in any state of the United States, Canada or Mexico including, without limitation, any business engaged in (i) intermodal marketing, (ii) flatbed specialized hauling services, (iii) less-then-truckload common carrier services, (iv) drayage, consolidation, deconsolidation or distribution services, (v) contract warehousing, freight handling or logistic services, (vi) comprehensive transportation management programs or services to third party customers, (vii) freight consolidation and deconsolidation, (viii) traffic management, and (ix) railroad signal project management. 4. Notwithstanding anything in this Letter Agreement to the contrary, nothing herein shall affect the validity of any restrictive covenant you are bound to pursuant to the Stock Purchase Agreement among you, Gary I. Goldfein, PMT Holdings, Inc., Interstate Consolidation, Inc., and Interstate Consolidation Service, Inc., dated as of December 16, 1997. Please acknowledge your agreement with this Letter Amendment by executing a counterpart of this Letter Agreement in the appropriate space and returning it to the Company. Very truly yours, PACER INTERNATIONAL, INC. by _____________________________ Acknowledged and Agreed to this __ day of ________ ________________________________ Allen E. Steiner EX-12.1 26 STATEMENT OF COMPUTATION OF RATIO Pacer International, Inc. Exhibit 12.1 Ratio of Earnings to Fixed Charges
Pro Forma Pro Forma Pro Forma For the For the for the For the For the Fiscal Three twelve Fiscal Period Year Months months Year Dec. 28, Ended Ended ended Ended 1996 to Dec. 25, Apr. 2, Apr. 2, Dec. 27, Nov. 12, 1998 1999 1999 1996 1996 ----------- ------------ ------------ ------------------------- Earnings: Income before taxes and minority $25.9 $ 6.5 $28.3 $61.5 $36.8 interest charge Less: Minority interest charge (1.8) (0.5) (1.8) - - Plus: Interest 30.1 7.5 30.1 - 2.0 Estimated interest on rent 18.3 4.9 18.5 11.7 12.4 ---------------------------------------------------------------------- 72.5 18.4 75.1 73.2 51.2 Fixed Charges: Interest 30.1 7.5 30.1 - 2.0 Estimated interest portion of rent expense 18.3 4.9 18.5 11.7 12.4 -------- -------- -------- ---------- ---------- 48.4 12.4 48.6 11.7 14.4 Ratio of Earnings to Fixed Charges 1.5x 1.5x 1.5x 6.2x 3.6x ======================================================================= For the For the For the For the Period Fiscal Three Three Nov. 13, Year Months Months 1996 to Ended Ended 1998 Ended Dec. 26, Dec. 25, Apr. 3, Apr. 2 1997 1998 1998 1999 --------------------------------------------------------------- Earnings: Income before taxes and minority $1.7 $33.2 $ 5.5 $ 7.6 interest charge Less: Minority interest charge - - - - Plus: Interest 0.3 - - - Estimated interest on rent 1.8 16.6 4.4 4.4 --------------------------------------------------------------- 3.8 49.8 9.9 12.0 Fixed Charges: Interest 0.3 - - - Estimated interest portion of rent expense 1.8 16.6 4.4 4.4 ----------------- ---------- ----------- ---------- 2.1 16.6 4.4. 4.4 Ratio of Earnings to Fixed Charges 1.8x 3.0x 2.3x 2.7x ===============================================================
Note: The estimated interest portion of rent expense is assumed to be one-third of rent expense. EX-16.1 27 LETTER RE CHANGE IN CERTIFYING ACCOUNTANT Exhibit 16.1 August 11, 1999 Office of the Chief Accountant Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Dear Sir/Madam: We have read the disclosure relating to item 304 of Regulation S-K included in the Form S-4 dated August 12, 1999 of Pacer International, Inc. to be filed with the Securities and Exchange Commission and are in agreement with the statements contained therein. Very truly yours, Arthur Andersen LLP By: /s/ Roger L. Chelemedos ----------------------- Roger L. Chelemedos EX-21.1 28 LIST OF SUBSIDIARIES OF PACER INTERNATIONAL, INC. Exhibit 21.1 List of the Subsidiaries of Pacer International, Inc. . Pacer Logistics, Inc. . Cross Con Transport, Inc. . Cross Con Terminals, Inc. . Pacer International Rail Services LLC . Pacer International Consulting LLC . Pacer Rail Services LLC . Pacer Motor Transport Company . Pacer Express, Inc. . Pacer Integrated Logistics, Inc. . PLM Acquisition Corporation . Manufacturers Consolidation Service, Inc. . Levcon, Inc. . Manufacturers Consolidation Service of Canada, Inc. . Interstate Consolidation Service, Inc. . Interstate Consolidation Inc. . Intermodal Container Service, Inc. . Keystone Terminals Acquisition Corp. EX-23.2 29 CONSENT OF ARTHUR ANDERSON LLP Exhibit 23.2 [ARTHUR ANDERSEN LLP] Consent of Independent Public Accountants As independent public accountants, we hereby consent to the use of our reports (and to all references to our firm) included in or made a part of this registration statement. /s/ Arthur Andersen LLP San Francisco, California, Date: August 11, 1999 EX-25.1 30 FORM T-1 STATEMENT OF ELIGIBILITY OF TRUSTEE EXHIBIT 25.1 Registration No. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2)_____ WILMINGTON TRUST COMPANY (Exact name of trustee as specified in its charter) Delaware 51-0055023 (State of incorporation) (I.R.S. employer identification no.) Rodney Square North 1100 North Market Street Wilmington, Delaware 19890 (Address of principal executive offices) Cynthia L. Corliss Vice President and Trust Counsel Wilmington Trust Company Rodney Square North Wilmington, Delaware 19890 (302) 651-8516 (Name, address and telephone number of agent for service) PACER INTERNATIONAL, INC. (Exact name of obligor as specified in its charter) Delaware 62-0935669 (State of incorporation) (I.R.S. employer identification no.) 1340 Treat Boulevard, Suite 200 Walnut Creek, California 94596 (Address of principal executive offices) (Zip Code) 11-3/4% Series B Senior Subordinated Notes due 2007 (Title of the indenture securities) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ITEM 1. GENERAL INFORMATION. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Federal Deposit Insurance Co. State Bank Commissioner Five Penn Center Dover, Delaware Suite #2901 Philadelphia, PA (b) Whether it is authorized to exercise corporate trust powers. The trustee is authorized to exercise corporate trust powers. ITEM 2. AFFILIATIONS WITH THE OBLIGOR. If the obligor is an affiliate of the trustee, describe each affiliation: Based upon an examination of the books and records of the trustee and upon information furnished by the obligor, the obligor is not an affiliate of the trustee. ITEM 3. LIST OF EXHIBITS. List below all exhibits filed as part of this Statement of Eligibility and Qualification. A. Copy of the Charter of Wilmington Trust Company, which includes the certificate of authority of Wilmington Trust Company to commence business and the authorization of Wilmington Trust Company to exercise corporate trust powers. B. Copy of By-Laws of Wilmington Trust Company. C. Consent of Wilmington Trust Company required by Section 321(b) of Trust Indenture Act. D. Copy of most recent Report of Condition of Wilmington Trust Company. Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, Wilmington Trust Company, a corporation organized and existing under the laws of Delaware, has duly caused this Statement of Eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Wilmington and State of Delaware on the 28th day of July, 1999. WILMINGTON TRUST COMPANY [SEAL] Attest: /s/ Patricia A. Evans By: /s/ James P. Lawler ----------------------------- -------------------------- Assistant Secretary Name: James P. Lawler Title: Vice President 2 EXHIBIT A AMENDED CHARTER Wilmington Trust Company Wilmington, Delaware As existing on May 9, 1987 Amended Charter or Act of Incorporation of Wilmington Trust Company Wilmington Trust Company, originally incorporated by an Act of the General Assembly of the State of Delaware, entitled "An Act to Incorporate the Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name of which company was changed to "Wilmington Trust Company" by an amendment filed in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter or Act of Incorporation of which company has been from time to time amended and changed by merger agreements pursuant to the corporation law for state banks and trust companies of the State of Delaware, does hereby alter and amend its Charter or Act of Incorporation so that the same as so altered and amended shall in its entirety read as follows: First: - The name of this corporation is Wilmington Trust Company. Second: - The location of its principal office in the State of Delaware is at Rodney Square North, in the City of Wilmington, County of New Castle; the name of its resident agent is Wilmington Trust Company whose address is Rodney Square North, in said City. In addition to such principal office, the said corporation maintains and operates branch offices in the City of Newark, New Castle County, Delaware, the Town of Newport, New Castle County, Delaware, at Claymont, New Castle County, Delaware, at Greenville, New Castle County Delaware, and at Milford Cross Roads, New Castle County, Delaware, and shall be empowered to open, maintain and operate branch offices at Ninth and Shipley Streets, 418 Delaware Avenue, 2120 Market Street, and 3605 Market Street, all in the City of Wilmington, New Castle County, Delaware, and such other branch offices or places of business as may be authorized from time to time by the agency or agencies of the government of the State of Delaware empowered to confer such authority. Third: - (a) The nature of the business and the objects and purposes proposed to be transacted, promoted or carried on by this Corporation are to do any or all of the things herein mentioned as fully and to the same extent as natural persons might or could do and in any part of the world, viz.: (1) To sue and be sued, complain and defend in any Court of law or equity and to make and use a common seal, and alter the seal at pleasure, to hold, purchase, convey, mortgage or otherwise deal in real and personal estate and property, and to appoint such officers and agents as the business of the Corporation shall require, to make by-laws not inconsistent with the Constitution or laws of the United States or of this State, to discount bills, notes or other evidences of debt, to receive deposits of money, or securities for money, to buy gold and silver bullion and foreign coins, to buy and sell bills of exchange, and generally to use, exercise and enjoy all the powers, rights, privileges and franchises incident to a corporation which are proper or necessary for the transaction of the business of the Corporation hereby created. (2) To insure titles to real and personal property, or any estate or interests therein, and to guarantee the holder of such property, real or personal, against any claim or claims, adverse to his interest therein, and to prepare and give certificates of title for any lands or premises in the State of Delaware, or elsewhere. (3) To act as factor, agent, broker or attorney in the receipt, collection, custody, investment and management of funds, and the purchase, sale, management and disposal of property of all descriptions, and to prepare and execute all papers which may be necessary or proper in such business. (4) To prepare and draw agreements, contracts, deeds, leases, conveyances, mortgages, bonds and legal papers of every description, and to carry on the business of conveyancing in all its branches. (5) To receive upon deposit for safekeeping money, jewelry, plate, deeds, bonds and any and all other personal property of every sort and kind, from executors, administrators, guardians, public officers, courts, receivers, assignees, trustees, and from all fiduciaries, and from all other persons and individuals, and from all corporations whether state, municipal, corporate or private, and to rent boxes, safes, vaults and other receptacles for such property. (6) To act as agent or otherwise for the purpose of registering, issuing, certificating, countersigning, transferring or underwriting the stock, bonds or other obligations of any corporation, association, state or municipality, and may receive and manage any sinking fund therefor on such terms as may be agreed upon between the two parties, and in like manner may act as Treasurer of any corporation or municipality. 2 (7) To act as Trustee under any deed of trust, mortgage, bond or other instrument issued by any state, municipality, body politic, corporation, association or person, either alone or in conjunction with any other person or persons, corporation or corporations. (8) To guarantee the validity, performance or effect of any contract or agreement, and the fidelity of persons holding places of responsibility or trust; to become surety for any person, or persons, for the faithful performance of any trust, office, duty, contract or agreement, either by itself or in conjunction with any other person, or persons, corporation, or corporations, or in like manner become surety upon any bond, recognizance, obligation, judgment, suit, order, or decree to be entered in any court of record within the State of Delaware or elsewhere, or which may now or hereafter be required by any law, judge, officer or court in the State of Delaware or elsewhere. (9) To act by any and every method of appointment as trustee, trustee in bankruptcy, receiver, assignee, assignee in bankruptcy, executor, administrator, guardian, bailee, or in any other trust capacity in the receiving, holding, managing, and disposing of any and all estates and property, real, personal or mixed, and to be appointed as such trustee, trustee in bankruptcy, receiver, assignee, assignee in bankruptcy, executor, administrator, guardian or bailee by any persons, corporations, court, officer, or authority, in the State of Delaware or elsewhere; and whenever this Corporation is so appointed by any person, corporation, court, officer or authority such trustee, trustee in bankruptcy, receiver, assignee, assignee in bankruptcy, executor, administrator, guardian, bailee, or in any other trust capacity, it shall not be required to give bond with surety, but its capital stock shall be taken and held as security for the performance of the duties devolving upon it by such appointment. (10) And for its care, management and trouble, and the exercise of any of its powers hereby given, or for the performance of any of the duties which it may undertake or be called upon to perform, or for the assumption of any responsibility the said Corporation may be entitled to receive a proper