AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 25, 1999

                                                      Registration No. 333-85041

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- --------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                               ----------------

                              AMENDMENT NO. 2
                                       TO
                                    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.

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   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).

   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.

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               SUBJECT TO COMPLETION, DATED OCTOBER 25, 1999

PROSPECTUS


                      [LOGO OF 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 validly           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 the
                                           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 other
   customary conditions described in
   this prospectus

                                        .  You may tender outstanding notes
                                           only in denominations of $1,000 and
                                           multiples of $1,000

                                        .  Affiliates of our company may not
                                           participate in the exchange offer

 .  You may withdraw your tender of
   outstanding notes at any time
   prior to the expiration of the
   exchange offer

   Please refer to "Risk Factors" beginning on page 12 of this document for a
 discussion of the risks that should be considered by holders before tendering
                                their old notes.


  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........................   12
The Exchange Offer..................   21
Use of Proceeds.....................   32
Unaudited Pro Forma Consolidated
 Financial Information..............   33
Selected Historical and Pro Forma
 Consolidated Financial
 Information........................   41
Management's Discussion and Analysis
 of Financial Condition and Results
 of Operations......................   47
Business............................   63
Management..........................   79
Related Transactions................   84
Material Agreements Relating to Our
 Recapitalization...................   86



                                     Page
                                     ----
                                  
Stock Ownership of Certain
 Beneficial Owners and Management..   92
Our Capital Stock..................   94
Description of Our Credit
 Agreement.........................   96
Description of Notes...............   99
Book-Entry; Delivery and Form......  138
Material Federal Income Tax
 Considerations....................  140
Plan of Distribution...............  141
Legal Matters......................  141
Change in Accountant...............  141
Experts............................  142
Index to Financial Statements and
 Financial Statement Schedule......  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, recent transactions entered into by us and
detailed financial data. In this prospectus, unless otherwise noted, the words
"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 the initial purchasers identified in this prospectus. The notes are
guaranteed by all of our subsidiaries.

   We and the 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 the conditions described in this prospectus.
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 cases where holders may require us to file
a shelf registration statement, 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.

                              We are offering to exchange $1,000 principal
The Exchange Offer..........  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 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.

                                       1



                              We will issue the exchange notes on or promptly
                              after the expiration of the exchange offer.

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.

Conditions to the Exchange
Offer.......................  The exchange offer is subject to the customary
                              conditions which are described in this prospectus
                              under the heading "The Exchange Offer--Conditions
                              to the Exchange Offer" and which may be waived by
                              us. The exchange offer is not conditioned upon
                              any minimum principal amount of notes being
                              tendered.

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."

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.

   For a more detailed description of the exchange offer, including the
procedures for tendering old notes, see "The Exchange Offer" elsewhere in this
prospectus.

                                       2



                     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 transfer restrictions contingent upon registration,
registration rights and the provisions providing for an increase in the
interest rate of the outstanding notes under 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.

Notes Offered.................
                                $150,000,000 aggregate principal amount of 11
                                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.

                                       3



Ranking.......................  The notes will rank behind all of our existing
                                and future senior debt and secured debt. As of
                                August 20, 1999, the notes were subordinated to
                                $135.0 million of senior debt, excluding unused
                                commitments of approximately $100.0 million
                                under our revolving credit facility. As of
                                August 20, 1999 we had no debt outstanding
                                ranking equally to the notes.

Material 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;

                                  .  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.........  All of our subsidiaries guarantee our
                                obligations under the notes. The guarantees are
                                full, unconditional, joint and several
                                obligations of the guarantors. 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
                                certificates representing the interests of all
                                the holders of the notes, 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 an actual certificate
                                representing your notes 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.



                                       4



                               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 a significant portion of all domestic
intermodal container shipments in 1998. We are also a leading intermodal
marketing company in the United States. 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 were $509.2 million, our net income was $7.8 million and our EBITDA
was $33.8 million for the six month period ended June 25, 1999. Through
implementation of our 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 one of the largest providers 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. We benefit from having
developed close working relationships with the railroads and we are the single
largest customer of our primary rail carrier, Union Pacific Railroad,
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 including numerous Fortune 500
companies. Intermodal marketing and logistics services are the process of
arranging door-to-door shipping via multiple modes of transportation. 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.

                                       5



   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.

Principal Executive Offices

   Our principal executive offices are located at 1340 Treat Boulevard, Suite
200, Walnut Creek, CA 94596 and our telephone number is (925) 979-4440.

                                       6



                              OUR RECAPITALIZATION

   In connection with the private offering of the notes, we were recapitalized
through

  (1) the purchase by entities formed by affiliates of Apollo Management,
      L.P. and by 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 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 199 double stack rail cars; and

  .  equity investments by 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 with the acquisition of Pacer Logistics, members of
Pacer Logistics management received shares of a series of Pacer Logistics
preferred stock exchangeable for our common stock. In connection with the
acquisition of Pacer Logistics, we used cash to refinance the existing debt of
Pacer Logistics, redeem outstanding Pacer Logistics preferred stock and make
payments in connection with other Pacer Logistics transactions. The sources of
funds used to complete the acquisition of Pacer Logistics 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 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 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.

                                       7



   Pacer International conducts business under the name Pacer Stacktrain. The
following chart sets forth our structure:


Affiliates of
  Apollo                                                          APL Limited
Management
  89.9%                                                               7.2%



                                Pacer International
                                     (Issuer)
                                100%


                                                              Pacer Logistics
                                                                 Management

                                                        Pacer Logistic Preferred
                                Pacer Logistics          Stock exchangeable for
                                  (Guarantor)             Pacer International
                                                              Common Stock




                                Pacer Logistics
                                 Subsidiaries
                                 (Guarantors)

   See "Use of Proceeds" for a description of our actual sources, including the
net proceeds from the private offering, and actual uses of funds for our
recapitalization and for the acquisition of Pacer Logistics.

                                       8


         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 six month period ended June 25, 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 acquisition of Pacer Logistics as
if they had occurred at the beginning of the first period presented. The
historical balance sheet data reflects the financial position of our business
as of June 25, 1999 including our recapitalization and the acquisition of Pacer
Logistics that occurred on May 28, 1999.

   Pacer International's fiscal year ends on the last Friday in December and
its six month period consisted of the first twenty-six weeks of the fiscal
year. As a result, Pacer International's 1998 year end is December 25, its 1999
fiscal year end is December 31 and its first six month period of 1999 ended on
June 25. The historical amounts for Pacer International in the pro forma
statements of operations for the six months ended June 25, 1999 represent the
operations of Pacer International including Pacer Logistics since the date of
the acquisition.

   Pacer Logistics' fiscal year ends on December 31, its five month interim
period ended on May 31 and its six month interim period ended on June 30, and
have been presented in the unaudited pro forma consolidated financial
statements without any adjustment for the difference in fiscal period ends
between Pacer International and Pacer Logistics or difference in acquisition
date and month end. The pro forma consolidated financial information reflects
our recapitalization and the acquisition of Pacer Logistics using the purchase
method of accounting for the acquisition of Pacer Logistics.

   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 acquisition of
Pacer Logistics 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 six months ended June 25, 1999 are not necessarily
indicative of the results that may be expected for the fiscal year ending
December 31, 1999.

                                       9


         SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION



                                                                   For the Six
                                                      For the      Months Ended
                                                 Fiscal Year Ended   June 25,
                                                 December 25, 1998     1999
                                                 ----------------- ------------
                                                  (in millions, except ratios
                                                     and statistical data)
                                                             
Statement of Operations Data:
Gross revenues..................................      $981.6          $509.2
Cost of purchased transportation and services...       780.4           404.9
Net revenues....................................       201.2           104.3
Direct operating expenses.......................        65.3            35.0
Selling, general and administrative expenses....        75.8            37.9
Income from operations..........................        55.0            29.0
Interest expense................................        30.1            14.9
Income before extraordinary loss................        13.3             7.8
Historical Balance Sheet Data (at period end):
Total assets....................................                      $432.3
Total debt......................................                       287.2
Exchangeable preferred stock....................                        24.4
Other Financial Data:
EBITDA (a)......................................      $ 64.8          $ 33.8
EBITDA margin (b)...............................        32.2%           32.4%
Depreciation....................................      $  6.1          $  3.1
Amortization....................................         3.7             1.7
Capital expenditures (c)........................         1.7             1.0
Cash interest expense (d).......................        28.5            14.1
Ratio of earnings to fixed charges (e)..........         1.5x            1.5x
EBITDA to cash interest expense.................         2.3x            2.4x

- --------

(a) 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 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. EBITDA as shown
    for the fiscal year ended December 25, 1998 has not been adjusted by $1.5
    million for the elimination of historical Pacer Logistics initial public
    offering costs or $0.6 million for historical Manufacturers Consolidation
    Service, Inc. initial public offering costs. EBITDA as shown for the six
    months ended June 25, 1999 has not been adjusted by $0.7 million for the
    elimination of a one time bonus payment related to the acquisition of Pacer
    Logistics. Additionally, Pacer International historically was allocated
    corporate overhead costs by APL Limited and though we believe the
    allocation was reasonable we believe our current corporate structure will
    effectively allow us to reduce the historical amounts by $3.0 million and
    $1.4 million, respectively for the fiscal year ended December 25, 1998 and
    the six months ended June 25, 1999. Estimates of reduction are after
    consideration of $2.8 million of estimated actual annual stand alone costs
    consisting of salaries and benefits of $1.7 million, outside salaries and
    consulting fees of $0.6 million and additional rent of $0.5 million.
(b) Pro forma EBITDA margins are calculated as a percentage of net revenues.
(c) In 1998, Pacer International purchased $39.7 million of railroad cars. In
    connection with our recapitalization and the acquisition of Pacer
    Logistics, we completed a sale and leaseback transaction for

                                       10


  199 railcars. On a pro forma basis, the capital expenditures related to
  these railcars has been eliminated and direct operating expenses have been
  increased by $2.5 million for the year ended December 25, 1998 and $1.0
  million for the six months ended June 25, 1999, to reflect the net impact on
  operating results of the additional lease expense less the historical
  depreciation on these railcars.
(d) Cash interest expense represents interest expense less amortization of
    debt issuance costs.
(e) For the purposes of the computation, the ratio of earnings to fixed
    charges has been calculated by dividing (A) income before income taxes
    plus fixed charges by (B) fixed charges. Fixed charges are defined as
    interest expense plus the estimated interest portion of rent expense. The
    estimated interest portion of rent expense is assumed to be one-third of
    rent expense.

                                      11


                                 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 Significant Debt Levels May Limit Our Flexibility in Obtaining Additional
Financing And In Pursuing Other Business Opportunities

   In order to complete our recapitalization and the acquisition of Pacer
Logistics, we incurred a high level of debt. As of June 25, 1999, after giving
effect to our recapitalization and the acquisition of Pacer Logistics, our
long-term debt was approximately $287.2 million, including $2.0 million drawn
under the $100.0 million revolving credit facility, while our total
capitalization was $272.7 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 because resources allocated to our
     debt obligations cannot be diverted without a risk of default.

We Have Substantial Existing Debt And May Incur Substantial Additional Debt,
So We May Be Unable To Pay Interest On The Notes Being Offered

   We now have, and will continue to have, a significant amount of
indebtedness. Our level of indebtedness could adversely affect our ability to:

  .  generate sufficient cash to service the debt securities;

  .  generate sufficient cash to service our other debt obligations; and

  .  obtain additional financing in the future.

   If our available cash is no longer sufficient to fund our expenditures and
debt service obligations, including the debt securities, we may need to raise
additional funds by:

  .  selling equity securities;

  .  refinancing all or a part of our indebtedness; or

  .  selling some of our assets.

   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.

                                      12


The Notes And The Guarantees Are Subordinate To Senior Indebtedness Thereby
Limiting The Assets Available To Pay Obligations On The Notes In A Liquidation,
Dissolution Or Bankruptcy Proceeding

   The notes and the guarantees are subordinate to all of our and the
guarantors' senior indebtedness including, without limitation, our credit
facilities. At August 20, 1999, after giving effect to our recapitalization and
the acquisition of Pacer Logistics, 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;

  .  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. If we do not obtain the necessary funds, the note holders may not
receive all or part of the interest and principal owed to them.

The Interests Of Apollo Management, L.P., The Majority Shareholder Of Pacer
International, May Conflict With Your Interests

   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;


                                       13


   .  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.

If We Lose Key Personnel And Qualified Technical Staff, Our Ability To Manage
The Day-To-Day Aspects Of Our Company Will Be Weakened

   We believe that a critical component for our success will be the attraction
and retention of qualified personnel. If we lose key personnel, or are unable
to recruit qualified personnel, our ability to manage the day-to-day aspects of
our company will be weakened. Our operations and prospects depend in large part
on the performance of our senior management team. 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
operation. You should be aware that we face significant competition in the
attraction and retention of personnel who possess the skill sets that we seek.
Because our senior management team, particularly Mr. Orris, has unique
experience with our company and within the transportation industry, it would be
difficult to replace them without adversely affecting our business operations.
In addition to their unique experience, our management team has fostered key
relationships with our suppliers. Such relationships are especially important
in a non-asset based company such as ours. Loss of these relationships could
have a material adverse effect on our profitability. We have obtained key
person life insurance on Mr. Orris.