compensation. (11) To purchase, receive, hold and own bonds, mortgages, debentures, shares of capital stock, and other securities, obligations, contracts and evidences of indebtedness, of any private, public or municipal corporation within and without the State of Delaware, or of the Government of the United States, or of any state, territory, colony, or possession thereof, or of any 3 foreign government or country; to receive, collect, receipt for, and dispose of interest, dividends and income upon and from any of the bonds, mortgages, debentures, notes, shares of capital stock, securities, obligations, contracts, evidences of indebtedness and other property held and owned by it, and to exercise in respect of all such bonds, mortgages, debentures, notes, shares of capital stock, securities, obligations, contracts, evidences of indebtedness and other property, any and all the rights, powers and privileges of individual owners thereof, including the right to vote thereon; to invest and deal in and with any of the moneys of the Corporation upon such securities and in such manner as it may think fit and proper, and from time to time to vary or realize such investments; to issue bonds and secure the same by pledges or deeds of trust or mortgages of or upon the whole or any part of the property held or owned by the Corporation, and to sell and pledge such bonds, as and when the Board of Directors shall determine, and in the promotion of its said corporate business of investment and to the extent authorized by law, to lease, purchase, hold, sell, assign, transfer, pledge, mortgage and convey real and personal property of any name and nature and any estate or interest therein. (b) In furtherance of, and not in limitation, of the powers conferred by the laws of the State of Delaware, it is hereby expressly provided that the said Corporation shall also have the following powers: (1) To do any or all of the things herein set forth, to the same extent as natural persons might or could do, and in any part of the world. (2) To acquire the good will, rights, property and franchises and to undertake the whole or any part of the assets and liabilities of any person, firm, association or corporation, and to pay for the same in cash, stock of this Corporation, bonds or otherwise; to hold or in any manner to dispose of the whole or any part of the property so purchased; to conduct in any lawful manner the whole or any part of any business so acquired, and to exercise all the powers necessary or convenient in and about the conduct and management of such business. (3) To take, hold, own, deal in, mortgage or otherwise lien, and to lease, sell, exchange, transfer, or in any manner whatever dispose of property, real, personal or mixed, wherever situated. (4) To enter into, make, perform and carry out contracts of every kind with any person, firm, association or corporation, and, without limit as to amount, to draw, make, accept, endorse, discount, execute and issue promissory notes, 4 drafts, bills of exchange, warrants, bonds, debentures, and other negotiable or transferable instruments. (5) To have one or more offices, to carry on all or any of its operations and businesses, without restriction to the same extent as natural persons might or could do, to purchase or otherwise acquire, to hold, own, to mortgage, sell, convey or otherwise dispose of, real and personal property, of every class and description, in any State, District, Territory or Colony of the United States, and in any foreign country or place. (6) It is the intention that the objects, purposes and powers specified and clauses contained in this paragraph shall (except where otherwise expressed in said paragraph) be nowise limited or restricted by reference to or inference from the terms of any other clause of this or any other paragraph in this charter, but that the objects, purposes and powers specified in each of the clauses of this paragraph shall be regarded as independent objects, purposes and powers. Fourth: - (a) The total number of shares of all classes of stock which the Corporation shall have authority to issue is forty-one million (41,000,000) shares, consisting of: (1) One million (1,000,000) shares of Preferred stock, par value $10.00 per share (hereinafter referred to as "Preferred Stock"); and (2) Forty million (40,000,000) shares of Common Stock, par value $1.00 per share (hereinafter referred to as "Common Stock"). (b) Shares of Preferred Stock may be issued from time to time in one or more series as may from time to time be determined by the Board of Directors each of said series to be distinctly designated. All shares of any one series of Preferred Stock shall be alike in every particular, except that there may be different dates from which dividends, if any, thereon shall be cumulative, if made cumulative. The voting powers and the preferences and relative, participating, optional and other special rights of each such series, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding; and, subject to the provisions of subparagraph 1 of Paragraph (c) of this Article Fourth, the Board of Directors of the Corporation is hereby expressly granted authority to fix by resolution or resolutions adopted prior to the issuance of any shares of a particular series of Preferred Stock, the voting powers and the designations, preferences and relative, optional and other special rights, and the qualifications, limitations and 5 restrictions of such series, including, but without limiting the generality of the foregoing, the following: (1) The distinctive designation of, and the number of shares of Preferred Stock which shall constitute such series, which number may be increased (except where otherwise provided by the Board of Directors) or decreased (but not below the number of shares thereof then outstanding) from time to time by like action of the Board of Directors; (2) The rate and times at which, and the terms and conditions on which, dividends, if any, on Preferred Stock of such series shall be paid, the extent of the preference or relation, if any, of such dividends to the dividends payable on any other class or classes, or series of the same or other class of stock and whether such dividends shall be cumulative or non-cumulative; (3) The right, if any, of the holders of Preferred Stock of such series to convert the same into or exchange the same for, shares of any other class or classes or of any series of the same or any other class or classes of stock of the Corporation and the terms and conditions of such conversion or exchange; (4) Whether or not Preferred Stock of such series shall be subject to redemption, and the redemption price or prices and the time or times at which, and the terms and conditions on which, Preferred Stock of such series may be redeemed. (5) The rights, if any, of the holders of Preferred Stock of such series upon the voluntary or involuntary liquidation, merger, consolidation, distribution or sale of assets, dissolution or winding-up, of the Corporation. (6) The terms of the sinking fund or redemption or purchase account, if any, to be provided for the Preferred Stock of such series; and (7) The voting powers, if any, of the holders of such series of Preferred Stock which may, without limiting the generality of the foregoing include the right, voting as a series or by itself or together with other series of Preferred Stock or all series of Preferred Stock as a class, to elect one or more directors of the Corporation if there shall have been a default in the payment of dividends on any one or more series of Preferred Stock or under such circumstances and on such conditions as the Board of Directors may determine. (c) (1) After the requirements with respect to preferential dividends on the Preferred 9 Stock (fixed in accordance with the provisions of section (b) of this Article Fourth), if any, shall have been met and after the Corporation shall have complied with all the requirements, if any, with respect to the setting aside of sums as sinking funds or redemption or purchase accounts (fixed in accordance with the provisions of section (b) of this Article Fourth), and subject further to any conditions which may be fixed in accordance with the provisions of section (b) of this Article Fourth, then and not otherwise the holders of Common Stock shall be entitled to receive such dividends as may be declared from time to time by the Board of Directors. (2) After distribution in full of the preferential amount, if any, (fixed in accordance with the provisions of section (b) of this Article Fourth), to be distributed to the holders of Preferred Stock in the event of voluntary or involuntary liquidation, distribution or sale of assets, dissolution or winding-up, of the Corporation, the holders of the Common Stock shall be entitled to receive all of the remaining assets of the Corporation, tangible and intangible, of whatever kind available for distribution to stockholders ratably in proportion to the number of shares of Common Stock held by them respectively. (3) Except as may otherwise be required by law or by the provisions of such resolution or resolutions as may be adopted by the Board of Directors pursuant to section (b) of this Article Fourth, each holder of Common Stock shall have one vote in respect of each share of Common Stock held on all matters voted upon by the stockholders. (d) No holder of any of the shares of any class or series of stock or of options, warrants or other rights to purchase shares of any class or series of stock or of other securities of the Corporation shall have any preemptive right to purchase or subscribe for any unissued stock of any class or series or any additional shares of any class or series to be issued by reason of any increase of the authorized capital stock of the Corporation of any class or series, or bonds, certificates of indebtedness, debentures or other securities convertible into or exchangeable for stock of the Corporation of any class or series, or carrying any right to purchase stock of any class or series, but any such unissued stock, additional authorized issue of shares of any class or series of stock or securities convertible into or exchangeable for stock, or carrying any right to purchase stock, may be issued and disposed of pursuant to resolution of the Board of Directors to such persons, firms, corporations or associations, whether such holders or others, and upon such terms as may be deemed advisable by the Board of Directors in the exercise of its sole discretion. (e) The relative powers, preferences and rights of each series of Preferred Stock in relation to the relative powers, preferences and rights of each other series of 10 Preferred Stock shall, in each case, be as fixed from time to time by the Board of Directors in the resolution or resolutions adopted pursuant to authority granted in section (b) of this Article Fourth and the consent, by class or series vote or otherwise, of the holders of such of the series of Preferred Stock as are from time to time outstanding shall not be required for the issuance by the Board of Directors of any other series of Preferred Stock whether or not the powers, preferences and rights of such other series shall be fixed by the Board of Directors as senior to, or on a parity with, the powers, preferences and rights of such outstanding series, or any of them; provided, however, that the Board of Directors may provide in the resolution or resolutions as to any series of Preferred Stock adopted pursuant to section (b) of this Article Fourth that the consent of the holders of a majority (or such greater proportion as shall be therein fixed) of the outstanding shares of such series voting thereon shall be required for the issuance of any or all other series of Preferred Stock. (f) Subject to the provisions of section (e), shares of any series of Preferred Stock may be issued from time to time as the Board of Directors of the Corporation shall determine and on such terms and for such consideration as shall be fixed by the Board of Directors. (g) Shares of Common Stock may be issued from time to time as the Board of Directors of the Corporation shall determine and on such terms and for such consideration as shall be fixed by the Board of Directors. (h) The authorized amount of shares of Common Stock and of Preferred Stock may, without a class or series vote, be increased or decreased from time to time by the affirmative vote of the holders of a majority of the stock of the Corporation entitled to vote thereon. Fifth: - (a) The business and affairs of the Corporation shall be conducted and managed by a Board of Directors. The number of directors constituting the entire Board shall be not less than five nor more than twenty-five as fixed from time to time by vote of a majority of the whole Board, provided, however, that the number of directors shall not be reduced so as to shorten the term of any director at the time in office, and provided further, that the number of directors constituting the whole Board shall be twenty-four until otherwise fixed by a majority of the whole Board. (b) The Board of Directors shall be divided into three classes, as nearly equal in number as the then total number of directors constituting the whole Board permits, with the term of office of one class expiring each year. At the annual meeting of stockholders in 1982, directors of the first class shall be elected to hold office for a 11 term expiring at the next succeeding annual meeting, directors of the second class shall be elected to hold office for a term expiring at the second succeeding annual meeting and directors of the third class shall be elected to hold office for a term expiring at the third succeeding annual meeting. Any vacancies in the Board of Directors for any reason, and any newly created directorships resulting from any increase in the directors, may be filled by the Board of Directors, acting by a majority of the directors then in office, although less than a quorum, and any directors so chosen shall hold office until the next annual election of directors. At such election, the stockholders shall elect a successor to such director to hold office until the next election of the class for which such director shall have been chosen and until his successor shall be elected and qualified. No decrease in the number of directors shall shorten the term of any incumbent director. (c) Notwithstanding any other provisions of this Charter or Act of Incorporation or the By-Laws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law, this Charter or Act of Incorporation or the By-Laws of the Corporation), any director or the entire Board of Directors of the Corporation may be removed at any time without cause, but only by the affirmative vote of the holders of two-thirds or more of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as one class) cast at a meeting of the stockholders called for that purpose. (d) Nominations for the election of directors may be made by the Board of Directors or by any stockholder entitled to vote for the election of directors. Such nominations shall be made by notice in writing, delivered or mailed by first class United States mail, postage prepaid, to the Secretary of the Corporation not less than 14 days nor more than 50 days prior to any meeting of the stockholders called for the election of directors; provided, however, that if less than 21 days' notice of the meeting is given to stockholders, such written notice shall be delivered or mailed, as prescribed, to the Secretary of the Corporation not later than the close of the seventh day following the day on which notice of the meeting was mailed to stockholders. Notice of nominations which are proposed by the Board of Directors shall be given by the Chairman on behalf of the Board. (e) Each notice under subsection (d) shall set forth (i) the name, age, business address and, if known, residence address of each nominee proposed in such notice, (ii) the principal occupation or employment of such nominee and (iii) the number of shares of stock of the Corporation which are beneficially owned by each such nominee. 