We Are Dependent Upon Third Parties For Equipment And Services Essential 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.

Our Reliance On Agents And Independent Contractors Could Reduce Our Operating
Control And The Strength Of Our Relationships With Our Customers And We May
Have Trouble Attracting And Retaining Agents and Independent Contractors.

   We rely exclusively on the services of agents and independent contractors in
our transportation services. The employment of agents and the use of
independent contractors may cause disadvantages such as reduced operating
control compared to companies who do not rely as heavily on independent
contractors. 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, we face
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
generally 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.


                                       14


A Determination By Regulators That Our Independent Contractors Are Employees
Could Expose Us To Various Liabilities

   From time to time, tax and other regulatory authorities and others have
sought to assert that independent contractors in the trucking industry are
employees, rather than independent contractors. There can be no assurance, 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. Our
business model relies on the fact that our independent contractors are not
deemed to be employees, and exposure to any of the above increased costs would
impair our competitiveness in the industry. See "Business-Litigation" for a
detailed description of a pending lawsuit with one of our independent
contractors.

If We Are Unable To Successfully Integrate Our Profitability Could Be Adversely
Affected

   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, some or all of which could have a material adverse effect on our
business, financial condition and results of operation. These risks include:

  .  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.

   We have acquired 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 that 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 conduct successfully our acquisition activities, there can be no
assurance in this regard or that we will not experience difficulties with
customers, personnel or others. The integrations following our acquisition
activity are more difficult than those of many other companies because the
value of the companies being integrated are in their business relationships,
rather than assets. The integration of business relationships poses more of a
risk than the integration of tangible assets because relationships may suddenly
weaken or terminate. 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. If we are not able to successfully integrate it could
adversely affect our ability to pay the obligations under the notes.

A Failure To Successfully Integrate Pacer International And Pacer Logistics May
Adversely Affect Our Ability To Achieve Projected Cost Savings, Revenue
Enhancements And Margin Improvements

   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. Such adverse effects include not
realizing the cost savings, revenue enhancements and margin improvements
anticipated as a result of the integration. Further, the process of integration
may cause difficulties with customers and personnel. For example, Pacer
Logistics is in the same business as many of Pacer International's customers
and there is a risk that these customers may shift their businesses elsewhere
if they believe Pacer Logistics is receiving favorable treatment from Pacer
International. If any one or more of the above were to occur it would result in
decreases to our net revenue and income from operations, thereby making it
harder to pay the obligations of the notes.



                                       15


We Face Competition In Our Intermodal Marketing, Trucking And Logistics
Businesses, Putting Downward Pressure On Prices

   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. 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. These adverse effects on revenues and income make it more difficult
for us to pay the obligations of the notes. In addition, some of our
competitors have substantially greater financial and other resources than we
do.

We Face Competition In Our Stacktrain Business, Putting Downward Pressure On
Prices

   Our stacktrain business competes primarily with over-the-road full truckload
carriers, conventional intermodal movement of trailers on flat cars, and
containerized intermodal rail services offered directly by railroads.
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. These adverse effects on revenues and
income make it more difficult for us to pay the obligations of the notes. In
addition, some of our competitors have substantially greater financial and
other resources than we do.

We Face Competition For The Services Of Commission Agents, Contractors And
Drivers, Putting Upward Pressure On Expenses.

   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. The pool of independent commission agents,
contractors and drivers from which we draw is limited. Our company relies
heavily on the use of agents and independent contractors and competition from
other transportation service companies has the effect of increasing the price
we must pay to obtain these services. Because independent contractors are not
employees, they may not be as loyal to our company. This may increase our cost
of doing business, thereby making it more difficult for us to pay the
obligations of the notes.

Our Customers Who Are Also Competitors Could Transfer Their Business To Non-
Competitors Which Would Decrease Our Profitability

   We buy and sell transportation services from and to many companies with
which we compete. This trend is primarily the result of our company operating
in two distinct, but related, segments. It is possible that such customers
could transfer their business away from us to other companies with which they
do not compete. For example, some competitors of Pacer Logistics are customers
of our stacktrain operations. The loss of any one of these customers could have
a material adverse effect on the profitability of our stacktrain operations. A
decrease in our profitability could have an adverse effect on our ability to
pay the notes.

Service Instability In The Railroad Industry Could Increase Costs And Decrease
Demand For Our Services

   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
increase the cost of 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

                                       16


disruptions could result, which would decrease the efficiency of 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
substantially adversely affected by these service disruptions, we could be
substantially 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 adversely affected by
labor disputes between the railroads and their union employees. Our business
would also be 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.
Increased costs or decreased demand for our services would reduce the resources
from which we pay the obligations of the notes.

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. 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. The additional stacktrain volume attributable to the transport of APL
Limited's international cargo contributes to our ability to obtain favorable
provisions in our rail contracts, although we do not profit from the APL
Limited's cargo revenue as such services are provided at cost. 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. 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
computer, software and other information technology necessary for the operation
of our stacktrain business. APL Limited's unionized employees are subject to
collective bargaining agreements. Our business could be materially adversely
affected by labor disputes between APL Limited and its union employees. 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.

Our Lack Of An Independent Operating History Could Mean Our Forecasts Are
Inaccurate

   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. If any of our forecasts
are inaccurate because of the reasons outlined above, we may be unable to pay
amounts due on the notes.

The Year 2000 Problem Could Disrupt Normal Business Activities

   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

                                       17


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. This could result in a
system failure or miscalculations causing disruptions of operations, including,
among other things, a temporary inability to process transactions, send
invoices or engage in similar normal business activities. The occurrence of any
or all of these consequences could affect customer and vendor relations and/or
adversely impact on our results of operations, financial condition and cash
flows.

   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" for a detailed description of
the current status of our Year 2000 readiness.

Losing Our Broker License Could Cause The Department Of Transportation To Issue
A Cease And Desist Order Against Any Operations Which Are Not In Compliance.
Such An Occurrence Would Have An Adverse Influence On 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 requirements for acting in
this capacity, including 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 result in a cease and
desist order against any operations that are not in compliance. Such an
occurrence would have a adverse influence on our results of operations or
financial condition, possibly affecting our ability to pay the obligations of
the notes.

We, Our Suppliers And Our Customers Are Subject To Government Regulation Which
Could Result In Additional Costs And Thereby Affect Our Results Of Operations

   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. Future laws and regulations may be more stringent and
require the outlay of significant additional costs. Additional expenditures
incurred by us, or by our suppliers, who would pass the costs onto us through
higher prices, would adversely affect our results of operation. 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

                                       18


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.

To The Extent Our Or Our Subsidiaries' Obligations Are Avoided As Fraudulent
Conveyances, The Holders Of The Notes Would Cease To Have Claims Against Us Or
Any Of Our Subsidiaries

   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. To the extent our or our
subsidiaries' obligations are avoided as fraudulent conveyances, the holders
of the notes would cease to have claims against us or any of our subsidiaries.

   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.

   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 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 their principal amount, plus accrued
and unpaid interest on the notes, if any, 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. The definition of "all or substantially all" assets is generally
determined based upon the facts and circumstances of a particular transaction
and the condition of the selling entity upon consummation of the transaction.
Consequently, you may be required to establish that a conveyance, transfer or
lease of all or substantially all of our assets has occurred before being
entitled to compel the repurchase of our notes in connection with a change of
control.

                                      19


Because of the uncertainty surrounding the definition of "all or substantially
all" you may not be able to require us to repurchase the notes as a result of a
conveyance or disposition of less than substantially all of our assets.

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,
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 in the purchase
agreement 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 of the
  notes, 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 of the notes, 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 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.

   These no action letters include:

  .  Exxon Capital Holdings Corporation (available May 13, 1988);

  .  Morgan Stanley & Co. Incorporated (available June 5, 1991);

  .  Mary Kay Cosmetics, Inc. (available June 5, 1991);

  .  Warnaco, Inc. (available October 11, 1991); and

  .  Shearman & Sterling (available July 2, 1993).

   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.

                                       21


   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,

  .  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 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 tendering holders who are
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 tendering 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 of the notes,

     (3) holders of unregistered exchange notes so request in writing to the
  company, on or before the 60th day after the date of the exchange offer, 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 of the notes 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 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 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 of the notes 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 of the notes,

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 in this prospectus 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 restrictions on transfer contingent upon
registration. 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 tendering holder who is a broker-dealer that receives exchange notes
for its own account in exchange for old notes, where such old notes were
acquired by such 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) provisions relating to an increase in the stated interest rate on
  the old notes if the exchange offer is not timely consummated or if a shelf
  registration statement ceases to be effective prior to a specified date
  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.


                                       24


   Pacer International expressly reserves the right, in its sole discretion:

     (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 in this prospectus
  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 in this prospectus and in the letter of
transmittal. 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 in this prospectus and in the letter of
transmittal. A holder may also effect a tender of old notes pursuant to the
procedures for book-entry transfer as provided for in this prospectus and in
the letter of transmittal. 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 in this
prospectus under "--Exchange

                                       25


Agent" 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 in this prospectus 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" for a more detailed description of these procedures.

   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, 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 institution that is 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;

     (2) prior to the expiration date, the exchange agent receives from such
  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 such institution as
    described in (1) above 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,

     (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 of the notes,

                                       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
  Hand Delivery or Overnight Courier:      Rodney Square North
                                           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 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.


                                       30


   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,

     (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.

                                      31


                                USE OF PROCEEDS

   We will not receive any cash proceeds from the exchange offer. We used net
proceeds from the private offering to consummate our recapitalization and to
fund the acquisition of Pacer Logistics. The following table shows you the
actual sources, including the net proceeds from the private offering, and
actual uses of funds for our recapitalization and for the acquisition of Pacer
Logistics:



                                   Amount
                                -------------
                                (in millions)
                          
     Sources of Funds
Senior credit
 facilities:(1)
  Borrowings under the
   revolving credit
   facility...............         $  2.0
  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...........         $420.0
                                   ======



                                                                  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(5)...........................          62.6
  Proceeds from sale and leaseback transaction(4).........         (40.0)
  Fees and expenses.......................................          22.1
                                                                  ------
  Total uses..............................................        $420.0
                                                                  ======

- --------

(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" for a summary of terms of the credit
    facility.
(2) Represents non-cash consideration.
(3) Includes (a) an aggregate $93.9 million cash equity investment by
    affiliates of Apollo Management and (b) an aggregate $3.0 million cash
    equity investment by affiliates of Deutsche Bank Securities Inc. and Credit
    Suisse First Boston Corporation.
(4) We executed a sale and leaseback transaction for 199 railcars purchased in
    1998.
(5) Represents repayment of $32.0 million of existing debt at an interest rate
    of approximately 8.2% and $30.6 million of existing debt at an interest
    rate of approximately 8.0%.

                                       32


           UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS

   The Unaudited Pro Forma Consolidated Statements of Operations for the year
ended December 25, 1998 and the six months ended June 25, 1999 give effect to
our recapitalization and the acquisition of Pacer Logistics using the purchase
method of accounting, as if our recapitalization and the acquisition of Pacer
Logistics had occurred at the beginning of the first period presented.

   The pro forma balance sheet is not presented, as our recapitalization and
the acquisition of Pacer Logistics were completed on May 28, 1999 and are
reflected in the historical consolidated financial statements as of June 25,
1999 included elsewhere in this Prospectus.

   The unaudited pro forma adjustments, as described in the notes to the
unaudited pro forma consolidated statements of operations are based on
available information and upon 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. Though the fair value estimates are preliminary, we do
not believe there will be a material change to goodwill when these estimates
are finalized.

   We do not claim or represent that the unaudited pro forma consolidated
statements of operations are indicative of the results that would have been
reported had the transactions actually occurred at the beginning of the first
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 statements of operations 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 "Our Recapitalization"
for a more detailed description of the recapitalization.

                                       33


                           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) 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:
 Depreciation(m)........   $  6,000      $    699          $    387          $  1,086      $   (973)          $  6,113




  See Accompanying Notes to the Unaudited Pro Forma Consolidated Statement of
                                   Operations

                                       34


                           PACER INTERNATIONAL, INC.

            UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
                         Six Months Ended June 25, 1999
                                 (in thousands)




                                                          Pacer
                                                        Logistics
                             Pacer         Pacer        Completed      Pacer                         Pacer
                         International   Logistics     1998 & 1999   Logistics   Pro Forma       International
                         Historical(a) Historical(b) Acquisitions(n) Pro Forma  Adjustments        Pro Forma
                         ------------- ------------- --------------- ---------  -----------      -------------
                                                                               
Gross revenues..........   $358,667      $151,708        $6,333      $158,041     $(7,557)(d)      $509,151
Cost of purchased
 transportation and
 services...............    286,607       127,157         5,447       132,604     (14,321)(e)       404,890
                           --------      --------        ------      --------     -------          --------
 Net revenues...........     72,060        24,551           886        25,437       6,764           104,261
Operating expenses:
 Direct operating
  expenses..............     34,030            --            --            --         988 (f)        35,018
 Selling, general and
  administrative
  expenses..............     18,682        17,641           376        18,017       1,176 (g)(h)     37,875
 Amortization...........        512           815            65           880         317 (i)         1,709
 Other
  (income)/expense......         --           700                         700                           700
 Transaction costs......         --            --            --            --          --                --
                           --------      --------        ------      --------     -------          --------
 Total operating
  expenses..............     53,224        19,156           441        19,597       2,481            75,302
                           --------      --------        ------      --------     -------          --------
 Income from
  operations............     18,836         5,395           445         5,840       4,283            28,959
Interest
 income/(expense).......     (2,417)       (1,972)         (148)       (2,120)    (10,359)(j)       (14,896)
                           --------      --------        ------      --------     -------          --------
 Income before income
  taxes and minority
  interest .............     16,419         3,423           297         3,720      (6,076)           14,063
Income taxes............      6,135         1,465           127         1,592      (2,330)(k)         5,397
Minority interest.......        140            --            --            --         759 (l)           899
                           --------      --------        ------      --------     -------          --------
 Net income.............   $ 10,144      $  1,958        $  170      $  2,128     $(4,505)         $  7,767
                           ========      ========        ======      ========     =======          ========
Other Financial Data:
 Depreciation(m)........   $  3,056      $    465        $    5      $    470     $  (448)         $  3,078




  See Accompanying Notes to the Unaudited Pro Forma Consolidated Statements of
                                   Operations

                                       35


                           PACER INTERNATIONAL, INC.

       NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS 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. For the
    six months ended June 25, 1999 amounts were derived from the unaudited
    statement of operations of Pacer International, Inc. and includes the
    results of Pacer Logistics since the date of acquisition.

(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 acquisition of Pacer
    Logistics, Pacer Logistics, Inc. was known as Pacer International, Inc. For
    the pro forma statement of operations for the six months ended June 25,
    1999, amounts represent the results of operations from January 1, 1999
    through May 31, 1999. The results of operations for the period from the
    acquisition date of May 28, 1999 until May 31, 1999 were immaterial and no
    adjustment has been made to include them in the results of 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 of $8,365, cost of purchased transportation and services of
      $7,644, selling, general and administrative expenses of $1,249,
      interest expense of $105, income taxes of $247 and EBITDA of $82 have
      been appropriately excluded from the Manufacturers Consolidation
      Service companies results of operations presented.

                                       36


  (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 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 in April 1998, the Cross Con
      companies in June 1998, the Manufacturers Consolidation Service
      companies in December 1998 and the Keystone companies in April 1999,
      the former owners' annual salaries and benefits were contractually
      reduced in the aggregate by $1,704. The components of the reduction
      were $7 related to Intraco, $18 related to the Cross Con companies,
      $786 related to the Manufacturers Consolidation Service companies and
      $893 related to the Keystone companies.

  (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   Six Months
                                                  December 25,    Ended June 25,
                                                      1998             1999
                                                ----------------- --------------
                                                            
   Intercompany revenues and cost elimination
    on net sales between Pacer International
    and Pacer
    Logistics.................................      $(24,376)        $(10,294)
   Management fee to be charged to APL Limited
    for services rendered in connection with
    the Stacktrain Services Agreement.........         6,600            2,737
                                                    --------         --------
                                                    $(17,776)        $ (7,557)
                                                    ========         ========


(e) As an integral part of the Pacer International acquisition of Pacer
    Logistics, Pacer International has reached an agreement with CSX
    Intermodal, Inc., 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 for the fiscal year ended December 25, 1998 and
    $14,321 for the six months ended June 25, 1999.

(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 acquisition of Pacer Logistics:



                                               Fiscal Year Ended   Six Months
                                                 December 25,    Ended June 25,
                                                     1998             1999
                                               ----------------- --------------
                                                           
   Elimination of historical railcar
    depreciation expense.....................       $ (973)          $ (448)
   Lease expense associated with the sale and
    leaseback transaction....................        3,500            1,436
                                                    ------           ------
                                                    $2,527           $  988
                                                    ======           ======


                                       37


(g) Pacer International historically was allocated corporate overhead costs by
    APL Limited and though we believe the allocation was reasonable, we believe
    our current corporate structure will effectively allow us to reduce the
    historical allocations. Reflects the following:



                                              Fiscal Year Ended  Six Months
                                                December 25,    Ended June 25,
                                                    1998             1999
                                              ----------------- --------------
                                                          
   Elimination of historical information
    technology expenses allocated to Pacer
    International by APL Limited............       $(7,300)        $(3,014)
   Cost to outsource information technology
    services in accordance with the
    Information Technology Outsourcing and
    License Agreement.......................        10,000           4,038
                                                   -------         -------
                                                   $ 2,700         $ 1,024
                                                   =======         =======

(h) Reflects the following:

   Incremental management fee charged to
    Pacer International by Apollo Management
    in accordance with the new management
    agreement...............................       $   375         $   152
                                                   =======         =======

(i) Reflects the following:

   Elimination of Pacer Logistics historical
    goodwill amortization...................       $(1,334)        $  (815)
   Elimination of Pacer Logistics 1998 and
    1999 completed acquisition goodwill
    amortization............................          (746)            (65)
   Estimated goodwill amortization as if the
    acquisition of Pacer Logistics had
    occurred on January 1, 1998, amortized
    over forty years .......................         3,096           1,197
                                                   -------         -------
                                                   $ 1,016         $   317
                                                   =======         =======

(j) Reflects the following:

   Elimination of historical Pacer Logistics
    interest expense and the amortization of
    debt issuance costs related to debt
    repaid in connection with the
    acquisition of Pacer Logistics..........       $(2,867)        $(1,972)
   Elimination of pro forma Pacer Logistics
    interest expense........................        (1,879)           (201)
   Interest expense resulting from our $135
    million term loan at an assumed interest
    rate of 8%..............................        10,800           4,500
   Interest expense resulting from the $150
    million notes at an interest rate of 11
    3/4%....................................        17,625           7,344
   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             688
                                                   -------         -------
                                                   $25,329         $10,359
                                                   =======         =======


(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.

(l) In connection with the acquisition of Pacer Logistics, members of
    management received Pacer Logistics exchangeable preferred stock calling
    for an annual 7.5% paid-in-kind dividend. The amount for the fiscal year
    ended December 25, 1998 represents the annual dividend, based on preferred
    stock value of Pacer Logistics of $24,300 at 7.5%. The adjustment for the
    six months ended June 25, 1999 represents five months of the annual charge
    as one month is included in historical results.

                                       38


(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   Six Months
                                                December 25,    Ended June 25,
                                                    1998             1999
                                              ----------------- --------------
                                                          
   Pacer International historical EBITDA.....      $39,800         $22,404
   Pacer Logistics historical EBITDA.........       12,356           6,675
   Pacer Logistics completed 1998 and 1999
    acquisitions EBITDA......................        4,661             515
   EBITDA associated with Pro forma
    Adjustments..............................        8,025           4,152
                                                   -------         -------
   Pacer International Pro forma EBITDA......      $64,842         $33,746
                                                   =======         =======


  EBITDA as shown for the fiscal year ended December 25, 1998 has not been
  adjusted for $1.5 million for the elimination of historical Pacer Logistics
  initial public offering costs or $0.6 million for the elimination of
  historical Manufacturers Consolidation Service, Inc. initial public
  offering costs. EBITDA as shown for the six months ended June 25, 1999 has
  not been adjusted for the elimination of one time bonus payments of $0.7
  million related to the acquisition of Pacer Logistics. Additionally, Pacer
  International historically was allocated corporate overhead costs by APL
  Limited and though we believe the allocation was reasonable, we believe our
  current corporate structure will effectively allow us to reduce the
  historical allocations, by $3.0 million for the fiscal year December 25,
  1998 and $1.4 million for the six months ended June 25, 1999. Estimates of
  reduction are after consideration of $2.8 million of estimated annual
  actual stand alone costs consisting of salaries and benefits of $1.7
  million, outside salaries and consulting fees of $0.6 million and
  additional rent of $0.5 million.

                                       39


(n) 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 period January 1, 1999 to April 20, 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........................  $6,333        --          $6,333
   Cost of revenues......................   5,447        --           5,447
                                           ------     -----          ------
     Net revenues........................     886        --             886
   Operating expenses:
     Selling, general and administrative
      expenses...........................     544     $(168)(1)(2)      376
     Amortization........................     --         65 (3)          65
                                           ------     -----          ------
   Total operating expenses..............     544      (103)            441
                                           ------     -----          ------
     Income from operations..............     342       103             445
   Interest income/(expense).............      53      (201)(4)        (148)
                                           ------     -----          ------
     Income before income taxes..........     395       (98)            297
   Income taxes..........................     --        127 (5)         127
                                           ------     -----          ------
     Income before extraordinary loss....  $  395     $(225)         $  170
                                           ======     =====          ======
   Depreciation..........................  $    5        --          $    5

- --------
  (1) As part of the Keystone Terminals acquisition in April 1999 the former
      owners' salaries and benefits of $93 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:


                                                                    Six Months
                                                                  Ended June 25,
                                                                       1999
                                                                  --------------
                                                               
     Goodwill amortization if the Keystone Terminals acquisition
      occurred on January 1, 1999...............................       $ 65

  (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.............................................       $201


  (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 1999 acquisition occurred on January 1, 1998 and includes
      an increase in tax provision for the Keystone companies, which were
      previously taxed as Subchapter S corporations.


                                      40


      SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

Pacer International, Inc.

   The following table presents, as of the dates and for the periods indicated,
selected historical financial information and selected pro forma consolidated
financial information after giving effect to our recapitalization and the
acquisition of Pacer Logistics. 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 and related notes 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 for
information on our history. 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. In November, 1998, APL Land Transport Services, Inc.
transferred all of its non-stacktrain assets to its parent, APL Limited. In
connection with our recapitalization and acquisition of Pacer Logistics, Inc.,
APL Land Transport Services, Inc. was renamed Pacer International.

   The selected historical financial data as of June 25, 1999 and for the six
months ended June 26, 1998 and June 25, 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 statement of operations and related information reflects
our recapitalization and the acquisition of Pacer Logistics as if they had
occurred at the beginning of the relevant period. The pro forma financial
information does not purport to represent what our results of operations would
have actually been had our recapitalization and the acquisition of Pacer
Logistics in fact occurred on the assumed dates or to project our results of
operations for any future date or period.

   The unaudited historical balance sheet data reflects the financial position
of our business as of June 25, 1999 and includes our recapitalization and the
acquisition of Pacer Logistics as these transactions were completed on May 28,
1999. 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."

                                       41




                                                                                                    Pro Forma Pacer
                       The Predecessor (a)                       The Company                         International
                    ------------------------- ------------------------------------------------- ------------------------
                                             (in millions, except ratios and statistical data)
                      For the                                For the                                           For the
                       Fiscal                                 Fiscal                              For the       Six-
                        Year       For the      For the        Year          For The Six-       Fiscal Year    Months
                       Ended        Period       Period       Ended          Months Ended          Ended        Ended
                    ------------ ------------ ------------ ------------ ----------------------- ------------ -----------
                                 December 28, November 13,
                                   1996 to      1997 to
                    December 27, November 12, December 26, December 25,  June 26,    June 25,   December 25,  June 25,
                        1996       1997(b)      1997(b)        1998        1998        1999         1998        1999
                    ------------ ------------ ------------ ------------ ----------- ----------- ------------ -----------
                                                                        (unaudited) (unaudited) (unaudited)  (unaudited)
Statement of
 Operations
 Data(c):
                                                                                              
Gross revenues..       $548.0       $517.1       $ 60.0       $590.8      $285.4      $358.7       $981.6      $509.2
Cost of
 purchased
 transportation
 and services...        423.7        407.5         47.4        466.3       228.2       286.6        780.4       404.9
Net revenues....        124.3        109.6         12.6        124.5        57.2        72.1        201.2       104.3
Direct operating
 expenses.......         37.4         49.4          7.4         62.4        33.8        34.1         65.3        35.0
Selling, general
 and
 administrative
 expenses.......         25.6         24.0          3.2         29.0        11.6        15.6         75.8        37.9
Income from
 operations.....         61.5         38.8          2.0         33.2         8.5        18.8         55.0        29.0
Income before
 extraordinary
 loss...........         38.1         22.9          1.0         20.6         5.0        10.1         13.3         7.8
Historical
 Balance Sheet
 Data (at period
 end):
Total
 assets(d)......       $ 71.4       $   --       $111.9       $156.1      $177.3      $432.3       $   --      $   --
Total debt
 including
 capital
 leases.........           --           --           --           --          --       287.2           --          --
Minority
 interest-
 exchangeable
 preferred
 stock..........           --           --           --           --          --        24.4           --          --
Other Financial
 Data:
EBITDA(e).......       $ 65.6       $ 41.8       $  2.7       $ 39.8      $ 11.8      $ 22.4       $ 64.8      $ 33.8
EBITDA
 margin(f)......         52.8%        38.1%        21.4%        32.0%       20.6%       31.1%        32.2%       32.4%
Depreciation ...       $  4.1       $  3.0       $  0.7       $  6.0      $  3.0      $  3.1       $  6.1      $  3.1
Amortization....           --           --           --          0.6         0.3         0.5          3.7         1.7
Capital
 Expenditures(g)..        0.2           --           --         39.7        39.7         0.1          1.7         1.0
Cash interest
 expense(h).....           --          2.0          0.3           --          --          --         28.5        14.1
EBITDA to cash
 interest
 expense........           --           --           --           --          --          --          2.3x        2.4x
Ratio of
 earnings to
 fixed
 charges(i).....          6.2x         3.6x         1.8x         3.0x        1.9x        2.5x         1.5x        1.5x

- --------
(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.

                                       42


(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
                             Ended        Period       Period           Ended
                          ------------ ------------ ------------ ---------------------
                                       December 28, November 13,
                                         1996 to      1997 to
                          December 27, November 12, December 26,          December 25,
                              1996         1997         1997     1997(b)      1998
                          ------------ ------------ ------------ -------  ------------
                                                              (in millions)
                                                           
Gross revenues:
 Freight revenue........     $526.6       $498.4       $57.7     $556.1      $566.1
 Avoided repositioning..       15.7         15.8         1.9       17.7        20.0
 Other revenue..........        5.7          2.9         0.4        3.3         4.7
                             ------       ------       -----     ------      ------
                              548.0        517.1        60.0      577.1       590.8
Cost of purchased
 transportation and
 services:
 Rail linehaul..........      401.3        383.7        43.8      427.5       438.1
 Trucks & other.........        7.2         10.1         1.2       11.3        11.0
 Empty repositioning....       13.2         11.0         2.0       13.0        13.2
 Terminal and cargo
  handling, variable....        2.0          2.7         0.4        3.1         4.0
                             ------       ------       -----     ------      ------
                              423.7        407.5        47.4      454.9       466.3
                             ------       ------       -----     ------      ------
Net revenues............      124.3        109.6        12.6      122.2       124.5
Direct operating
 expenses:
 Terminal and cargo
  handling, fixed.......        0.6          1.5         0.3        1.8         1.7
 Equipment maintenance
  and repair............       15.1         14.6         1.8       16.4        18.3
 Other variable
  (income)/expense......      (16.7)        (6.7)       (0.7)      (7.4)      (13.1)
 Fixed equipment
 Rail cars..............        3.4          3.3         0.5        3.8         6.5
 Containers/chassis.....       31.6         33.5         4.9       38.4        44.9
 Other..................        3.4          3.2         0.6        3.8         4.1
                             ------       ------       -----     ------      ------
                               37.4         49.4         7.4       56.8        62.4
Selling, general and
 administrative
 expenses:
 Direct expenses........       15.2         13.0         1.8       14.8        15.7
 Other overhead.........        0.1          0.1         --         0.1         0.9
 Corporate
  headquarters..........        6.1          4.2         0.5        4.7         5.7
 IT systems.............        4.2          6.7         0.9        7.6         7.3
 Less reclassification
  to amortization.......        --           --          --         --         (0.6)
                             ------       ------       -----     ------      ------
                               25.6         24.0         3.2       27.2        29.0
Amortization............        --           --          --         --          0.6
Other (income)/expense..       (0.2)        (2.6)        --        (2.6)       (0.7)
                             ------       ------       -----     ------      ------
  Income from
   operations...........       61.5         38.8         2.0       40.8        33.2
Interest
 income/(expense).......        --          (2.0)       (0.3)      (2.3)        --
                             ------       ------       -----     ------      ------
  Income before income
   taxes................       61.5         36.8         1.7       38.5        33.2
Income taxes(1).........      (23.4)       (13.9)       (0.7)     (14.6)      (12.6)
                             ------       ------       -----     ------      ------
  Net income............     $ 38.1       $ 22.9       $ 1.0     $ 23.9      $ 20.6
                             ======       ======       =====     ======      ======

- --------
 (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.

                                       43


(d) Total assets at June 25, 1999 were significantly higher as compared to
    December 25, 1998 due to our recapitalization and acquisition of Pacer
    Logistics.

(e) 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 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.

  EBITDA as shown for the fiscal year ended December 25, 1998 has not been
  adjusted by $1.5 million for the elimination of historical Pacer Logistics
  initial public offering costs or $0.6 million for the elimination of
  historical Manufacturers Consolidation Service, Inc. initial public offering
  costs. EBITDA shown for the six months ended June 25, 1999 has not been
  adjusted for the elimination of one time bonus payments of $0.7 million
  related to the acquisition of Pacer Logistics. Additionally, Pacer
  International historically was allocated corporate overhead costs by APL
  Limited and though we believe the allocation was reasonable, we believe our
  current corporate structure will effectively allow us to reduce the
  historical allocations by $3.0 million for the fiscal year ended December
  25, 1998 and $1.4 million for the six months ended June 25, 1999. Estimates
  of reduction are after consideration of $2.8 million of estimated actual
  annual stand alone costs consisting of salaries and benefits of $1.7
  million, outside salaries and consulting fees of $0.6 million and additional
  rent of $0.5 million.

(f) EBITDA margins are calculated as a percentage of net revenues.

(g) In connection with our recapitalization and the acquisition of Pacer
    Logistics, we completed a sale and leaseback transaction for 199 railcars
    purchased during 1998. Therefore, on a pro forma basis, the capital
    expenditure related to these railcars has been eliminated and direct
    operating expense has been increased by $2.5 million for the year ended
    December 25, 1998 and $1.0 million for the six months ended June 25, 1999,
    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 income before income taxes plus fixed
    charges by fixed charges. Fixed charges are defined as interest expense
    plus the estimated interest portion of rent expense. The estimated
    interest portion of rent expense is assumed to be one-third of rent
    expense.

                                      44


Pacer Logistics, Inc.

   The following table presents as of the dates and for the periods indicated
selected historical consolidated financial information and summary pro forma
consolidated financial information giving effect to acquisitions completed by
Pacer Logistics. 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 and notes of Pacer Logistics
appearing in this prospectus.

   The financial data as of December 31, 1995 and 1994 and May 31, 1999 and
1998 and for the year ended December 31, 1994 and for the five months ended May
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 five months ended
May 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
subsidiary of the Union Pacific Railroad Company, and therefore is not
comparable in all respects to the periods subsequent to March 31, 1997. On May
28, 1999 Pacer Logistics was acquired by Pacer International, Inc. and began to
operate as a subsidiary. Its results since the date of acquisition are included
in Pacer International's results.

   The unaudited pro forma statement of operations and related information
reflect the acquisition of companies by Pacer Logistics as described as if they
had occurred at the beginning of the relevant period. The pro forma financial
information does not purport to represent what Pacer Logistics' financial
position or results of operations would have actually been had these
acquisitions in fact occurred on the assumed dates or to project Pacer
Logistics' 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" for information on these acquisitions.

                                       45




                                            Pacer Logistics Historical                                    Pro Forma (b)
                  ---------------------------------------------------------------------------------- ------------------------
                         The Predecessor (a)                         The Company (a)
                  ------------------------------------ ---------------------------------------------
                                                                                                                    For the
                                             For the     For the                                       For the       Five
                   For the Fiscal Years       Period      Period    For the       For the Five       Fiscal Year    Months
                           Ended            January 1,  March 31,   Fiscal        Months Ended          Ended        Ended
                  ------------------------   1997 to     1997 to     Year    ----------------------- ------------ -----------
                                            March 31,  December 31,  Ended     May 31,     May 31,   December 31,   May 31,
                     1994     1995   1996      1997        1997      1998       1998        1999         1998        1999
                  ----------- -----  -----  ---------- ------------ -------  ----------- ----------- ------------ -----------
                  (unaudited)                                                (unaudited) (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      $83.2      $151.7       $408.6      $158.0
Cost of
 purchased
 transportation
 and services...      64.8     65.9   73.1     16.5        68.7      211.2       68.4       127.2        346.5       132.6
Net revenues....      11.1     12.4   13.7      3.0        12.4       41.5       14.8        24.5         62.1        25.4
Income from
 operations.....       3.7      3.6    3.5      0.2         3.2       10.3        4.0         5.4         13.9         5.8
Income before
 extraordinary
 loss...........       2.7      3.0    3.0      0.1         1.5        4.3        1.8         2.0          5.1         2.1
Balance Sheet
 Data
 (at period
  end):
Total assets
 (d)............     $31.6    $32.3  $37.6    $11.4       $57.1     $113.9      $58.2      $124.9       $   --      $   --
Total debt and
 capital
 leases.........        --       --     --       --        26.9       53.3       24.8        62.8           --          --
Other Financial
 Data:
EBITDA (e)......     $ 3.9    $ 3.7  $ 3.6    $ 0.2       $ 3.6     $ 12.4      $ 4.6      $  6.7       $ 17.0      $  7.2
EBITDA margin
 (f)............      35.1%    29.8%  26.3%     6.7%       29.0%      29.9%      31.1%       27.3%        27.4%       28.3%
Depreciation....     $ 0.2    $ 0.1  $ 0.1       --       $ 0.1     $  0.7      $ 0.2      $  0.5       $  1.1      $  0.5
Amortization....        --       --     --       --         0.3        1.3        0.4         0.8          2.1         0.9
Capital
 expenditures...        --       --    0.2      0.1         0.4        1.7        0.6         0.9           --          --
Interest
 expense........        --       --     --       --         0.7        2.9        0.9         2.0          4.8         2.1
EBITDA to
 interest
 expense........        --       --     --       --          --         --         --          --          3.5x        3.4x

- --------
(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" for information on these
    acquisitions.

(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 (e)............................    3.8
     EBITDA margin (f).....................   24.7%


(d) 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.

(e) 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.

  EBITDA as shown for the fiscal year ended December 25, 1998 has not been
  adjusted by $1.5 million for the elimination of historical Pacer Logistics
  initial public offering costs or $0.6 million for historical Manufacturers
  Consolidation Services, Inc. initial public offering costs. EBITDA as shown
  for the five months ended May 31, 1999 has not been adjusted by $0.7 million
  for the elimination of a one time bonus payment related to the acquisition of
  Pacer Logistics.

(f) EBITDA margins are calculated as a percentage of net revenues.

                                       46


                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

   The following discussion and analysis of financial condition and results of
operations for the six months ended June 25, 1999 includes the results of our
operations after our recapitalization and the acquisition of Pacer Logistics,
both of which were completed on May 28, 1999 compared to the six months ended
June 26, 1998 which represents the results of the former stacktrain business
only. The full fiscal year discussion presented below cover periods before the
completion of our recapitalization and the acquisition of Pacer Logistics. In
connection with the recapitalization and the acquisition of Pacer Logistics, 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 acquisition of Pacer Logistics
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.

   Pacer International, Inc. has two reportable segments, stacktrain and
logistics, which have separate management teams and offer different but related
products and services. The stacktrain segment provides intermodal rail service
in North America by selling intermodal service to shippers while buying space
on intermodal rail trains. The large majority of business is conducted
domestically, with minor services in Mexico and Canada. Customers include
intermodal marketers which serve customers in various industries as well as the
ocean carrier industry. The logistics segment supports the stacktrain segment
by offering marketing, freight handling, truck and local pickup and delivery
services. See "Business--Development of Our Company" for a detailed description
of the development of the stacktrain and logistics segments.

Stacktrain Overview

   The stacktrain segment is one of the largest providers 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 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


                                       47


   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 in 1996, $17.7 million in 1997 and $20.0 million in 1998.

   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 in 1996,
16.4 in 1997 and 17.9 in 1998. These operating issues resulted in

   (1) the loss of some premium business,

   (2) price reductions on shipments to satisfy customer frustrations, and

   (3) less efficient utilization of our container fleet.

The loss of some premium business, such as our expedited services and
refrigerated services negatively impacted both gross and net revenue as
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 loaded container volumes increased in 1997
by 41,680 containers or 9.1% and in 1998 by 21,438 containers 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
of APL Limited's costs in 1996, $7.6 million in 1997 and $7.3 million in 1998.
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
the term sheet on which the negotiations are based the information technology
services would be provided to us for an annual fee of $10.0 million. APL
Limited also provided corporate administrative services to us for which we were
allocated $6.1 million of APL Limited's total corporate costs in 1996, $4.7
million in 1997 and $5.7 million in 1998. 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 connection with the
Stacktrain Services Agreement. We have also agreed with APL Limited that these
administrative

                                       48


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 acquisition of Pacer Logistics, we reached an
agreement with CSX Intermodal, Inc., which provides us with $8.0 million in
annual rate reductions for transportation services it provides in return for
our utilization of them for an agreed-upon percentage of our revenue moves.

Logistics Overview

   The logistics segment 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, the logistics segment is able to focus
its efforts on providing information and knowledged based transportation
services for its customers through its network of agents and independent
contractors. The logistics segment provides services to numerous global,
national and regional manufacturers and retailers.