12 (f) The Chairman of the meeting may, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. (g) No action required to be taken or which may be taken at any annual or special meeting of stockholders of the Corporation may be taken without a meeting, and the power of stockholders to consent in writing, without a meeting, to the taking of any action is specifically denied. Sixth: - The Directors shall choose such officers, agent and servants as may be provided in the By-Laws as they may from time to time find necessary or proper. Seventh: - The Corporation hereby created is hereby given the same powers, rights and privileges as may be conferred upon corporations organized under the Act entitled "An Act Providing a General Corporation Law", approved March 10, 1899, as from time to time amended. Eighth: - This Act shall be deemed and taken to be a private Act. Ninth: - This Corporation is to have perpetual existence. Tenth: - The Board of Directors, by resolution passed by a majority of the whole Board, may designate any of their number to constitute an Executive Committee, which Committee, to the extent provided in said resolution, or in the By-Laws of the Company, shall have and may exercise all of the powers of the Board of Directors in the management of the business and affairs of the Corporation, and shall have power to authorize the seal of the Corporation to be affixed to all papers which may require it. Eleventh: - The private property of the stockholders shall not be liable for the payment of corporate debts to any extent whatever. Twelfth: - The Corporation may transact business in any part of the world. Thirteenth: - The Board of Directors of the Corporation is expressly authorized to make, alter or repeal the By-Laws of the Corporation by a vote of the majority of the entire Board. The stockholders may make, alter or repeal any By-Law whether or not adopted by them, provided however, that any such additional By-Laws, alterations or repeal may be adopted only by the affirmative vote of the holders of two-thirds or more of the outstanding shares of capital stock of the Corporation 13 entitled to vote generally in the election of directors (considered for this purpose as one class). Fourteenth: - Meetings of the Directors may be held outside of the State of Delaware at such places as may be from time to time designated by the Board, and the Directors may keep the books of the Company outside of the State of Delaware at such places as may be from time to time designated by them. Fifteenth: - (a) (1) In addition to any affirmative vote required by law, and except as otherwise expressly provided in sections (b) and (c) of this Article Fifteenth: (A) any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with or into (i) any Interested Stockholder (as hereinafter defined) or (ii) any other corporation (whether or not itself an Interested Stockholder), which, after such merger or consolidation, would be an Affiliate (as hereinafter defined) of an Interested Stockholder, or (B) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of related transactions) to or with any Interested Stockholder or any Affiliate of any Interested Stockholder of any assets of the Corporation or any Subsidiary having an aggregate fair market value of $1,000,000 or more, or (C) the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of related transactions) of any securities of the Corporation or any Subsidiary to any Interested Stockholder or any Affiliate of any Interested Stockholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate fair market value of $1,000,000 or more, or (D) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation, or (E) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any similar transaction (whether or not with or into or otherwise involving an Interested Stockholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of the Corporation or any Subsidiary which is directly or indirectly owned by any Interested Stockholder, or any Affiliate of any Interested Stockholder, 14 shall require the affirmative vote of the holders of at least two-thirds of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, considered for the purpose of this Article Fifteenth as one class ("Voting Shares"). Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that some lesser percentage may be specified, by law or in any agreement with any national securities exchange or otherwise. (2) The term "business combination" as used in this Article Fifteenth shall mean any transaction which is referred to any one or more of clauses (A) through (E) of paragraph 1 of the section (a). (b) The provisions of section (a) of this Article Fifteenth shall not be applicable to any particular business combination and such business combination shall require only such affirmative vote as is required by law and any other provisions of the Charter or Act of Incorporation of By-Laws if such business combination has been approved by a majority of the whole Board. (c) For the purposes of this Article Fifteenth: (1) A "person" shall mean any individual firm, corporation or other entity. (2) "Interested Stockholder" shall mean, in respect of any business combination, any person (other than the Corporation or any Subsidiary) who or which as of the record date for the determination of stockholders entitled to notice of and to vote on such business combination, or immediately prior to the consummation of any such transaction: (A) is the beneficial owner, directly or indirectly, of more than 10% of the Voting Shares, or (B) is an Affiliate of the Corporation and at any time within two years prior thereto was the beneficial owner, directly or indirectly, of not less than 10% of the then outstanding voting Shares, or (C) is an assignee of or has otherwise succeeded in any share of capital stock of the Corporation which were at any time within two years prior thereto beneficially owned by any Interested Stockholder, and such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933. 15 (3) A person shall be the "beneficial owner" of any Voting Shares: (A) which such person or any of its Affiliates and Associates (as hereafter defined) beneficially own, directly or indirectly, or (B) which such person or any of its Affiliates or Associates has (i) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (ii) the right to vote pursuant to any agreement, arrangement or understanding, or (C) which are beneficially owned, directly or indirectly, by any other person with which such first mentioned person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of capital stock of the Corporation. (4) The outstanding Voting Shares shall include shares deemed owned through application of paragraph (3) above but shall not include any other Voting Shares which may be issuable pursuant to any agreement, or upon exercise of conversion rights, warrants or options or otherwise. (5) "Affiliate" and "Associate" shall have the respective meanings given those terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on December 31, 1981. (6) "Subsidiary" shall mean any corporation of which a majority of any class of equity security (as defined in Rule 3a11-1 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect in December 31, 1981) is owned, directly or indirectly, by the Corporation; provided, however, that for the purposes of the definition of Investment Stockholder set forth in paragraph (2) of this section (c), the term "Subsidiary" shall mean only a corporation of which a majority of each class of equity security is owned, directly or indirectly, by the Corporation. (d) majority of the directors shall have the power and duty to determine for the purposes of this Article Fifteenth on the basis of information known to them, (1) the number of Voting Shares beneficially owned by any person (2) whether a person is an Affiliate or Associate of another, (3) whether a person has an agreement, arrangement or understanding with another as to the matters referred to in paragraph (3) of section (c), or (4) whether the assets subject to 16 any business combination or the consideration received for the issuance or transfer of securities by the Corporation, or any Subsidiary has an aggregate fair market value of $1,000,000 or more. (e) Nothing contained in this Article Fifteenth shall be construed to relieve any Interested Stockholder from any fiduciary obligation imposed by law. Sixteenth: Notwithstanding any other provision of this Charter or Act of Incorporation or the By-Laws of the Corporation (and in addition to any other vote that may be required by law, this Charter or Act of Incorporation by the By-Laws), the affirmative vote of the holders of at least two-thirds of the outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as one class) shall be required to amend, alter or repeal any provision of Articles Fifth, Thirteenth, Fifteenth or Sixteenth of this Charter or Act of Incorporation. Seventeenth: (a) a Director of this Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a Director, except to the extent such exemption from liability or limitation thereof is not permitted under the Delaware General Corporation Laws as the same exists or may hereafter be amended. (b) Any repeal or modification of the foregoing paragraph shall not adversely affect any right or protection of a Director of the Corporation existing hereunder with respect to any act or omission occurring prior to the time of such repeal or modification." 17 EXHIBIT B BY-LAWS WILMINGTON TRUST COMPANY WILMINGTON, DELAWARE As existing on January 16, 1997 18 BY-LAWS OF WILMINGTON TRUST COMPANY ARTICLE I Stockholders' Meetings Section 1. The Annual Meeting of Stockholders shall be held on the third Thursday in April each year at the principal office at the Company or at such other date, time, or place as may be designated by resolution by the Board of Directors. Section 2. Special meetings of all stockholders may be called at any time by the Board of Directors, the Chairman of the Board or the President. Section 3. Notice of all meetings of the stockholders shall be given by mailing to each stockholder at least ten (10) days before said meeting, at his last known address, a written or printed notice fixing the time and place of such meeting. Section 4. A majority in the amount of the capital stock of the Company issued and outstanding on the record date, as herein determined, shall constitute a quorum at all meetings of stockholders for the transaction of any business, but the holders of a small number of shares may adjourn, from time to time, without further notice, until a quorum is secured. At each annual or special meeting of stockholders, each stockholder shall be entitled to one vote, either in person or by proxy, for each shares of stock registered in the stockholder's name on the books of the Company on the record date for any such meeting as determined herein. ARTICLE II Directors Section 1. The number and classification of the Board of Directors shall be as set forth in the Charter of the Bank. Section 2. No person who has attained the age of seventy-two (72) years shall be nominated for election to the Board of Directors of the Company, provided, however, that this limitation shall not apply to any person who was serving as director of the Company on September 16, 1971. Section 3. The class of Directors so elected shall hold office for three years or until their successors are elected and qualified. Section 4. The affairs and business of the Company shall be managed and conducted by the Board of Directors. Section 5. The Board of Directors shall meet at the principal office of the Company or elsewhere in its discretion at such times to be determined by a majority of its members, or at the call of the Chairman of the Board of Directors or the President. Section 6. Special meetings of the Board of Directors may be called at any time by the Chairman of the Board of Directors or by the President, and shall be called upon the written request of a majority of the directors. Section 7. A majority of the directors elected and qualified shall be necessary to constitute a quorum for the transaction of business at any meeting of the Board of Directors. Section 8. Written notice shall be sent by mail to each director of any special meeting of the Board of Directors, and of any change in the time or place of any regular meeting, stating the time and place of such meeting, which shall be mailed not less than two days before the time of holding such meeting. Section 9. In the event of the death, resignation, removal, inability to act, or disqualification of any director, the Board of Directors, although less than a quorum, shall have the right to elect the successor who shall hold office for the remainder of the full term of the class of directors in which the vacancy occurred, and until such director's successor shall have been duly elected and qualified. Section 10. The Board of Directors at its first meeting after its election by the stockholders shall appoint an Executive Committee, a Trust Committee, an Audit Committee and a Compensation Committee, and shall elect from its own members a Chairman of the Board of Directors and a President who may be the same person. The Board of Directors shall also elect at such meeting a Secretary and a Treasurer, who may be the same person, may appoint at any time such other committees and elect or appoint such other officers as it may deem advisable. The Board of Directors may also elect at such meeting one or more Associate Directors. Section 11. The Board of Directors may at any time remove, with or without cause, any member of any Committee appointed by it or any associate director or officer elected by it and may appoint or elect his successor. Section 12. The Board of Directors may designate an officer to be in charge of such of the departments or division of the Company as it may deem advisable. ARTICLE III Committees Section 1. Executive Committee (A) The Executive Committee shall be composed of not more than nine members who shall be selected by the Board of Directors from its own members and who shall hold office during the pleasure of the Board. (B) The Executive Committee shall have all the powers of the Board of Directors when it is not in session to transact all business for and in behalf of the Company that may be brought before it. (C) The Executive Committee shall meet at the principal office of the Company or elsewhere in its discretion at such times to be determined by a majority of its members, or at the call of the Chairman of the Executive Committee or at the call of the Chairman of the Board of Directors. The majority of its members shall be necessary to constitute a quorum for the transaction of business. Special meetings of the Executive Committee may be held at any time when a quorum is present. (D) Minutes of each meeting of the Executive Committee shall be kept and submitted to the Board of Directors at its next meeting. (E) The Executive Committee shall advise and superintend all investments that may be made of the funds of the Company, and shall direct the disposal of the same, in accordance with such rules and regulations as the Board of Directors from time to time make. (F) In the event of a state of disaster of sufficient severity to prevent the conduct and management of the affairs and business of the Company by its directors and officers as contemplated by these By-Laws any two available members of the Executive Committee as constituted immediately prior to such disaster shall constitute a quorum of that Committee for the full conduct and management of the affairs and business of the Company in accordance with the provisions of Article III of these By-Laws; and if less than three members of the Trust Committee is constituted immediately prior to such disaster shall be available for the transaction of its business, such Executive Committee shall also be empowered to exercise all of the powers reserved to the Trust Committee under Article III Section 2 hereof. In the event of the unavailability, at such time, of a minimum of two members of such Executive Committee, any three available directors shall constitute the Executive Committee for the full conduct and management of the affairs and business of the Company in accordance with the foregoing provisions of this Section. This By-Law shall be subject to implementation by Resolutions of the Board of Directors presently existing or hereafter passed from time to time 3 for that purpose, and any provisions of these By-Laws (other than this Section) and any resolutions which are contrary to the provisions of this Section or to the provisions of any such implementary Resolutions shall be suspended during such a disaster period until it shall be determined by any interim Executive Committee acting under this section that it shall be to the advantage of the Company to resume the conduct and management of its affairs and business under all of the other provisions of these By-Laws. Section 2. Trust Committee (A) The Trust Committee shall be composed of not more than thirteen members who shall be selected by the Board of Directors, a majority of whom shall be members of the Board of Directors and who shall hold office during the pleasure of the Board. (B) The Trust Committee shall have general supervision over the Trust Department and the investment of trust funds, in all matters, however, being subject to the approval of the Board of Directors. (C) The Trust Committee shall meet at the principal office of the Company or elsewhere in its discretion at such times to be determined by a majority of its members or at the call of its chairman. A majority of its members shall be necessary to constitute a quorum for the transaction of business. (D) Minutes of each meeting of the Trust Committee shall be kept and promptly submitted to the Board of Directors. (E) The Trust Committee shall have the power to appoint Committees and/or designate officers or employees of the Company to whom supervision over the investment of trust funds may be delegated when the Trust Committee is not in session. Section 3. Audit Committee (A) The Audit Committee shall be composed of five members who shall be selected by the Board of Directors from its own members, none of whom shall be an officer of the Company, and shall hold office at the pleasure of the Board. (B) The Audit Committee shall have general supervision over the Audit Division in all matters however subject to the approval of the Board of Directors; it shall consider all matters brought to its attention by the officer in charge of the Audit Division, review all reports of examination of the Company made by any governmental agency or such independent auditor employed for that purpose, and make such recommendations to the Board of Directors with respect thereto or with respect to any other matters pertaining to auditing the 4 Company as it shall deem desirable. (C) The Audit Committee shall meet whenever and wherever the majority of its members shall deem it to be proper for the transaction of its business, and a majority of its Committee shall constitute a quorum. Section 4. Compensation Committee (A) The Compensation Committee shall be composed of not more than five (5) members who shall be selected by the Board of Directors from its own members who are not officers of the Company and who shall hold office during the pleasure of the Board. (B) The Compensation Committee shall in general advise upon all matters of policy concerning the Company brought to its attention by the management and from time to time review the management of the Company, major organizational matters, including salaries and employee benefits and specifically shall administer the Executive Incentive Compensation Plan. (C) Meetings of the Compensation Committee may be called at any time by the Chairman of the Compensation Committee, the Chairman of the Board of Directors, or the President of the Company. Section 5. Associate Directors (A) Any person who has served as a director may be elected by the Board of Directors as an associate director, to serve during the pleasure of the Board. (B) An associate director shall be entitled to attend all directors meetings and participate in the discussion of all matters brought to the Board, with the exception that he would have no right to vote. An associate director will be eligible for appointment to Committees of the Company, with the exception of the Executive Committee, Audit Committee and Compensation Committee, which must be comprised solely of active directors. Section 6. Absence or Disqualification of Any Member of a Committee (A) In the absence or disqualification of any member of any Committee created under Article III of the By-Laws of this Company, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absence or disqualified member. 5 ARTICLE IV Officers Section 1. The Chairman of the Board of Directors shall preside at all meetings of the Board and shall have such further authority and powers and shall perform such duties as the Board of Directors may from time to time confer and direct. He shall also exercise such powers and perform such duties as may from time to time be agreed upon between himself and the President of the Company. Section 2. The Vice Chairman of the Board. The Vice Chairman of the ------------------------------- Board of Directors shall preside at all meetings of the Board of Directors at which the Chairman of the Board shall not be present and shall have such further authority and powers and shall perform such duties as the Board of Directors or the Chairman of the Board may from time to time confer and direct. Section 3. The President shall have the powers and duties pertaining to the office of the President conferred or imposed upon him by statute or assigned to him by the Board of Directors in the absence of the Chairman of the Board the President shall have the powers and duties of the Chairman of the Board. Section 4. The Chairman of the Board of Directors or the President as designated by the Board of Directors, shall carry into effect all legal directions of the Executive Committee and of the Board of Directors, and shall at all times exercise general supervision over the interest, affairs and operations of the Company and perform all duties incident to his office. Section 5. There may be one or more Vice Presidents, however denominated by the Board of Directors, who may at any time perform all the duties of the Chairman of the Board of Directors and/or the President and such other powers and duties as may from time to time be assigned to them by the Board of Directors, the Executive Committee, the Chairman of the Board or the President and by the officer in charge of the department or division to which they are assigned. Section 6. The Secretary shall attend to the giving of notice of meetings of the stockholders and the Board of Directors, as well as the Committees thereof, to the keeping of accurate minutes of all such meetings and to recording the same in the minute books of the Company. In addition to the other notice requirements of these By-Laws and as may be practicable under the circumstances, all such notices shall be in writing and mailed well in advance of the scheduled date of any other meeting. He shall have custody of the corporate seal and shall affix the same to any documents requiring such corporate seal and to attest the same. 6 Section 7. The Treasurer shall have general supervision over all assets and liabilities of the Company. He shall be custodian of and responsible for all monies, funds and valuables of the Company and for the keeping of proper records of the evidence of property or indebtedness and of all the transactions of the Company. He shall have general supervision of the expenditures of the Company and shall report to the Board of Directors at each regular meeting of the condition of the Company, and perform such other duties as may be assigned to him from time to time by the Board of Directors of the Executive Committee. Section 8. There may be a Controller who shall exercise general supervision over the internal operations of the Company, including accounting, and shall render to the Board of Directors at appropriate times a report relating to the general condition and internal operations of the Company. There may be one or more subordinate accounting or controller officers however denominated, who may perform the duties of the Controller and such duties as may be prescribed by the Controller. Section 9. The officer designated by the Board of Directors to be in charge of the Audit Division of the Company with such title as the Board of Directors shall prescribe, shall report to and be directly responsible only to the Board of Directors. There shall be an Auditor and there may be one or more Audit Officers, however denominated, who may perform all the duties of the Auditor and such duties as may be prescribed by the officer in charge of the Audit Division. Section 10. There may be one or more officers, subordinate in rank to all Vice Presidents with such functional titles as shall be determined from time to time by the Board of Directors, who shall ex officio hold the office Assistant Secretary of this Company and who may perform such duties as may be prescribed by the officer in charge of the department or division to whom they are assigned. Section 11. The powers and duties of all other officers of the Company shall be those usually pertaining to their respective offices, subject to the direction of the Board of Directors, the Executive Committee, Chairman of the Board of Directors or the President and the officer in charge of the department or division to which they are assigned. ARTICLE V Stock and Stock Certificates Section 1. Shares of stock shall be transferrable on the books of the Company and a 7 transfer book shall be kept in which all transfers of stock shall be recorded. Section 2. Certificate of stock shall bear the signature of the President or any Vice President, however denominated by the Board of Directors and countersigned by the Secretary or Treasurer or an Assistant Secretary, and the seal of the corporation shall be engraved thereon. Each certificate shall recite that the stock represented thereby is transferrable only upon the books of the Company by the holder thereof or his attorney, upon surrender of the certificate properly endorsed. Any certificate of stock surrendered to the Company shall be cancelled at the time of transfer, and before a new certificate or certificates shall be issued in lieu thereof. Duplicate certificates of stock shall be issued only upon giving such security as may be satisfactory to the Board of Directors or the Executive Committee. Section 3. The Board of Directors of the Company is authorized to fix in advance a record date for the determination of the stockholders entitled to notice of, and to vote at, any meeting of stockholders and any adjournment thereof, or entitled to receive payment of any dividend, or to any allotment or rights, or to exercise any rights in respect of any change, conversion or exchange of capital stock, or in connection with obtaining the consent of stockholders for any purpose, which record date