   Gross Revenues

   The stacktrain segment's 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.

   The logistics segment's gross revenues are generated through fees charged
for a broad portfolio of freight transportation services. The logistics
segment's 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 the logistics segment will be driven
through its ability to market its broad array of transportation services to its
existing customer base. Increases in gross 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. The logistics segment 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, the logistics segment provides outsourcing
services for customers' traffic departments and railcar repair and maintenance.

                                       49


  Cost of Purchased Transportation and Services/Net Revenues

   The stacktrain segment's 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.

   The logistics segment's 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.

  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

   The stacktrain segment's selling, general and administrative expenses prior
to the recapitalization 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.
Management believes such allocations were reasonable. Effective May 28, 1999,
the corporate administrative services previously provided by APL Limited will
be incurred directly by us and we estimate that our annual cost will be $2.8
million. In addition, we are in the process of negotiating a twenty-year
agreement requiring APL Limited to continue to provide information technology
services. See "Material Agreements Relating to Our Recapitalization" for a more
detailed description of the APL Limited Information Technology Services
Agreement.

   The logistics segment's 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. The logistics
segment 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 the logistics
segment's 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.

                                       50


Results of Operations

   The following table sets forth condensed historical financial data for Pacer
International, Inc., expressed as a percentage of net revenues for each of the
most recent fiscal years and for the two most recent six month periods. Note
that the logistics segment is only included as part of Pacer International for
the one month period of June, 1999 since the acquisition.


                          Fiscal Year   Fiscal Year   Fiscal Year   Six  Months    Six Months
                              Ended        Ended         Ended         Ended         Ended
                          December 27,  December 26,  December 25,    June 26,      June 25,
                              1996        1997(2)         1998          1998          1999
                          ------------  ------------  ------------  ------------  ------------
                                       (in millions, except statistical data)
                                                           
Gross revenues..........  $548.0        $577.1        $590.8        $285.4        $358.7
Cost of purchased
 transportation and
 services...............   423.7         454.9         466.3         228.2         286.6
                          ------        ------        ------        ------        ------
Net revenues............   124.3 100.0%  122.2 100.0%  124.5 100.0%   57.2 100.0%   72.1 100.0%
Expenses:
 Direct operating
  expenses..............    37.4  30.1    56.8  46.5    62.4  50.1    33.8  59.1    34.0  47.2
 Selling, general &
  administrative
  expenses..............    25.6  20.6    27.2  22.3    29.0  23.3    11.6  20.3    15.8  21.9
Income from operations..    61.5  49.5    40.8  33.4    33.2  26.7     8.5  14.9    18.7  25.9
Net income..............    38.1  30.7    23.9  19.6    20.6  16.5     5.0   8.7    10.1  14.0
EBITDA(1)...............  $ 65.6  52.8% $ 44.5  36.4% $ 39.8  32.0% $ 11.8  20.6% $ 22.4  31.1%

- --------
(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.

 Six Months Ended June 25, 1999 Compared to the Six Months Ended June 26, 1998

   Gross Revenues. Gross revenues increased $73.3 million, or 25.7%, from
$285.4 million in the first six months of 1998 to $358.7 million in the first
six months of 1999. The stacktrain segment accounted for $41.5 million of the
increase and the addition of the logistics segment results for the one month of
June, 1999 accounted for the remainder of the change. The stacktrain segment
increase was due primarily to a $39.5 million, or 14.4% increase in freight
revenues driven by an overall container volume increase of 40,617 containers or
16.1%, partially offset by a slight decline in average revenue per container of
1.4% primarily resulting from mix changes. Domestic, international and
automotive business all contributed to the freight revenue increase with
increases of $19.8 million (12.6%) for domestic, $11.6 million (26.2%) for
international and $8.1 million (11.3%) for automotive, on container volume
increases of 17,068 (12.0%) for domestic, 15,144 (30.1%) for international and
8,405 (14.0)% for automotive. The revenue and volume increases are due to
increased customer demand coupled with the addition of 2,000 53-foot containers
during the second half of 1998. In addition, international business increased
due to both growth among existing customers as well as the addition of a major
new customer in the second quarter of 1999. Reposition incentive revenues
increased $1.3 million or 13.8% as a result of increased APL Limited shipping
volume.

   Net Revenues. Net revenues increased $14.9 million, or 26.0%, to $72.1
million in the first six months of 1999 from $57.2 million in the first six
months of 1998. Expressed as a percent of gross revenues, the overall margin
increased slightly to 20.1% in the first six months of 1999 from 20.0% in the
first six months of 1998. The stacktrain segment accounted for $9.4 million or
64% of the increase and the logistics segment accounted for $5.5 million, or
36%.

                                       51


   Direct Operating Expenses. Direct operating expenses increased $0.2 million,
or 0.6%, from $33.8 million in the first six months of 1998 to $34.0 million in
the first six months of 1999. The stacktrain segment accounted for 100% of this
item. As a result of the expansion of the fleet of containers and chassis
discussed in gross revenues above, lease expense increased by $1.3 million and
equipment maintenance and repair increased by $1.1 million for the first six
months of 1999 compared to the same period in 1998. Substantially offsetting
these unfavorable increases was an increase in rail car rental income of $1.8
million due to the increase in the railcar fleet in mid-1998. Equipment
depreciation expense for the 1999 period decreased by $0.1 million compared to
the same period in 1998 due to the sale and leaseback of 199 railcars.

   Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $4.2 million, or 36.2%, to $15.8 million in
the 1999 period from $11.6 million in the 1998 period. The stacktrain segment
accounted for $0.4 million or 9.5% of the increase and the inclusion of the
logistic segment for June 1999 accounted for $3.8 million or 90.5% of the
increase.

   Income from Operations. Income from operations increased $10.2 million or
120.0% from $8.5 million in the first six months of 1998 to $18.7 million in
the same period of 1999. The stacktrain segment accounted for $8.8 million or
86.3% of the increase and the inclusion of the logistics segment accounted for
$1.4 million or 13.7% of the increase. Expressed as a percentage of net
revenues, the stacktrain segment improved from 14.9% in the 1998 period to
25.9% in the 1999 period due primarily to holding the operating expense
increase to 1.1%, while container volumes increased 16.1%. The logistics
segment had an operating margin of 28.5% for June, 1999.

   Interest expense. Interest expense increased by $2.1 million from $0.3
million in the 1998 period to $2.4 million in the 1999 period due to the
issuance of $150 million of senior subordinated notes and borrowing $135
million under the term loan portion of our credit facility on May 28, 1999 to
fund our recapitalization and the acquisition of Pacer Logistics.

   Income tax expense. Income tax expense increased by $2.9 million from $3.2
million in 1998 to $6.1 million due to increased income in the 1999 period.

   Net Income. Net income increased $5.1 million, or 102.9%, from $5.0 million
in the 1998 period to $10.1 million in the first six months of 1999. The
stacktrain segment accounted for $4.6 million, or 90.2% of the increase as a
result of increased container volumes and the logistics segment accounted for
$0.5 million of the increase.

 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 primarily due to a $10.0 million
increase in freight revenues and a $2.3 million increase in reposition
incentive revenues. Freight revenues increased $10.0 million, or 1.8%, due to a
loaded container volume increase of 21,438 containers, or 4.3% primarily in
domestic and international business, offset by a slight decrease per load in
the average freight rate as a result of product mix changes and the loss of
some premium business in automotive and reefers. The domestic and international
business contributed to the $10.0 million increase in freight revenues with
increases of $17.0 million for domestic and $3.7 million for international, as
a result of increased volumes of 7.9% for domestic and 11.7% for international,
partially attributable to the additional 2,000 53-foot containers which were
leased during 1998, and the strong import market positively impacting the
international business. The automotive and reefer business revenues partially

                                       52


offset these freight revenue increases as they 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 some 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 primarily 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, partially 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 operating equipment of $2.6 million in 1997 compared to a gain on the
sale of equipment of $0.4 million in 1998.

   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 increase in direct operating expenses of $5.6 million, the increase in
selling, general and administrative expense of $1.8 million and the decrease in
other income of $1.9 million which was partially offset by the increase in net
revenues.

   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.

   Net income. Net income decreased $3.3 million, or 13.8%, to $20.6 million in
1998 from $23.9 million in 1997 primarily due to the $5.6 million increase in
direct operating expenses, the $1.8 million increase in selling, general and
administrative expenses, the $1.9 million decrease in other income and
amortization expense of $.6 million which were partially offset by decreased
interest expense of $2.3 million, decreased income taxes of $2.0 and increased
net revenues of $2.3 million.

                                       53


 Year Ended December 26, 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. This increase in
volume contributed to increased revenues of $48.7 million which was partially
offset by a decrease in rates. The average revenue per container decreased 2.8%
in 1997, primarily as a result of losing premium business to the trucking
industry because of the railroad service problems beginning in the last four
months of 1997. 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. 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 primarily
negatively impacted by higher transportation costs for rail linehaul and
trucks/other which increased approximately $30.3 million over 1997 costs and a
decrease in average rates per container as discussed above and partially offset
by a slight reduction in terminal and cargo handling costs. 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 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 increases in direct operating
expenses and selling, general and administrative expenses, which were partially
offset by increases in net revenues and other income.

   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.

   Net income. Net income decreased $14.2 million, or 37.3%, to $23.9 million
in 1997 from $30.7 million in 1996 primarily due to the $19.4 million increase
in direct operating expenses, the $2.3 million in interest

                                       54


expense, the $2.1 decrease in net revenues and the $1.6 million increase in
selling, general and administrative expenses. These items were partially offset
by a $2.4 million increase in other income resulting from the sale of operating
equipment and an $8.8 million decrease in income taxes.

Liquidity and Capital Resources

   Historical

   Cash generated from operating activities was $17.4 million in 1996, $30.9
million in 1997, $31.8 million in 1998, $3.0 million in the first six months of
1998 and $(16.2) million in the first six months of 1999. The increase in net
cash provided by operating activities from 1996 to 1997 was attributable to a
significant decrease in accounts receivable in 1997 as a result of the sale of
APL Limited's intermodal marketing operations to a customer. The increased use
of cash for the first six months of 1999 compared to the same period in 1998
was due to increases in accounts receivable associated with the increase in
traffic volume of 16.1%, as well as transaction fees and expenses paid in May,
1999 related to our recapitalization and acquisition of Pacer Logistics.
Historically, we have used cash generated from operating activities for
seasonal working capital purposes, to fund capital expenditures and repay
intercompany debt. We had a working capital deficit of $(17.6) million at June
25, 1999 compared to a deficit of $(28.4) million at June 26, 1998, an
improvement of $10.8 million.

   Cash flows from investing activities were $0.9 million in 1996, $3.6 million
in 1997, $(38.5) million in 1998, $(39.7) million in the first six months of
1998 and $(71.8) million in the first six months of 1999. The increased use of
cash between 1997 and 1998 was due to the purchase of 200 railcars for $39.7
million in the first half of 1998. The increased use of cash in the first six
months of 1999 was due to our acquisition of Pacer Logistics for $(111.3)
million partially offset by the net proceeds of $39.6 million from the sale and
leaseback transaction of the 199 railcars originally purchased in 1998.

   Cash flows from financing activities were $(18.3) million in 1996, $(34.5)
million in 1997, $6.7 million in 1998, $36.7 million in the first six months of
1998 and $89.4 million in the first six months of 1999. Historically, any
excess cash generated from operating or investing activities was remitted to
APL Limited, the former parent, through participation in the cash management
plan. This repayment occurred in 1996 and 1997 with a net intercompany
borrowing in 1998 to finance the acquisition of the 200 railcars. During the
first six months of 1998, $36.7 million of funding from APL Limited was
necessary for the railcar purchase. During the first six months of 1999, in
connection with our recapitalization and acquisition of Pacer Logistics, we
issued common stock in return for $104.4 million. We also borrowed $135 million
under a term loan facility and issued $150 million of senior subordinated
notes, as well as borrowed $2.0 million from the $100.0 million revolving
credit facility expiring in 2004. The $2.0 million borrowed under the revolving
credit facility was repaid in July, 1999. The borrowings were offset by a
distribution to shareholders of $300.0 million

   Post-Transactions

   Following our recapitalization and the acquisition of Pacer Logistics, 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.

   Our debt service obligations could have important consequences to holders of
the notes. See "Risk Factors" for a more detailed discussion of the risks
associated with our debt service obligations.

                                       55


   In connection with our recapitalization and the acquisition of Pacer
Logistics, 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 the financial ratios
set forth in the credit agreement. At June 25, 1999, the interest rate on the
revolving credit facility was 9.25% and the interest rate on the term loan was
7.94%. 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 liens on our
properties and assets. Our credit facilities are subject to customary
representations, warranties and covenants. See "Description of Our Credit
Agreement" for a more detailed description of our credit facilities.

   Based upon the current level of operations and anticipated growth, including
the 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 next five years, although no assurance can be given in this
regard.