shall not be more than 60 nor less than 10 days proceeding the date of any meeting of stockholders or the date for the payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, or a date in connection with obtaining such consent. ARTICLE VI Seal Section 1. The corporate seal of the Company shall be in the following form: Between two concentric circles the words "Wilmington Trust Company" within the inner circle the words "Wilmington, Delaware." ARTICLE VII Fiscal Year Section 1. The fiscal year of the Company shall be the calendar year. 8 ARTICLE VIII Execution of Instruments of the Company Section 1. The Chairman of the Board, the President or any Vice President, however denominated by the Board of Directors, shall have full power and authority to enter into, make, sign, execute, acknowledge and/or deliver and the Secretary or any Assistant Secretary shall have full power and authority to attest and affix the corporate seal of the Company to any and all deeds, conveyances, assignments, releases, contracts, agreements, bonds, notes, mortgages and all other instruments incident to the business of this Company or in acting as executor, administrator, guardian, trustee, agent or in any other fiduciary or representative capacity by any and every method of appointment or by whatever person, corporation, court officer or authority in the State of Delaware, or elsewhere, without any specific authority, ratification, approval or confirmation by the Board of Directors or the Executive Committee, and any and all such instruments shall have the same force and validity as though expressly authorized by the Board of Directors and/or the Executive Committee. ARTICLE IX Compensation of Directors and Members of Committees Section 1. Directors and associate directors of the Company, other than salaried officers of the Company, shall be paid such reasonable honoraria or fees for attending meetings of the Board of Directors as the Board of Directors may from time to time determine. Directors and associate directors who serve as members of committees, other than salaried employees of the Company, shall be paid such reasonable honoraria or fees for services as members of committees as the Board of Directors shall from time to time determine and directors and associate directors may be employed by the Company for such special services as the Board of Directors may from time to time determine and shall be paid for such special services so performed reasonable compensation as may be determined by the Board of Directors. ARTICLE X Indemnification Section 1. (A) The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "proceeding") by reason of the fact that he, or a person for whom he is the legal representative, is or was a director, officer, employee or agent of the Corporation or is or was 9 serving at the request of the Corporation as a director, officer, employee, fiduciary or agent of another corporation or of a partnership, joint venture, trust, enterprise or non-profit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses reasonably incurred by such person. The Corporation shall indemnify a person in connection with a proceeding initiated by such person only if the proceeding was authorized by the Board of Directors of the Corporation. (B) The Corporation shall pay the expenses incurred in defending any proceeding in advance of its final disposition, provided, however, that the -------- ------- payment of expenses incurred by a Director officer in his capacity as a Director or officer in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking by the Director or officer to repay all amounts advanced if it should be ultimately determined that the Director or officer is not entitled to be indemnified under this Article or otherwise. (C) If a claim for indemnification or payment of expenses, under this Article X is not paid in full within ninety days after a written claim therefor has been received by the Corporation the claimant may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the Corporation shall have the burden of proving that the claimant was not entitled to the requested indemnification of payment of expenses under applicable law. (D) The rights conferred on any person by this Article X shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of the Charter or Act of Incorporation, these ByLaws, agreement, vote of stockholders or disinterested Directors or otherwise. (E) Any repeal or modification of the foregoing provisions of this Article X shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification. ARTICLE XI Amendments to the By-Laws Section 1. These By-Laws may be altered, amended or repealed, in whole or in part, and any new By-Law or By-Laws adopted at any regular or special meeting of the Board of Directors by a vote of the majority of all the members of the Board of Directors then in office. 10 EXHIBIT C Section 321(b) Consent Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as amended, Wilmington Trust Company hereby consents that reports of examinations by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon requests therefor. WILMINGTON TRUST COMPANY Dated: July 28, 1999 By: /s/ James P. Lawler --------------------------- Name: James P. Lawler Title: Vice President EXHIBIT D NOTICE This form is intended to assist state nonmember banks and savings banks with state publication requirements. It has not been approved by any state banking authorities. Refer to your appropriate state banking authorities for your state publication requirements.
R E P O R T O F C O N D I T I O N Consolidating domestic subsidiaries of the WILMINGTON TRUST COMPANY of WILMINGTON - -------------------------------------------- --------------------------------- Name of Bank City in the State of DELAWARE , at the close of business on March 31, 1999. ------------ ASSETS Thousands of dollars Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coins................ 196,035 Interest-bearing balances.......................................... 0 Held-to-maturity securities............................................. 44,909 Available-for-sale securities........................................... 1,396,028 Federal funds sold and securities purchased under agreements to resell.. 127,340 Loans and lease financing receivables: Loans and leases, net of unearned income............. 4,176,290 LESS: Allowance for loan and lease losses........... 68,543 LESS: Allocated transfer risk reserve............... 0 Loans and leases, net of unearned income, allowance, and reserve... 4,107,747 Assets held in trading accounts......................................... 0 Premises and fixed assets (including capitalized leases)................ 139,843 Other real estate owned................................................. 1,055 Investments in unconsolidated subsidiaries and associated companies..... 1,225 Customers' liability to this bank on acceptances outstanding............ 0 Intangible assets....................................................... 5,265 Other assets............................................................ 99,075 Total assets............................................................ 6,118,520 CONTINUED ON NEXT PAGE
LIABILITIES Deposits: In domestic offices.......................................................... 4,332,124 Noninterest-bearing............... 959,777 Interest-bearing.................. 3,372,347 Federal funds purchased and Securities sold under agreements to repurchase... 432,395 Demand notes issued to the U.S. Treasury..................................... 28,906 Trading liabilities (from Schedule RC-D)..................................... 0 Other borrowed money:........................................................ /////// With original maturity of one year or less.............................. 715,000 With original maturity of more than one year............................ 43,000 Bank's liability on acceptances executed and outstanding..................... 0 Subordinated notes and debentures............................................ 0 Other liabilities (from Schedule RC-G)....................................... 93,311 Total liabilities............................................................ 5,644,736 EQUITY CAPITAL Perpetual preferred stock and related surplus................................ 0 Common Stock................................................................. 500 Surplus (exclude all surplus related to preferred stock)..................... 62,118 Undivided profits and capital reserves....................................... 408,053 Net unrealized holding gains (losses) on available-for-sale securities....... 3,113 Total equity capital......................................................... 473,784 Total liabilities, limited-life preferred stock, and equity capital.......... 6,118,520
2 EX-27.1 31 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PACER INTERNATIONAL, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0001091735 PACER 1,000 YEAR OTHER DEC-25-1998 DEC-26-1997 DEC-27-1997 NOV-14-1997 DEC-25-1998 DEC-26-1997 0 0 0 0 43,900 33,400 100 100 0 0 47,400 35,900 95,400 56,500 6,600 600 156,000 111,900 84,600 68,400 0 0 0 0 0 0 0 0 55,600 29,600 156,100 111,900 566,100 57,700 590,800 60,000 471,500 48,500 558,300 58,000 0 0 0 0 0 300 33,200 11,700 12,600 700 20,600 1,000 0 0 0 0 0 0 20,600 1,000 0 0 0 0
EX-27.2 32 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PACER INTERNATIONAL, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0001091735 PACER 1,000 OTHER YEAR DEC-26-1997 DEC-27-1996 DEC-28-1996 DEC-28-1995 NOV-12-1997 DEC-27-1995 0 0 0 0 0 39,200 0 100 0 0 0 42,600 0 93,900 0 67,900 0 71,400 0 68,700 0 0 0 0 0 0 0 0 0 (100) 0 71,400 498,400 526,600 517,100 548,000 415,400 422,100 480,900 486,700 0 0 0 0 2,000 0 36,800 61,500 13,900 23,400 22,900 38,100 0 0 0 0 0 0 22,900 38,100 0 0 0 0
EX-99.1 33 FORM LETTER OF TRANSMITTAL Exhibit 99.1 PACER INTERNATIONAL, INC. LETTER OF TRANSMITTAL for Tender of all Outstanding 11 3/4% Senior Subordinated Notes due 2007 in exchange for 11 3/4% Series B Senior Subordinated Notes due 2007 Which Have Been Registered Under the Securities Act of 1933 Pursuant to the Prospectus dated , 1999 THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1999, UNLESS THE EXCHANGE OFFER IS EXTENDED. To: Wilmington Trust Company (the "Exchange Agent") By Registered or Certified Mail: By Hand Delivery: By Courier: Wilmington Trust Company Wilmington Trust Company Wilmington Trust Company Rodney Square North Rodney Square North Rodney Square North 1100 North Market Street 1100 North Market Street 1100 North Market Street Wilmington, DE 19890 Wilmington, DE 19890 Wilmington, DE 19890 Attn: Corporate Trust Attn: Corporate Trust Attn: Corporate Trust Administration, Ann Roberts Administration, Ann Roberts Administration, Ann Roberts
Facsimile for Eligible Institutions: Wilmington Trust Company (302) 651-8882 To Confirm by Telephone: (302) 651-8681 DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OR TRANSMISSION TO A FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES, IS AT THE RISK OF THE HOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. The undersigned acknowledges that he or she has received the Prospectus, dated , 1999 (the "Prospectus") of Pacer International, Inc., a Tennessee corporation (the "Company") and this Letter of Transmittal and the instructions hereto (the "Letter of Transmittal"), which together constitute the Company's offer (the "Exchange Offer") to exchange $1,000 principal amount of its 11 3/4% Series B Senior Subordinated Notes due 2007 (the "Exchange Notes") that have been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a Registration Statement of which the Prospectus is a part, for each $1,000 principal amount of its outstanding 11 3/4% Senior Subordinated Notes due 2007 (the "Old Notes"), of which $150,000,000 aggregate principal amount is outstanding, upon the terms and subject to the conditions set forth in the Prospectus. The term "Expiration Date" shall mean 5:00 p.m., New York City time, on , 1999, unless the Company, in its sole discretion, extends the Exchange Offer, in which case the term shall mean the latest date and time to which the Exchange Offer is extended by the Company. Capitalized terms used but not defined herein have the meaning given to them in the Prospectus. This Letter of Transmittal is to be used either if (i) certificates representing Old Notes are to be physically delivered to the Exchange Agent herewith by Holders, (ii) tender of Old Notes is to be made by book-entry transfer to an account maintained by the Exchange Agent at The Depository Trust Company ("DTC"), pursuant to the procedures set forth in "The Exchange Offer--Procedures for Tendering" in the Prospectus by any financial institution that is a participant in DTC and whose name appears on a security position listing as the owner of Old Notes or (iii) tender of Old Notes is to be made according to the guaranteed delivery procedures set forth in the Prospectus under "The Exchange Offer--Guaranteed Delivery Procedures." Delivery of this Letter of Transmittal and any other required documents must be made to the Exchange Agent. Delivery of documents to DTC does not constitute delivery to the Exchange Agent. The term "Holder" as used herein means any person in whose name Old Notes are registered on the books of the Company or any other person who has obtained a properly completed bond power from the registered holder. All Holders of Old Notes who wish to tender their Old Notes must, prior to the Expiration Date: (1) complete, sign, and deliver this Letter of Transmittal, or a facsimile thereof, to the Exchange Agent, in person or to the address set forth above; and (2) tender (and not withdraw) his or her Old Notes or, if a tender of Old Notes is to be made by book-entry transfer to the account maintained by the Exchange Agent at DTC, confirm such book-entry transfer (a "Book-Entry Confirmation"), in each case in accordance with the procedures for tendering described in the Instructions to this Letter of Transmittal. Holders of Old Notes whose certificates are not immediately available, or who are unable to deliver their certificates or Book-Entry Confirmation and all other documents required by this Letter of Transmittal to be delivered to the Exchange Agent on or prior to the Expiration Date, must tender their Old Notes according to the guaranteed delivery procedures set forth under the caption "The Exchange Offer--Guaranteed Delivery Procedures" in the Prospectus. (See Instruction 2.) Upon the terms and subject to the conditions of the Exchange Offer, the acceptance for exchange of the Old Notes validly tendered and not withdrawn and the issuance of the Exchange Notes will be made promptly following the Expiration Date. For the purposes of the Exchange Offer, the Company shall be deemed to have accepted for exchange validly tendered Old Notes when, as and if the Company has given written notice thereof to the Exchange Agent. The undersigned has completed, executed and delivered this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer. Holders who wish to tender their Old Notes must complete this Letter of Transmittal in its entirety. Please read the entire Letter of Transmittal and the Prospectus carefully before checking any box below. The instructions included in this Letter of Transmittal must be followed. Questions and requests for assistance or for additional copies of the Prospectus, this Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to the Exchange Agent. See Instruction 12 herein. Holders who wish to accept the Exchange Offer and tender their Old Notes must complete this Letter of Transmittal in its entirety and comply with all of its terms. 2 List below the Old Notes to which this Letter of Transmittal relates. If the space provided below is inadequate, the Certificate Numbers and Principal Amounts should be listed on a separate signed schedule, attached hereto. The minimum permitted tender is $1,000 in principal amount of each of the 11 3/4% Senior Subordinated Notes due 2007. All other tenders must be in integral multiples of $1,000. DESCRIPTION OF 11 3/4% SENIOR SUBORDINATED NOTES DUE 2007 Box I
- ---------------------------------------------------------------------------------------------------------------------- Name(s) and Address(es) of Registered Holder(s)* (Please fill in, if blank) - ---------------------------------------------------------------------------------------------------------------------- (A) (B) Aggregate Principal Certificate Number(s)* Amount Tendered (if less than all)** --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- Total Principal Amount of Old Notes Tendered - ----------------------------------------------------------------------------------------------------------------------
- ------- * Need not be completed by book-entry holders. ** Need not be completed by Holders who wish to tender with respect to all Old Notes listed. 3 PLEASE READ CAREFULLY THE ACCOMPANYING INSTRUCTIONS Box II Box III SPECIAL REGISTRATION SPECIAL DELIVERY INSTRUCTIONS (See Instructions 4, INSTRUCTIONS 5 and 6) (See Instructions 4, 5 and 6) To be completed ONLY if To be completed ONLY if certificates for Old Notes in a certificates for Old Notes in a principal amount not tendered, or principal amount not tendered, or Exchange Notes issued in exchange Exchange Notes issued in exchange for Old Notes accepted for for Old Notes accepted for exchange, are to be issued in the exchange, are to be delivered to name of someone other than the someone other than the undersigned. undersigned. Issue certificate(s) to: Deliver certificate(s) to: Name _____________________________ Name _____________________________ (Please Print) (Please Print) __________________________________ __________________________________ (Please Print) (Please Print) Address __________________________ Address __________________________ __________________________________ __________________________________ (Include Zip Code) (Include Zip Code) __________________________________ __________________________________ (Tax Identification or Social (Tax Identification or Social Security Number) Security Number) IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE HEREOF (TOGETHER WITH THE CERTIFICATE(S) FOR OLD NOTES OR A CONFIRMATION OF BOOK-ENTRY TRANSFER OF SUCH OLD NOTES AND ALL OTHER REQUIRED DOCUMENTS) OR, IF GUARANTEED DELIVERY PROCEDURES ARE TO BE COMPLIED WITH, A NOTICE OF GUARANTEED DELIVERY, MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE. [_]CHECK HERE IF OLD NOTES ARE BEING DELIVERED BY DTC TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE THE FOLLOWING: Name of Tendering Institution _____________ [_] The Depository Trust Company Account Number _____________________________________________________________ Transaction Code Number ____________________________________________________ Holders whose Old Notes are not immediately available or who cannot deliver their Old Notes and all other documents required hereby to the Exchange Agent on or prior to the Expiration Date may tender their Old Notes according to the guaranteed delivery procedures set forth in the Prospectus under the caption "The Exchange Offer--Guaranteed Delivery Procedures." (See Instruction 2.) 4 [_]CHECK HERE IF OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING: Name(s) of tendering Holder(s) _____________________________________________ Date of Execution of Notice of Guaranteed Delivery _________________________ Name of Institution which Guaranteed Delivery ______________________________ Transaction Code Number ____________________________________________________ [_]CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: ______________________________________________________________________ Address: ___________________________________________________________________ If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Old Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: Subject to the terms and conditions of the Exchange Offer, the undersigned hereby tenders to Pacer International, Inc. (the "Company") the principal amount of Old Notes indicated above. Subject to and effective upon the acceptance for exchange of the principal amount of Old Notes tendered hereby in accordance with this Letter of Transmittal, the undersigned sells, assigns and transfers to, or upon the order of, the Company all right, title and interest in and to the Old Notes tendered hereby. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as its agent and attorney-in-fact (with full knowledge that the Exchange Agent also acts as the agent of the Company and as Trustee and Registrar under the Indenture for the Old Notes and the Exchange Notes) with respect to the tendered Old Notes with full power of substitution (such power of attorney being deemed an irrevocable power coupled with an interest), subject only to the right of withdrawal described in the Prospectus, to (i) deliver certificates for such Old Notes to the Company or transfer ownership of such Old Notes on the account books maintained by DTC, together, in either such case, with all accompanying evidences of transfer and authenticity to, or upon the order of, the Company and (ii) present such Old Notes for transfer on the books of the Company and receive all benefits and otherwise exercise all rights of beneficial ownership of such Old Notes, all in accordance with the terms of the Exchange Offer. The undersigned acknowledges that the Exchange Offer is being made in reliance upon interpretative advice given by the staff of the Securities and Exchange Commission to third parties in connection with transactions similar to the Exchange Offer, so that the Exchange Notes issued pursuant to the Exchange Offer in exchange for the Old Notes may be offered for resale, resold and otherwise transferred by holders thereof (other than a broker-dealer who purchased such Old Notes directly from the Company for resale pursuant to Rule 144A or any other available exemption under the Securities Act or a person that is an "affiliate" of the Company or any Guarantor within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such Exchange Notes are acquired in the ordinary course of such holders' business and such holders have no arrangement with any person to participate in the distribution of such Exchange Notes. 5 The undersigned agrees that acceptance of any tendered Old Notes by the Company and the issuance of Exchange Notes in exchange therefor shall constitute performance in full by the Company of its obligations under the Registration Rights Agreement, (as defined in the Prospectus) and that, upon the issuance of the Exchange Notes, the Company will have no further obligations or liabilities thereunder (except in certain limited circumstances). The undersigned represents and warrants that (i) the Exchange Notes acquired pursuant to the Exchange Offer are being acquired in the ordinary course of business of the person receiving Exchange Notes (which shall be the undersigned unless otherwise indicated in the box entitled "Special Delivery Instructions" above) (the "Recipient"), (ii) neither the undersigned nor the Recipient (if different) is engaged in, intends to engage in or has any arrangement or understanding with any person to participate in the distribution of such Exchange Notes, and (iii) neither the undersigned nor the Recipient (if different) is an "affiliate" of the Company or any Guarantor as defined in Rule 405 under the Securities Act. If the undersigned is not a broker-dealer, the undersigned further represents that it is not engaged in, and does not intend to engage in, a distribution of the Exchange Notes. If the undersigned is a broker-dealer, the undersigned further (x) represents that it acquired Old Notes for the undersigned's own account as a result of market- making activities or other trading activities, (y) represents that it has not entered into any arrangement or understanding with the Company or any "affiliate" of the Company (within the meaning of Rule 405 under the Securities Act) to distribute the Exchange Notes to be received in the Exchange Offer and (z) acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act (for which purposes delivery of the Prospectus, as the same may be hereafter supplemented or amended, shall be sufficient) in connection with any resale of Exchange Notes received in the Exchange Offer. Such a broker-dealer will not be deemed, solely by reason of such acknowledgment and prospectus delivery, to admit that it is an "underwriter" within the meaning of the Securities Act. The undersigned understands and agrees that the Company reserves the right not to accept tendered Old Notes from any tendering holder if the Company determines, in its sole and absolute discretion, that such acceptance could result in a violation of applicable securities laws. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, exchange, assign and transfer the Old Notes tendered hereby and to acquire Exchange Notes issuable upon the exchange of such tendered Old Notes, and that, when the same are accepted for exchange, the Company will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim. The undersigned also warrants that it will, upon request, execute and deliver any additional documents deemed to be necessary or desirable by the Exchange Agent or the Company in order to complete the exchange, assignment and transfer of tendered Old Notes or transfer of ownership of such Old Notes on the account books maintained by a book-entry transfer facility. The undersigned understands and acknowledges that the Company reserves the right in its sole discretion to purchase or make offers for any Old Notes that remain outstanding subsequent to the Expiration Date or, as set forth in the Prospectus under the caption "The Exchange Offer--Procedures for Tendering," to terminate the Exchange Offer and, to the extent permitted by applicable law, purchase Old Notes in the open market, in privately negotiated transactions or otherwise. The terms of any such purchases or offers could differ from the terms of the Exchange Offer. The undersigned understands that the Company may accept the undersigned's tender by delivering written notice of acceptance to the Exchange Agent, at which time the undersigned's right to withdraw such tender will terminate. For purposes of the Exchange Offer, the Company shall be deemed to have accepted validly tendered Old Notes when, as and if the Company has given oral (which shall be confirmed in writing) or written notice thereof to the Exchange Agent. The undersigned understands that the first interest payment following the Expiration Date will include unpaid interest on the Old Notes accrued through the date of issuance of the Exchange Notes. The undersigned understands that tenders of Old Notes pursuant to the procedures described under the caption "The Exchange Offer--Procedures for Tendering" in the Prospectus and in the instructions hereto will constitute a binding agreement between the undersigned and the Company upon the terms and subject to the conditions of the Exchange Offer. The undersigned acknowledges that the Exchange Offer is subject to the more detailed terms set forth in the Prospectus and, in case of any conflict between the terms of the Prospectus and this Letter of Transmittal, the Prospectus shall prevail. 