   In connection with our recapitalization and the acquisition of Pacer
Logistics, we incurred certain significant nonrecurring expenses. See
"Unaudited Pro Forma Consolidated Financial Information." We incurred
approximately $9.5 million related to financing of our recapitalization and the
acquisition of Pacer Logistics and $12.6 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

   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. Pacer International, utilizes software and related computer technologies
essential to its operations that could be affected by the Year 2000 issue.

   Year 2000 remediation and testing of the stacktrain segment's systems
infrastructure and business applications is being conducted by APL Limited.
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
term 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

                                       56


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 is expected to be
twenty years.

   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 five key phases of APL Limited's approach are
inventory assessment, remediation, customer and vendor assessment, testing and
contingency planning. APL Limited is currently on track to spend $33.2 million,
through 2000, for all of its Year 2000 efforts inclusive of the work being done
to our infrastructure and business applications.

   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 June 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 of the infrastructure was
completed by the end of August 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 will continue through the
remainder of 1999.

   APL Limited has contacted major rail vendors and performed a risk assessment
based on their reported state of Year 2000 preparedness. These assessments are
updated, as rail vendors make new information available. Vendors, which report
they expect to complete Year 2000 efforts and are willing to participate in
integrated testing, are considered low risk. Those who either do not anticipate
completing their work or are not available for integrated testing are
considered medium risk. Based on both APL Limited's assessment as supplied to
us and our own assessment, we believe the US rail carriers, which carry the
majority of our cargo, fall into the low risk category while two foreign rail
carriers are currently rated as medium risk. We are engaged in ongoing efforts
to re-assess the medium risk carriers. In addition, we are actively engaged in
the development of contingency plans to mitigate potential problems.

   We exchange electronic data with many of its vendors and customers. By June
1999, those who exchange electronic data with us had been contacted. Integrated
testing is dependent upon the cooperation of our partners. We and APL Limited
are actively engaged in efforts to conduct integrated testing with our vendors
and customers.

   Based on the state of vendor, customer and system readiness for Year 2000,
we assume that major underlying rail carriers and major customers systems and
services will be operating but may not be able to communicate with each other
electronically. We are planning for temporary disruptions caused by local
utility outages.

   The contingency planning protocol adopted by us focuses on the critical
business processes required to maintain freight movement and is designed to
integrate with customer and vendor contingency plans. These processes have been
identified, ranked by their impact on customer cargo movement and rated by the
failure probability. Key managers are developing contingency plans based on
existing plans that have been used in the

                                       57


past to deal with periodic system failures. Contingency plans are scheduled
for completion by the latter part of the November 1999.

   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 logistics segment task force activities relate to the following four
business categories:

     (1) Infrastructure, meaning computing systems hardware and systems
  software.

     (2) Applications software, meaning vendor provided or custom written
  operations software.

     (3) Embedded processors in equipment used by Pacer Logistics, meaning
  communications equipment, voice and data, and other miscellaneous systems.

     (4) Significant third party vendors and service providers and customers.

   Logistics has also developed a five-phase approach to resolving the Year
2000 issue. The phases are:

     Phase 1--Inventory of all date-sensitive systems and equipment.

     Phase 2--Assessing compliance and assigning priorities to items
  identified as not being compliant.

     Phase 3--Remediation of non-compliant items.

     Phase 4--Testing and certification of systems and equipment being
  brought into compliance.

     Phase 5--Contingency planning to provide for continuity of business
  activities in the event of unanticipated failures, whether of internal or
  external origin.

   The planned budget amount is $2.75 million to achieve Year 2000 compliance.
Through the end of the third quarter, expenditures approximate $2.175 million.
It is anticipated that the remaining budgeted amount should be adequate to
achieve compliance.

   All computers in use with the logistics segment were targeted for
individual testing/certification and appropriate remediation. Through the end
of the third quarter, testing and certification are nearly 100% complete.
Approximately 90% of the remediation actions consisting largely of
replacement, and/or installation of operating system software upgrades have
been completed.

   Each application software product in use within the logistics segment was
examined to determine Year 2000 compliance. Remediation strategy was planned
for each non-compliant product, based on priority of importance. Actions
consist of revision, replacement with a compliant product, or abandonment.
Approximately 75% of the software in use is vendor provided, and is
represented to be year 2000 compliant, with the

                                      58


remaining 25% being custom written. The assessment phase was completed by the
end of the second quarter. Overall compliance has been attained for
approximately 85% of all products. Remediation actions are still underway, with
a planned target for completion of the end of October, 1999.
Testing/certification of the software systems will continue through the fourth
quarter of the year.

   Inventories have been reviewed and non-compliant items consisting largely of
voice and other miscellaneous communications products have been identified.
Remediation consists primarily of replacement or upgrade of non-compliant
items. As of the end of the third quarter this activity is nearly 100%
complete.

   The logistics segment 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. With respect to critical
partnerships that involve electronic information exchange, communications have
been successful and productive. In numerous cases existing EDI applications
have been upgraded to year 2000 compliant versions of software. Overall,
responses to date, are incomplete and do not in all cases provide detailed
information with which to assess level of compliance. Follow-up activities are
on-going and will continue through the fourth quarter of this year.

   Although the logistics segment is striving to insure that its products and
services are Year 2000 ready, the logistics segment 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 the logistics segment does business, or exchanges information.
Therefore, contingency planning is underway throughout the organization. Core
business processes have been identified. Contingency plans consist largely of
refinement of existing manual procedures that are utilized during periodic
interruptions of computer and other communications failures. In addition, since
computerized electronic communications is a critical component of on-going
operations, a number of actions have been taken to further insure continuity.
These include installation of diesel or natural gas powered electricity
generators at key operations sights, and installation of backup communication
equipment in case of failure of existing network communication facilities. In
addition, negotiations are underway to secure backup computer "hot-sight"
facilities and services. We believe these and other related efforts will help
us avoid significant problems and will enable us to address and correct any
problems that do arise.

   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 problems in its systems, our business, financial condition and results of
operations could be materially adversely affected. In a worst case scenario,
this could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices or engage in similar normal business activities.
The occurrence of any or all of these consequences could affect customer and
vendor relations and/or adversely impact our results of operations, financial
condition or cash flow.

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 American Institute of Certified Public Accountants 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.

                                       59


   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, we will apply the
provisions of this statement as applicable.

Pacer Logistics

 Results of Operations

 Year Ended December 31, 1998 Compared to Nine Months Ended December 31, 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. 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 Pacer
Logistics' acquisitions (excluding MCS and Keystone) were acquired at the
beginning of the most recent fiscal year presented (the "integrated company").

   Gross Revenues. Revenues increased $171.7 million, or 211.7%, to $252.8
million for the year ended December 31, 1998 from $81.1 million for the nine
months ended December 31, 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.

   Net Revenues. Net revenues increased $29.1 million, or 234.7%, to $41.5
million for the year ended December 31, 1998 from $12.4 million for the nine
months ended December 31, 1997. Net revenues as a percentage of gross revenues
increased to 16.4% in 1998 from 15.3% in 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 for the year
ended December 31, 1998 from $8.8 million for the nine months ended December
31, 1997. As a percentage of gross revenues, selling, general and
administrative expenses increased to 11.0% in 1998 from 10.8% in 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.

                                       60



   Transaction Costs. During the year ended December 31, 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 for the year ended December 31, 1998 from $3.2 million for the
nine months ended December 31, 1997. Operating income increased $6.9 million,
or 202.9%, to $10.3 million in 1998 from $3.4 million for the twelve months
ended December 31, 1997. These increases are due to the increases in net
revenues partially offset by increases in selling, general and administrative
expenses, and the incurrence of transaction costs associated with the
terminated initial public offering. Operating income for the integrated company
increased $3.6 million or 37.9% as a result of the increase in net revenues of
$7.4 million which was partially offset by an increase in selling, general and
administrative expenses of $3.8 million.

   Interest Expense. Net interest expense increased to $2.9 million for the
year ended December 31, 1998 from $0.7 million for the nine months ended
December 31, 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% for the
year ended December 31, 1998 from 38.9% for the nine months ended December 31,
1997. The increase is due primarily to the amortization of goodwill related to
acquisitions made during the period.

 Nine Months Ended December 31, 1997 Compared to Year Ended December 31, 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 for the nine months ended December 31, 1997 from $86.8 million for the
year ended December 31, 1996. This decrease is due to the additional quarter of
revenues in 1996, which is partially offset by additional business with Union
Pacific in 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
for the nine months ended December 31, 1997 from $13.7 million for the year
ended December 31, 1996. Net revenues as a percentage of gross revenues
decreased to 15.3% in 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 1997.

   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 for the nine
months ended December 31, 1997 from $10.0 million for the year ended December
31, 1996. As a percentage of gross revenues, selling, general and
administrative expenses decreased to 10.8% in 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

                                       61



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 for the nine months ended December 31, 1997 from $3.5 million for
the year ended December 31, 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. These decreases are due to the decreases in net revenues which
were partially offset by decreases in selling, general and administrative
expenses. Operating income for the integrated company increased $2.3 million or
31.9%, due to growth in net revenues of $4.3 million, partially offset by an
increase of $2.0 million in selling, general and administrative expenses.

   Interest Expense (Income). Net interest expense increased $2.1 million to
$0.7 million for the nine months ended December 31, 1997 from $1.4 million in
net interest income for the year ended December 31, 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 1997 as compared to 1996.

                                       62


                                    BUSINESS

Development of Our Company

   Development of the Logistics Segment

   PMT Holdings, Inc., the predecessor to Pacer Logistics, was formed on March
5, 1997. After formation, PMT Holdings completed the following acquisitions:

  .  On March 31, 1997, PMT Holdings acquired all of the capital stock of
     Pacific Motor Transport Company from Union Pacific Railroad Company and
     its subsidiaries in a management buyout in exchange for approximately
     $13.0 million in cash and warrants to purchase PMT Holdings common and
     preferred stock. The buyout was funded in part by Eos Partners, L.P.
     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 a 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.

  .  On April 3, 1998, PMT Holdings, 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 PMT Holdings stock. Intraco is involved in
     the transportation of equipment primarily for railroads.

   In May 1998, PMT Holdings was renamed Pacer International, Inc. and its
subsidiaries reorganized. Subsequent to that reorganization Pacer International
consummated the following transactions:

  .  On June 5, 1998, Pacer International 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 in cash and $4.8 million in Pacer
     International stock. The Cross Con companies are multipurpose providers
     of transportation services, including intermodal marketing and local
     trucking.

  .  On July 25, 1998, Pacer International acquired substantially all of the
     assets of Professional Logistics Management Co., Inc. and 3PL
     Corporation, in exchange for $2.9 million in cash including acquisition
     fees. Professional Logistics and 3PL are providers of logistics
     services.

  .  On December 9, 1998, Pacer International acquired all of the capital
     stock of Manufacturers Consolidation Service, Inc. and its subsidiaries,
     Levcon, Inc., MCS of Kansas, Inc. and Manufacturers Consolidation
     Service of Canada Inc., for $10.1 million in cash and assumed debt and
     acquisition fees. The Manufacturers Consolidation Service companies are
     multipurpose providers of transportation services, including intermodal
     marketing and local trucking.

  .  On April 20, 1999, Pacer International acquired substantially all of the
     assets of Keystone Terminals, Inc. (DE) and Keystone Terminals, Inc.
     (NJ), in exchange for $8.5 million in cash including acquisition fees.
     The Keystone companies are providers of transportation services.

   In connection with the recapitalization in May 1999 described below, Pacer
International was renamed Pacer Logistics.

   Development of the Stacktrain Segment

   Prior to November 1998 APL Land Transport Services, Inc. consisted of two
operating divisions: the Stacktrain Services Division and the Automotive
Division. However, on November 20, 1998, APL Land

                                       63



Transport Services transferred all of its assets, except those of the
Stacktrain Services Division, to its parent, APL Limited. In May 1999, APL Land
Transport Services was recapitalized through the purchase of shares of its
common stock by affiliates of Apollo Management, L.P., Deutsche Bank Securities
Inc. and Credit Suisse First Boston Corporation from APL Limited and its
redemption of shares of common stock held by APL Limited. After the
recapitalization, APL Land Transport Services formed a transitory subsidiary
that was merged with and into Pacer International, making Pacer International a
wholly owned subsidiary of APL Land Transport Services. In connection with
these transactions APL Land Transport Services was renamed Pacer International,
Inc.

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 a significant portion of all domestic intermodal
container shipments 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. Chassis are steel
frames with rubber tires used to transport containers over the highway. 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.
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;

  .  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.

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  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. Mr. Orris and his
management team at APL Limited founded our stacktrain business in 1984. 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. 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" for a
more detailed description of the preferred stock.

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 business 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 if the railroad industry returns
to historical service levels. There are, however, no assurances that the
railroad industry will return to historic 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. 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.

   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

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consolidation and outsourcing by maintaining a broad range of service offerings
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 selling existing services to existing customers who
do not currently purchase such services from us 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 logistics market in 1997 was approximately $536.0 billion,
representing over 6.0% of the U.S. economy

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measured as a percentage of gross domestic 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
intermodal 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. From 1996 to 1997, industry sources have
estimated that the third-party transportation industry has grown at a rate of
approximately 20%. We believe that this growth has resulted from shippers
increasingly outsourcing 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

   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 some 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, the annual growth
rate of total domestic intermodal shipments declined to 0.9%. We believe that
this is 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, although
there can be no assurance that this will occur.

   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, asset
utilization and service quality and reliability. We anticipate that these
improvements will be passed

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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 1997.

   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 78.7% 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.

  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

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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
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,

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became the basis for the offering of stacktrain service to third parties. APL
Limited has indicated it is selling its stacktrain business pursuant to the
strategy of its corporate parent, Neptune Orient Lines, to focus its operations
on global container transportation and logistics services.

   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.

   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. 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
terminal facilities.

   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 "Material
Agreements Relating to Our Recapitalization" for a more detailed discussion of
our agreement with APL Limited.

   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.

   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

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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.

  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

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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. The stacktrain segment has two third party customers, Hub City and
Union Pacific, who accounted for approximately 25% to 30% of revenues in 1998
as reported in the audited financial statements of American President Lines
Stacktrain Services included elsewhere in this document. 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, 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.

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 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

                                       72


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 "Material Agreements Relating to Our Recapitalization" for a
more detailed discription of our Information Technology 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. 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.

   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

                                       73


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.
Drayage is the orgination or completion of an intermodal freight movement via
truck. 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 electronic data interchange
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 "Material Agreements Relating to Our
     Recapitalization" for a more detailed description of our TPI chassis
     sublet agreement.

   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.

                                       74


   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 our long
haul and local trucking 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.

   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

                                       75


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 "Material Agreements Relating to Our Recapitalization"
for a more detailed description of our Stacktrain Services agreement.

Employees

   As of June 25, 1999, we employed a total of 684 people.

Business Cycle

   Historically, 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 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.

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 surety bonding requirements. We provide
motor carrier

                                       76


transportation services that require registration with the Department of
Transportation and compliance with 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.

   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. Because American President Lines is our largest single customer, if
it were to lose market share as a result of not being able to compete
effectively due to the regulatory environment created by the Ocean Shipping
Reform Act, its volume of business tendered to us could decline, adversely
affecting availability of intermodal containers for our use and correspondingly
reducing our revenues. However, because American President Lines is a major
carrier in the trans-Pacific containerized shipping market it could garner
increased market share as a result of the changes from the Ocean Shipping
Reform Act. If that occurs, then our revenues could increase. If other less
significant customers of ours either gain or lose market share as a result of
the Ocean Shipping Reform Act, that fact could affect the volume of shipments
they tender to us and accordingly either reduce or increase our revenues.

   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

   Two subsidiaries of Pacer Logistics, Interstate Consolidation, Inc. and
Intermodal Container Service, Inc., are named defendants in a class action
filed by Irwin Albillo 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. Defendants
have 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. A decision is expected in November of 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

                                       77


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, the
registration statement includes information not required to be included in this
prospectus. 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., or 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.

   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.

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                                   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, a railroad. 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 Pacific Motor Transport Company,
a trucking company, from March 1997 until May 1998. Since 1982, Mr. Angeli has
served as President and Chief Executive Officer of the Pacer division of
Pacific Motor Transport Company 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
Interstate Consolidation, Inc. and Interstate Consolidation Service, Inc. in
1972. From 1972 until December 1997, Mr. Goldfein served as President and
Treasurer of Interstate Consolidation Service, Inc. and Intermodal Container
Service, Inc. and Vice President and Secretary of Interstate Consolidation,
Inc. Interstate Consolidation, Inc., Interstate Consolidation Service, Inc. and
Intermodal Container Service, Inc. are multipurpose providers of transportation
services, including intermodal marketing, local trucking and freight
consolidation and handling.

                                       79


   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, an
intermodal marketing company.

   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, an intermodal marketing company, 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 Interstate Consolidation, Inc. and Interstate
Consolidation Services, Inc. in 1972. From 1972 until December 1997, Mr.
Steiner served as President and Treasurer of Interstate Consolidation, Inc. and
Vice President and Secretary of Interstate Consolidation Services, Inc. and
Intermodal Container Service, Inc.

   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 Southern
Pacific Motor Trucking Company, a trucking company, from July 1992 until
December 1993. From January 1994 until March 1997, he served as Vice President
and Comptroller of Pacific Motor Transport Company and served as a Regional
Director of PMT Auto Transport, a division of Pacific Motor Transport Company,
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 an associate at Apollo Management, responsible for mergers and
acquisitions and overseeing portfolio investments, 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

                                       80


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.

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/2/
- ---------------------------  ---- -------- ------- ------------ ----------- ------------ ------- ---------------
                                                                         
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 acquisition of Pacer Logistics, certain of the
     options relating to Pacer Logistics preferred stock will convert to
     options to purchase Pacer Logistics Series A preferred 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.

                                      81


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.

   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 the specified 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.

                                       82


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.

   Under the employment agreement of Mr. Orris, our board of directors may
award an annual bonus to him in an amount up to $120,000 and under the
employment agreements of Messrs. Angeli, Cross, 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 operating income targets. Further, an additional bonus of up to
50% of the annual bonus may be awarded to each of Messrs. Orris, Angeli, Cross,
Goldfein and Steiner, based upon acquisitions made during the year.

   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 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.

                                       83


                              RELATED TRANSACTIONS

   In 1998, we purchased 200 railcars for $39.7 million, of which $31.8 million
was funded through our operations and the remaining amount was funded by APL
Limited. In connection with our recapitalization, we completed a sale and
leaseback transaction for 199 of the recently purchased railcars. The net pro
forma operating results for the fiscal year ended December 25, 1998 of the
additional lease expense, net of historical depreciation expense, as a result
of the sale and leaseback transaction is $2.5 million.

   In connection with our recapitalization and the acquisition of Pacer
Logistics, we entered into a number of agreements with APL Limited pursuant to
which we pay for services provided to us by APL Limited and receive payment for
services we provide to APL Limited. In addition, we entered into certain
shareholder agreements and a management agreement with Apollo. A detailed
description of these agreements is set forth in "Material Agreements Relating
to Our Recapitalization."

   In the ordinary course of business, we provide intermodal services to APL
Limited. 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 for the fiscal year ended December
25, 1998.

   In addition, we receive a credit from APL Limited for the repositioning
expense that APL Limited has avoided due to our using APL Limited's containers
in surplus locations. The total amount of revenue recognized for these services
was $20.0 million for the fiscal year ended December 25, 1998.

   We also provide services to American President Lines' 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 for the
fiscal year ended December 25, 1998.

   APL Limited and its subsidiaries share certain expenses with us. These
expenses include systems support, office space, salaries, and other corporate
services which are either allocated or charged on a cost reimbursement basis to
us. These expenses were $14.4 million for the fiscal year ended December 25,
1998. We also receive an allocation for lease and maintenance and repair
expenses from APL Limited. These expenses were $19.5 million for the fiscal
year ended December 25, 1998. Management believes these allocations are
reasonable.

   APL de Mexico, S.A. de C.V. (APL Mexico), a wholly owned Mexican subsidiary
of APL Limited, provides various agency services to us with respect to its
bills of lading in Mexico. Expenses recorded by us from APL Mexico were $0.5
million for the fiscal year ended December 25, 1998.

   During the period from inception through December 31, 1997, Pacer Logistics
paid $75,000 in management fees and $100,000 in acquisition-related consulting
fees to Eos Partners, L.P. Under an amended and restated management consulting
agreement, dated as of December 16, 1997, between Pacer Logistics and Eos
Management, Inc., Pacer Logistics paid Eos Management a monthly management fee
of $10,417 which management fee was payable whether or not Eos Management was
called upon to render services. The amended and restated management consulting
agreement terminated in connection with our recapitalization. Pacer Logistics
provided over-the-road transportation services in the amount of $13.0 million
and purchased linehaul transportation services in the amount of $16.6 million
from UP and its subsidiaries for the year ended December 31, 1998. All services
are provided and purchased at quoted market rates.

                                       84



   Pacer Logistics 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 our company. Mr.
Steiner is a stockholder and an Executive Vice President of our company. Lease
payments were $0.5 million for the year ended December 31, 1998.

   Cross Con leases a facility consisting of office space from Richard P.
Hyland, a stockholder and an Executive Vice President of the our 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 is entitled to
65 percent of the gross profit on Cross Con Terminals' Detroit office. TEK is
owned by a brother of Richard Hyland, a stockholder and an Executive Vice
President of our 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.

                                       85


              MATERIAL AGREEMENTS RELATING TO OUR RECAPITALIZATION

APL Limited Agreements

   We have entered into, or have entered negotiations to enter into, agreements
with APL Limited and several of its affiliates relating to our stacktrain
business. We believe that each of the agreements are as fair to us as any
agreement we could have obtained from unrelated third parties and arms-length
negotiation. 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, a
Singapore corporation and the parent of APL Limited, APL Limited, our former
parent, 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 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 years.

   Administrative Services Agreement

   Pursuant to an administrative services agreement, APL Limited provides us
with certain administrative and support services.

   These administrative and support services include:

  .  accounts payable,

  .  cargo claims,

  .  walker administration,

  .  office space and associated office services,

  .  training, and

  .  front line office accounting and information resource support.

   We compensate APL Limited on a per transaction basis and a headcount basis,
as applicable. APL Limited has represented to us in the administrative services
agreement that the fees payable to APL Limited pursuant to such agreement, when
applied to the actual number of transactions in 1998, would not result in total
fees 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 days. Upon expiration of the administrative services
agreement we will perform the services provided thereunder itself.

   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, an affiliate of Apollo Management,
and us, we are currently completing negotiation of an information technology
outsourcing and license agreement based upon a term sheet agreed by the
parties. If any

                                       86


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.

   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. As of August 20, 1999, we paid $2.5 million to APL
Limited under the term sheet.

   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

                                       87


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. As of August 20, 1999 APL
Limited has paid us $58.3 million pursuant to the stacktrain services
agreement.

   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 consideration for the
services outlined above. As of August 20, 1999 APL has paid us $1.65 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
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. APL
Limited has paid us approximately $3.5 million in connection with the
repositioning of empty containers through August 20, 1999.

   The stacktrain service agreement will expire twenty 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. As of August 20, 1999 no amounts were paid by
APL Limited under the TPI chassis sublet agreement.

                                       88


   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 affiliates of Deutsche Bank Securities Inc. and
Credit Suisse First Boston Corporation collectively own 2.9%, of our
outstanding common stock.

   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 APL Bermuda Pte. Ltd., its affiliate, 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 APL Bermuda Pte.
Ltd., 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.

                                       89


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) incidental registration rights in the event Pacer International effects
      a registration of its common stock;

  (3) 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) 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 of the total
        shares of Pacer International common stock held by it.

   We are a party to shareholders' agreements with

   (1) members of Pacer Logistics management, Coyote Acquisition and Coyote
Acquisition II and

   (2) 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

                                      90


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.

                                       91


                              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.



                                                           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, because such options and preferred
   stock are not convertible into common stock within 60 days.

 (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, because such options and preferred
   stock are not convertible into common stock within 60 days.

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 (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, because such options and preferred stock are not convertible
   into common stock within 60 days.

 (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, because such options and preferred
   stock are not convertible into common stock within 60 days.

 (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, because such options and preferred stock are not convertible
   into common stock within 60 days.

 (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, because such options and preferred stock are not convertible
   into common stock within 60 days.

 (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, because such options
   are not convertible into common stock within 60 days.

(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, because such options are
   not convertible into common stock within 60 days.

(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.


                                      93


                               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."

   Each share of common stock of Pacer International 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 Pacer International 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 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 shall have any preferential or
preemptive right to subscribe for, purchase or receive any share of our stock,
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.

   Pacer Logistics has a series of 7.5% exchangeable preferred stock
outstanding. Since the 7.5% exchangeable preferred stock of Pacer Logistics is
convertible into shares of common stock of Pacer International, it is described
below. The following description is a summary of the material terms of the 7.5%
exchangeable preferred stock, but does not restate the certificate of
designation in its 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 acquisition of Pacer Logistics. 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.

                                       94


   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. 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.

                                       95


                      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 the financial ratios set forth in the credit agreement of the net cash
  proceeds of all asset sales and dispositions by our company and its
  subsidiaries, subject to exceptions,

     (b) 100.0% or a lesser percentage determined based upon the achievement
  of the financial ratios set forth in the credit agreement of the net cash
  proceeds of issuances of certain debt obligations and certain preferred
  stock by our company and its subsidiaries, subject to exceptions,

     (c) 50.0% or a lesser percentage determined based upon the achievement
  of the financial ratios set forth in the credit agreement of the net cash
  proceeds from common equity and certain preferred stock issuances by our
  company and its subsidiaries, subject to exceptions, including in
  connection with permitted acquisitions,

     (d) 75.0% or a lesser percentage determined based upon the achievement
  of the financial ratios set forth in the credit agreement of annual Excess
  Cash Flow (as defined in our credit agreement) and

     (e) 100.00% of certain insurance proceeds, subject to the exceptions set
  forth in the credit agreement.