6 If any tendered Old Notes are not accepted for exchange pursuant to the Exchange Offer for any reason, certificates for any such unaccepted Old Notes will be returned (except as noted below with respect to tenders through DTC), at the Company's cost and expense, to the undersigned at the address shown below or at a different address as may be indicated herein under "Special Delivery Instructions" as promptly as practicable after the Expiration Date. All authority conferred or agreed to be conferred by this Letter of Transmittal shall survive the death, incapacity or dissolution of the undersigned, and every obligation of the undersigned under this Letter of Transmittal shall be binding upon the undersigned's heirs, personal representatives, successors and assigns. This tender may be withdrawn only in accordance with the procedures set forth in this Letter of Transmittal. By acceptance of the Exchange Offer, each broker-dealer that receives Exchange Notes pursuant to the Exchange Offer hereby acknowledges and agrees that upon the receipt of notice by the Company of the happening of any event which makes any statement in the Prospectus untrue in any material respect or which requires the making of any changes in the Prospectus in order to make the statements therein not misleading (which notice the Company agrees to deliver promptly to such broker-dealer), such broker-dealer will suspend use of the Prospectus until the Company has amended or supplemented the Prospectus to correct such misstatement or omission and has furnished copies of the amended or supplemented prospectus to such broker-dealer. Unless otherwise indicated under "Special Registration Instructions," please issue the certificates representing the Exchange Notes issued in exchange for the Old Notes accepted for exchange and return any certificates for Old Notes not tendered or not exchanged, in the name(s) of the undersigned (or, in either such event in the case of Old Notes tendered by DTC, by credit to the account at DTC). Similarly, unless otherwise indicated under "Special Delivery Instructions," please send the certificates representing the Exchange Notes issued in exchange for the Old Notes accepted for exchange and any certificates for Old Notes not tendered or not exchanged (and accompanying documents, as appropriate) to the undersigned at the address shown below the undersigned's signature(s), unless, in either event, tender is being made through DTC. In the event that both "Special Registration Instructions" and "Special Delivery Instructions" are completed, please issue the certificates representing the Exchange Notes issued in exchange for the Old Notes accepted for exchange in the name(s) of, and return any certificates for Old Notes not tendered or not exchanged to, the person(s) so indicated. The undersigned understands that the Company has no obligations pursuant to the "Special Registration Instructions" or "Special Delivery Instructions" to transfer any Old Notes from the name of the registered Holder(s) thereof if the Company does not accept for exchange any of the Old Notes so tendered. Holders who wish to tender the Old Notes and (i) whose Old Notes are not immediately available or (ii) who cannot deliver their Old Notes, this Letter of Transmittal or any other documents required hereby to the Exchange Agent prior to the Expiration Date, may tender their Old Notes according to the guaranteed delivery procedures set forth in the Prospectus under the caption "The Exchange Offer--Guaranteed Delivery Procedures." See Instruction 1 regarding the completion of the Letter of Transmittal. 7 PLEASE SIGN HERE WHETHER OR NOT OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY AND WHETHER OR NOT TENDER IS TO BE MADE PURSUANT TO THE GUARANTEED DELIVERY PROCEDURES This Letter of Transmittal must be signed by the registered holder(s) as their name(s) appear on the Old Notes or, if tendered by a participant in DTC, exactly as such participant's name appears on a security listing as the owner of Old Notes, or by person(s) authorized to become registered holder(s) by a properly completed bond power from the registered holder(s), a copy of which must be transmitted with this Letter of Transmittal. If Old Notes to which this Letter of Transmittal relate are held of record by two or more joint holders, then all such holders must sign this Letter of Transmittal. If signature is by a trustee, executor, administrator, guardian, attorney-in- fact, officer of a corporation or other person acting in a fiduciary or representative capacity, then such person must (i) set forth his or her full title below and (ii) unless waived by the Company, submit evidence satisfactory to the Company of such person's authority so to act. (See Instruction 4.) X ____________________________________ ______________________________________ Date X ____________________________________ ______________________________________ Date Date Signature(s) of Holder(s) or Authorized Signatory Name(s): Name(s): _____________________________ Address: _____________________________ Name(s): _____________________________ Address: _____________________________ (Please Print) (including Zip Code) Capacity: ____________________________ Area Code and Telephone Number: ______ Social Security No.: _________________ PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN 8 Box IV SIGNATURE GUARANTEE (See Instruction 1) Certain Signatures Must Be Guaranteed by an Eligible Institution ------------------------------------------------------------------------------ (Name of Eligible Institution Guaranteeing Signatures) ------------------------------------------------------------------------------ (Address (including zip code) and Telephone Number (including area code) of Firm) ------------------------------------------------------------------------------ (Authorized Signature) ------------------------------------------------------------------------------ (Printed Name) ------------------------------------------------------------------------------ (Title) Date: ____________________ INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. Guarantee of Signatures. Signatures on this Letter of Transmittal need not be guaranteed if (a) this Letter of Transmittal is signed by the registered holder(s) of the Old Notes tendered herewith and such holder(s) have not completed the box set forth herein entitled "Special Registration Instructions" or the box entitled "Special Delivery Instructions" or (b) such Old Notes are tendered for the account of an Eligible Institution. (See Instruction 6.) Otherwise, all signatures on this Letter of Transmittal or a notice of withdrawal, as the case may be, must be guaranteed by a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office or correspondent in the United States (an "Eligible Institution"). All signatures on bond powers and endorsements on certificates must also be guaranteed by an Eligible Institution. 2. Delivery of this Letter of Transmittal and Old Notes. Certificates for all physically delivered Old Notes or confirmation of any book-entry transfer to the Exchange Agent at DTC of Old Notes tendered by book-entry transfer, as well as, in each case (including cases where tender is affected by book-entry transfer), a properly completed and duly executed copy of this Letter of Transmittal or facsimile hereof and any other documents required by this Letter of Transmittal must be received by the Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City time, on the Expiration Date. The method of delivery of the tendered Old Notes, this Letter of Transmittal and all other required documents to the Exchange Agent is at the election and risk of the Holder and the delivery will be deemed made only when actually received by the Exchange Agent. If Old Notes are sent by mail, registered mail with return receipt requested, properly insured, is recommended. In all cases, sufficient time should be allowed to ensure timely delivery. No Letter of Transmittal or Old Notes should be sent to the Company. The Exchange Agent will make a request to establish an account with respect to the Old Notes at the Depositary for purposes of the Exchange Offer within two business days after receipt of this Prospectus, and any financial institution that is a participant in the Depositary may make book-entry delivery of Old Notes by causing the Depositary to transfer such Old Notes into the Exchange Agent's account at the Depositary in accordance with the Depositary's procedures for transfer. 9 However, although delivery of Old Notes may be effected through book-entry transfer at the Depositary, the Letter of Transmittal, with any required signature guarantees or an Agent's Message (as defined below) in connection with a book-entry transfer and any other required documents, must, in any case, be transmitted to and received by the Exchange Agent at the address specified on the cover page of the Letter of Transmittal on or prior to the Expiration Date or the guaranteed delivery procedures described below must be complied with. A Holder may tender Old Notes that are held through the Depositary by transmitting its acceptance through the Depositary's Automatic Tender Offer Program, for which the transaction will be eligible, and the Depositary will then edit and verify the acceptance and send an Agent's Message to the Exchange Agent for its acceptance. The term "Agent's Message" means a message transmitted by the Depositary to, and received by, the Exchange Agent and forming part of the Book-Entry Confirmation, which states that the Depositary has received an express acknowledgment from each participant in the Depositary tendering the Old Notes and that such participant has received the Letter of Transmittal and agrees to be bound by the terms of the Letter of Transmittal and the Company may enforce such agreement against such participant. Holders who wish to tender their Old Notes and (i) whose Old Notes are not immediately available, or (ii) who cannot deliver their Old Notes, this Letter of Transmittal or any other documents required hereby to the Exchange Agent prior to the Expiration Date or comply with book-entry transfer procedures on a timely basis must tender their Old Notes according to the guaranteed delivery procedures set forth in the Prospectus. See "The Exchange Offer-- Guaranteed Delivery Procedures." Pursuant to such procedure: (i) such tender must be made by or through an Eligible Institution; (ii) prior to the Expiration Date, the Exchange Agent must have received from the Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, overnight courier, mail or hand delivery) setting forth the name and address of the Holder of the Old Notes, the certificate number or numbers of such Old Notes and the principal amount of Old Notes tendered, stating that the tender is being made thereby and guaranteeing that, within three New York Stock Exchange trading days after the Expiration Date, this Letter of Transmittal (or facsimile hereof) together with the certificate(s) representing the Old Notes and any other required documents will be deposited by the Eligible Institution with the Exchange Agent; and (iii) such properly completed and executed Letter of Transmittal (or facsimile hereof), as well as all other documents required by this Letter of Transmittal and the certificate(s) representing all tendered Old Notes in proper form for transfer (or a confirmation of book-entry transfer of such Old Notes into the Exchange Agent's account at DTC), must be received by the Exchange Agent within three New York Stock Exchange trading days after the Expiration Date, all in the manner provided in the Prospectus under the caption "The Exchange Offer--Guaranteed Delivery Procedures." Any Holder who wishes to tender his Old Notes pursuant to the guaranteed delivery procedures described above must ensure that the Exchange Agent receives the Notice of Guaranteed Delivery prior to 5:00 p.m., New York City time, on the Expiration Date. Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be sent to Holders who wish to tender their Old Notes according to the guaranteed delivery procedures set forth above. All questions as to the validity, form, eligibility (including time of receipt), acceptance of tendered Old Notes, and withdrawal of tendered Old Notes will be determined by the Company in its sole discretion, which determination will be final and binding. All tendering holders, by execution of this Letter of Transmittal (or facsimile thereof), shall waive any right to receive notice of the acceptance of the Old Notes for exchange. The Company reserves the absolute right to reject any and all Old Notes not properly tendered or any Old Notes the Company's acceptance of which would, in the opinion of counsel for the Company, be unlawful. The Company also reserves the right to waive any irregularities or conditions of tender as to particular Old Notes, The Company's interpretation of the terms and conditions of the Exchange Offer (including the instructions in this Letter of Transmittal) shall be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Old Notes must be cured within such time as the Company shall determine. Neither the Company, the Exchange Agent nor any other person shall be under any duty to give notification of defects or irregularities with respect to tenders of Old Notes, nor shall any of them incur any liability for failure to give such notification. Tenders of Old Notes will not be deemed to have been made until such defects or irregularities have been cured to the Company's satisfaction or waived. Any Old Notes received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the Exchange Agent to the tendering Holders pursuant to the Company's determination, unless otherwise provided in this Letter of Transmittal as soon as practicable following the Expiration Date. The Exchange Agent has no fiduciary duties to the Holders with respect to the Exchange Offer and is acting solely on the basis of directions of the Company. 10 3. Inadequate Space. If the space provided is inadequate, the certificate numbers and/or the number of Old Notes should be listed on a separate signed schedule attached hereto. 4. Tender by Holder. Only a Holder of Old Notes may tender such Old Notes in the Exchange Offer. Any beneficial owner of Old Notes who is not the registered Holder and who wishes to tender should arrange with such registered holder to execute and deliver this Letter of Transmittal on such beneficial owner's behalf or must, prior to completing and executing this Letter of Transmittal and delivering his Old Notes, either make appropriate arrangements to register ownership of the Old Notes in such beneficial owner's name or obtain a properly completed bond power from the registered holder or properly endorsed certificates representing such Old Notes. 5. Partial Tenders; Withdrawals. Tenders of Old Notes will be accepted only in integral multiples of $1,000. If less than the entire principal amount of any Old Notes is tendered, the tendering Holder should fill in the principal amount tendered in the third column of the box entitled "Description of 11 3/4% Senior Subordinated Notes due 2007" above. The entire principal amount of any Old Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. If the entire principal amount of all Old Notes is not tendered, then Old Notes for the principal amount of Old Notes not tendered and a certificate or certificates representing Exchange Notes issued in exchange for any Old Notes accepted will be sent to the Holder at his or her registered address, unless a different address is provided in the "Special Delivery Instructions" box above on this Letter of Transmittal or unless tender is made through DTC, promptly after the Old Notes are accepted for exchange. Except as otherwise provided herein, tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. To withdraw a tender of Old Notes in the Exchange Offer, a written or facsimile transmission notice of withdrawal must be received by the Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City time, on the Expiration Date. Any such notice of withdrawal must (i) specify the name of the person having deposited the Old Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be withdrawn (including the certificate number or numbers and principal amount of such Old Notes, or, in the case of Old Notes transferred by book-entry transfer the name and number of the account at DTC to be credited), (iii) be signed by the Depositor in the same manner as the original signature on the Letter of Transmittal by which such Old Notes were tendered (including any required signature guarantees) or be accompanied by documents of transfer sufficient to have the Registrar with respect to the Old Notes register the transfer of such Old Notes into the name of the person withdrawing the tender and (iv) specify the name in which any such Old Notes are to be registered, if different from that of the Depositor. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Company, whose determination shall be final and binding on all parties. Any Old Notes so withdrawn will be deemed not to have been validly tendered for purposes of the Exchange Offer and no Exchange Notes will be issued with respect thereto unless the Old Notes so withdrawn are validly retendered. Any Old Notes which have been tendered but which are not accepted for exchange by the Company will be returned to the Holder thereof without cost to such Holder as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Old Notes may be retendered by following one of the procedures described in the Prospectus under "The Exchange Offer--Procedures for Tendering" at any time prior to the Expiration Date. 6. Signatures on the Letter of Transmittal; Bond Powers and Endorsements. If this Letter of Transmittal (or facsimile hereof) is signed by the registered holder(s) of the Old Notes tendered hereby, the signature must correspond with the name(s) as written on the face of the Old Note without alteration, enlargement or any change whatsoever. If any of the Old Notes tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If a number of Old Notes registered in different names are tendered, it will be necessary to complete, sign and submit as many copies of this Letter of Transmittal as there are different registrations of Old Notes. If this Letter of Transmittal (or facsimile hereof) is signed by the registered Holder or Holders (which term, for the purposes described herein, shall include a book-entry transfer facility whose name appears on a security listing as the owner of the Old Notes) of Old Notes tendered and the certificate or certificates for Exchange Notes issued in exchange therefor is 11 to be issued (or any untendered principal amount of Old Notes to be reissued) to the registered Holder, then such Holder need not and should not endorse any tendered Old Notes, nor provide a separate bond power. In any other case, such Holder must either properly endorse the Old Notes tendered or transmit a properly completed separate bond power with this Letter of Transmittal with the signatures on the endorsement or bond power guaranteed by an Eligible Institution. If this Letter of Transmittal (or facsimile hereof) is signed by a person other than the registered Holder or Holders of any Old Notes listed, such Old Notes must be endorsed or accompanied by appropriate bond powers in each case signed as the name of the registered Holder or Holders appears on the Old Notes. If this Letter of Transmittal (or facsimile hereof) or any Old Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, or officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and unless waived by the Company, evidence satisfactory to the Company of their authority so to act must be submitted with this Letter of Transmittal. Endorsements on Old Notes or signatures on bond powers required by this Instruction 6 must be guaranteed by an Eligible Institution. 7. Special Registration and Delivery Instructions. Tendering Holders should indicate, in the applicable box or boxes, the name and address to which Exchange Notes or substitute Old Notes for principal amounts not tendered or not accepted for exchange are to be issued or sent, if different from the name and address of the person signing this Letter of Transmittal. In the case of issuance in a different name, the taxpayer identification or social security number of the person named must also be indicated. 8. Backup Federal Income Tax Withholding and Substitute Form W-9. Under the federal income tax laws, payments that may be made by the Company on account of Exchange Notes issued pursuant to the Exchange Offer may be subject to backup withholding at the rate of 31%. In order to avoid such backup withholding, each tendering holder should complete and sign the Substitute Form W-9 included in this Letter of Transmittal and either (a) provide the correct taxpayer identification number ("TIN") and certify, under penalties of perjury, that the TIN provided is correct and that (i) the holder has not been notified by the Internal Revenue Service (the "IRS") that the holder is subject to backup withholding as a result of failure to report all interest or dividends or (ii) the IRS has notified the holder that the holder is no longer subject to backup withholding; or (b) provide an adequate basis for exemption. If the tendering holder has not been issued a TIN and has applied for one, or intends to apply for one in the near future, such holder should check the box in Part 3 of the Substitute Form W-9, sign and date the Substitute Form W-9 and sign the Certificate of Payee Awaiting Taxpayer Identification Number. If the box in Part 3 is checked, the Company (or the Paying Agent under the Indenture governing the Exchange Notes) shall retain 31% of payments made to the tendering holder during the sixty-day period following the date of the Substitute Form W-9. If the Holder furnishes the Exchange Agent or the Company with its TIN within sixty days after the date of the Substitute Form W-9, the Company (or the Paying Agent) shall remit such amounts retained during the sixty-day period to the Holder and no further amounts shall be retained or withheld from payments made to the Holder thereafter. If, however, the Holder has not provided the Exchange Agent or the Company with its TIN within such sixty-day period, the Company (or the Paying Agent) shall remit such previously retained amounts to the IRS as backup withholding. In general, if a Holder is an individual, the TIN is the Social Security number of such individual. If the Exchange Agent or the Company are not provided with the correct TIN, the Holder may be subject to a $50 penalty imposed by the Internal Revenue Service. Certain Holders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, such Holder must submit a statement (generally, IRS Form W-8), signed under penalties of perjury, attesting to that individual's exempt status. Such statements can be obtained from the Exchange Agent. For further information concerning backup withholding and instructions for completing the Substitute Form W-9 (including how to obtain a taxpayer identification number if you do not have one and how to complete the 12 Substitute Form W-9 if Old Notes are registered in more than one name), consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. Failure to complete the Substitute Form W-9 will not, by itself, cause Old Notes to be deemed invalidly tendered, but may require the Company (or the Paying Agent) to withhold 31% of the amount of any payments made on account of the Exchange Notes. Backup withholding is not an additional federal income tax. Rather, the federal income tax liability of a person subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the IRS. 9. Transfer Taxes. The Company will pay all transfer taxes, if any, applicable to the exchange of Old Notes pursuant to the Exchange Offer. If, however, certificates representing Exchange Notes or Old Notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be registered in the name of, any person other than the registered holder of the Old Notes tendered hereby, or if tendered Old Notes are registered in the name of a person other than the person signing this Letter of Transmittal, or if a transfer tax is imposed for any reason other than the exchange of Old Notes pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered holder or on any other persons) will be payable by the tendering Holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with this Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering Holder. See the Prospectus under "The Exchange Offer--Solicitation of Tenders; Fees and Expenses." Except as provided in this Instruction 9, it will not be necessary for transfer tax stamps to be affixed to the Old Notes listed in this Letter of Transmittal. 10. Waiver of Conditions. The Company reserves the right, in their sole discretion, to amend, waive or modify specified conditions in the Exchange Offer in the case of any Old Notes tendered. 11. Mutilated, Lost, Stolen or Destroyed Old Notes. Any tendering Holder whose Old Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated herein for further instructions. 12. Requests for Assistance or Additional Copies. Requests for assistance and requests for additional copies of the Prospectus or this Letter of Transmittal may be directed to the Exchange Agent at the address specified in the Prospectus. Holder may also contact their broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Exchange Offer. 13 (DO NOT WRITE IN SPACE BELOW)
Certificate Surrendered Old Notes Tendered Old Notes Accepted ______________________________ ______________________________ ______________________________ ______________________________ ______________________________ ______________________________ Date Received_________________ Checked by____________________ Date__________________________ Delivery Prepared by__________ Checked by____________________ Date__________________________
IMPORTANT TAX INFORMATION Under federal income tax laws, a Holder whose tendered Old Notes are accepted for payment is required to provide the Exchange Agent (as payer) with such Holder's correct TIN on Substitute Form W-9 below or otherwise establish a basis for exemption from backup withholding. If such Holder is an individual, the TIN is his social security number. If the Exchange Agent is not provided with the correct TIN, a $50 penalty may be imposed by the Internal Revenue Service, and payments made pursuant to the Exchange Offer may be subject to backup withholding. Certain Holders (including, among others, all corporations and certain foreign persons) are not subject to these backup withholding and reporting requirements. Exempt Holders should indicate their exempt status on Substitute Form W-9. A foreign person may qualify as an exempt recipient by submitting to the Exchange Agent a properly completed Internal Revenue Service Form W-8, signed under penalties of perjury, attesting to that Holder's exempt status. A Form W-8 can be obtained from the Exchange Agent. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional instructions. If backup withholding applies, the Exchange Agent is required to withhold 20% of any payments made to the Holder or other payee. Backup withholding is not an additional federal income tax. Rather, the federal income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. Purpose of Substitute Form W-9 To prevent backup withholding on payments made with respect to the Exchange Offer, the Holder is required to provide the Exchange Agent with either: (i) the Holder's correct TIN by completing the form below, certifying that the TIN provided on Substitute Form W-9 is correct (or that such Holder is awaiting a TIN) and that (A) the Holder has been notified by the Internal Revenue Service that the Holder is subject to backup withholding as a result of failure to report all interest or dividends or (B) the Internal Revenue Service has notified the Holder that the Holder is no longer subject to backup withholding or (ii) an adequate basis for exemption. What Number to Give the Exchange Agent The Holder is required to give the Exchange Agent the TIN (e.g., social security number or employer identification number) of the registered Holder of the Old Notes. If the Old Notes are held in more than one name or are held not in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report. 14 TO BE COMPLETED BY ALL TENDERING HOLDERS Payer's Name: Pacer International, Inc. - ------------------------------------------------------------------------------- Part 1--PLEASE PROVIDE YOUR Social Security TIN IN THE BOX AT RIGHT AND Number(s) or CERTIFY BY SIGNING AND DATING BELOW Employer Identification Number(s) SUBSTITUTE W-9 Form -------------------------- ----------------------------------------------------------- Part 2--Certification--Under penalties of perjury, I certify that: Department of the (1) The number shown on this form is my correct taxpayer Treasury identification number (or I am waiting for a number Internal Revenue to be issued to me), and Service Part 3--Awaiting TIN [_] Payer's Request For Taxpayer (2) I am not subject to back up withholding because: (a) Identification I am exempt from backup withholding, or (b) I have Number ("TIN") not been notified by the Internal Revenue Service and Certification (IRS) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to back up withholding. Certification Instructions--You must cross out item (2) above if you have been notified by the IRS that you are currently subject to backup withholding because of underreporting interest or dividends on your tax return. ----------------------------------------------------------- Name ________________________ Address _____________________ Signature ___________________ Date: _______________________ NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50 PENALTY IMPOSED BY THE INTERNAL REVENUE SERVICE AND BACKUP WITHHOLDING OF 31% OF ANY REPORTABLE CASH PAYMENTS. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9. CERTIFICATE OF PAYEE AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 31% of all reportable cash payments made to me thereafter will be withheld until I provide a taxpayer identification number. -------------------------------------- -------------------------------------- Signature Date 15 -----END PRIVACY-ENHANCED MESSAGE-----