   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.

   The interest rates under our credit agreement are as follows:

     (1) At our option, the interest rate on our term loan facility, subject
  to increases or decreases based upon the achievement of certain financial
  rations, is

       (a) 2.00% in excess of the base rate equal to the higher of

         (x) 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

                                       96


       (b) 3.00% in excess of the Eurodollar rate for Eurodollar Loans (as
    defined in our credit agreement); and

     (2) At our option, the interest rate on our revolving credit facility,
  subject to increases or decreases based upon the achievement of certain
  financial rations, is

       (a) 1.50% in excess of the base rate equal to the higher of

         (x) 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) 2.50% in excess of the Eurodollar rate for Eurodollar Loans.

   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 the
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 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 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;

                                      97


  .  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
     exceptions.

   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 the new credit
agreement, but does not contain all of the information that may be important to
investors. The above summary 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 us.

                                       98


                              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 description is a summary of the material provisions of
the indenture. It does not contain all of the information that may be important
to investors. We urge you to read the indenture because it, and not this
description, defines your rights as holders of the notes. We have filed a copy
of the indenture as an exhibit to the registration statement of which this
prospectus forms a part.

Brief Description of the Notes and Guarantees

   The Exchange Notes

   These notes:

  .  are general unsecured obligations of Pacer International;

  .  are subordinate in right of payment to all existing and future Senior
     debt of Pacer International;

  .  are identical, in all material respects, to the form and terms of the
     old notes, except that the exchange notes have been registered under the
     Securities Act;

  .  are not subject to transfer restrictions, registration rights and
     certain provisions relating to an increase in the stated interest rate
     of the old notes under certain circumstances;

  .  are subordinate in right of payment to all existing and future Senior
     Debt of Pacer International; and

  .  are unconditionally guaranteed by the guarantors.

   The Guarantees

   These notes are guaranteed by all the direct and indirect subsidiaries of
Pacer International. The guarantees of these notes:

  .  are full, unconditional, joint and several obligations of each
     guarantor; and

  .  are subordinate in right of payment to all existing and future Senior
     Debt of each guarantor.

   These notes will be issued in fully register 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 these notes at the trustees 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."

                                       99


   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 of the notes 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 comprised
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,
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:

  (1) at least 65% of the aggregate amount of the notes originally issued
      under the indenture remain outstanding after the redemption; plus

  (2) the redemption occurs within 120 days of the date of the closing of
      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 Pacer International's Common Stock on Form S-8.

   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.


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Selection and Notice of Redemption

   If 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 as follows:

  (1) if the notes are listed, in compliance with the requirements of the
      principal national securities exchange on which the notes are listed;
      or

  (2) if the notes are not listed, on a pro rata basis, by lot or by such
      method as the trustee shall deem fair and appropriate.

   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;

   No notes of a principal amount of $1,000 or less shall be redeemed in part.

   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 of the note to be redeemed. A new note in a principal
amount equal to the unredeemed portion of the note will be issued in the name
of the holder of the note 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.

   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.

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
before the holders of notes will be entitled to receive any payment or
distribution of any kind with respect to any Obligations 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.

     Such payment shall include 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.

   Pacer International also may not make any payment or in respect of 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

                                      101


     (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 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.

   As a result of such subordination provisions described above, 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.

   After giving effect to the Transactions, on a pro forma basis, at August
20, 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 are full and unconditional obligations of the
guarantors. 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.


                                      102


   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 for a more detailed
description each guarantor's consolidation rights." 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

   If a Change of Control occurs, 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 shall constitute an
Event of Default described in clause (3) and not in clause (2) under "Events
of Default" below. Any failure to send the notice referred to in the
succeeding paragraph as a result of the prohibition in the second preceding
sentence shall also constitute an Event of Default described in clause (3) and
not clause (2) under "Events of Default" below.

   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
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.


                                      103


   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 reason of such laws or regulations.

   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.

Material 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 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;

                                      104


     (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; all such
  payments and other 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 after the Issue Date 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

       (d) without duplication, the sum of:

         (x) 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;

         (y) 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

         (z) 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 (x), (y) and (z) 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.

   So long as no Default has occurred and is continuing or would be caused by
the above, the preceding provisions 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;

                                      105


     (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

         (x) shares of Qualified Capital Stock of Pacer International or

         (y) 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

       (a) employees of Pacer International or any of its Subsidiaries or
    their authorized representatives

         (x) 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,

         (y) 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

         (z) to the extent required pursuant to the Shareholder Agreement
      or the Option Plan, or

       (b) 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 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

                                      106


  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 of Pacer International or any Restricted
    Subsidiary, which are shown on Pacer International's or such Restricted
    Subsidiary's most recent balance sheet 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,

                                      107


         (y) in properties and assets that will be used in the business of
      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,

                                      108


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 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;


                                      109


     (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

     (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 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:

         (x) 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

         (y) 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 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.

                                      110


   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 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.

   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.

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   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;

     (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;

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     (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 of the notes 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 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 or the senior management
  of Pacer International, 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.


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   Reports to Holders

   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,

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

                                      114


  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 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.

   At any time after a declaration of acceleration with respect to the notes,
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

                                      115


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.

   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 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

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       (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 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.


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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 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 affected holder of notes,
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

                                      118


  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 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 trustee is Wilmington Trust Company. 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 holders of not less than a majority in principal amount of the
outstanding notes 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. However, the trustee may refuse to follow any direction
that conflicts with any law or the indenture, that the trustee determines may
be unduly prejudicial to the rights of another holder of the notes, or that may
involve the trustee in personal liability; provided that the trustee may take
any other action deemed proper by the trustee that is not inconsistent with
such direction.

   Pacer has agreed to indemnify and hold harmless the trustee and its agents,
employees, officers, stockholders and directors 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 or their part arising out of or in
connection with acceptance or administration of their duties as trustee.

   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.

Definitions

   Set forth below is a summary 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

                                      119


     (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 1.0% of
the then outstanding principal amount of such note and

   (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;


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     (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 or
  Moody's Investors Service, Inc.;

     (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, whether 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

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  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 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;

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     (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,


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       (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 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.


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   "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.

   "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 of the Capital Stock,
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, 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

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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;


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     (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 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


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     (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 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.

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   "Permitted Holders" means

     (1) Apollo and

     (2) members of senior management of Pacer International and its
  Subsidiaries.

   "Permitted Indebtedness" means, without duplication, each of the following:

     (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

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  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;

     (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;
    provided that for purposes of this clause (a) 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; 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

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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 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

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     (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, 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;

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     (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

       (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.

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   "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.

   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

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     (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,

       (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;

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     (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"; provided, that, 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 violate such provisions of the
  indenture, 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 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.


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   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.

                                      137


                         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 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.

                                      138


   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.

                                      139


                   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.

                                      140


                              PLAN OF DISTRIBUTION

   Each tendering 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 tendering 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 tendering broker-dealer for use in
connection with any such resale.

   We will not receive any proceeds from any sale of exchange notes by
tendering broker-dealers. Exchange notes received by tendering 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 tendering broker-dealer or the purchasers of any such
exchange notes. Any tendering 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
tendering 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 tendering 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 tendering broker-dealers
and will indemnify the holders of the notes, including any tendering 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
February 10, 1999 changed its independent accountants from Arthur Andersen LLP
to PricewaterhouseCoopers LLP. Arthur Andersen's report on the financial
statements of American President Lines Stacktrain Services (the predecessor of
Pacer International) 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 the financial statements of American President Lines
Stacktrain Services for the periods indicated above.

                                      141


                                    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.


                                      142


         INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

FINANCIAL STATEMENTS:
                                                                        
AMERICAN PRESIDENT LINES STACKTRAIN SERVICES--A DIVISION OF APL LAND TRANSPORT
 SERVICES, INC. (currently known as Pacer International, Inc. and
 Subsidiaries)*
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
  Condensed Consolidated Balance Sheet as of June 25, 1999 and Statement
   of Assets, Liabilities and Divisional Control Account as of December
   25, 1998............................................................... F-15
  Condensed Consolidated Statements of Operations for the six months ended
   June 25, 1999 and June 26, 1998........................................ F-16
  Condensed Consolidated Statement of Changes in Stockholders' Equity
   (Deficit) for the period December 26, 1998 to June 25, 1999............ F-17
  Condensed Consolidated Statements of Cash Flows for the six months ended
   June 25, 1999 and June 26, 1998........................................ F-18
  Notes to Condensed Consolidated Financial Statements.................... F-19
PACER INTERNATIONAL, INC. (currently known as Pacer Logistics, Inc. )*
HISTORICAL AUDITED FINANCIAL STATEMENTS
  Report of Independent Public Accountants................................ F-24
  Consolidated Balance Sheets as of December 31, 1998 and 1997 and March
   31, 1997............................................................... F-25
  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-26
  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-27
  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-28
  Notes to Consolidated Financial Statements.............................. F-29
UNAUDITED INTERIM FINANCIAL STATEMENTS
  Condensed Consolidated Statement of Operations for the five months ended
   May 31, 1999........................................................... F-46
  Condensed Consolidated Statement of Cash Flows for the five months ended
   May 31, 1999........................................................... F-47
  Notes to Condensed Consolidated Financial Statements.................... F-48
FINANCIAL STATEMENT SCHEDULE:
AMERICAN PRESIDENT LINES STACKTRAIN SERVICES--A DIVISION OF APL LAND
 TRANSPORT SERVICES, INC.
  Report of Independent Public Accountants on Schedule II................. F-49
  Schedule II--Valuation and Qualifying Accounts.......................... F-50


- --------
*  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.

                                             /s/ ARTHUR ANDERSEN LLP

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, Hub City and Union Pacific, who account for approximately 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 which are either allocated or charged on a cost
reimbursement basis to the Company. 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. Management believes these allocations are reasonable.

   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

   Prior to November 1998 APL Land Transport Services, Inc. consisted of two
operating divisions: Stacktrain Services Division and the Automotive Division.
However, on November 20, 1998, APL Land Transport Services, Inc. transferred
all of its assets, except those of the Stacktrain Services Division, to its
parent, APL Limited. As of May 28, 1999 APL Land Transport Services, Inc. was
recapitalized through (1) the purchase by entities formed by affiliates of
Apollo Management, L.P., Deutsche Bank Securities Inc. and Credit Suisse First
Boston Corporation of shares of the Company's common stock from APL Limited and
(2) the Company's redemption of shares of its common stock held by APL Limited.
As part of the recapitalization, the assets and liabilities of the Company
remained at their historical basis. Immediately following its recapitalization,
the Company acquired Pacer Logistics, Inc. through the merger of a transitory
subsidiary with and into Pacer Logistics, Inc., resulting in Pacer Logistics
becoming a subsidiary of the Company. The acquisition of Pacer Logistics was
accounted for using the purchase method of accounting. In connection with
completion of these transactions, APL Land Transport Services, Inc. was renamed
Pacer International, Inc.

                                      F-14


                   PACER INTERNATIONAL, INC. AND SUBSIDIARIES

              UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET

                            AS OF JUNE 25, 1999

                                    AND

               AMERICAN PRESIDENT LINES STACKTRAIN SERVICES

              a division of APL Land Transport Services, Inc.

      STATEMENT OF ASSETS, LIABILITIES AND DIVISIONAL CONTROL ACCOUNT

                   AS OF DECEMBER 25, 1998 (SEE NOTE 1)



                                                        June 25,   December 25,
                                                          1999         1998
                                                       ----------- ------------
                                                       (unaudited)
                                                            (In millions)
                        ASSETS
                                                             
Current Assets
  Cash and Cash Equivalents...........................   $  1.4       $   --
  Trade and Other Receivables, Net of Allowances of
   $3.1 million
   and $0.7 million...................................    133.6         43.9
  Intercompany Trade Receivables......................      --           3.4
  Prepaid Expenses and Other..........................      5.3          0.1
  Deferred Income Taxes...............................      0.6           --
                                                         ------       ------
   Total Current Assets...............................    140.9         47.4
                                                         ------       ------
Property and Equipment
  Property and Equipment At Cost......................     60.5         95.4
  Accumulated Depreciation and Amortization...........     (8.3)        (6.6)
                                                         ------       ------
   Property and Equipment, Net........................     52.2         88.8
                                                         ------       ------
Other Assets
  Goodwill and Other Intangible Assets, Net...........    141.5         19.2
  Deferred Income Taxes...............................     84.6           --
  Other Assets........................................     13.1          0.7
                                                         ------       ------
   Total Other Assets.................................    239.2         19.9
                                                         ------       ------
Total Assets..........................................   $432.3       $156.1
                                                         ======       ======

        LIABILITIES AND STOCKHOLDERS' EQUITY
            OR DIVISIONAL CONTROL ACCOUNT
                                                             
Current Liabilities
  Current Maturities of Long-Term Debt and Capital
   Leases.............................................   $  1.6       $   --
  Accounts Payable and Accrued Liabilities............    156.9         84.6
                                                         ------       ------
   Total Current Liabilities..........................    158.5         84.6
                                                         ------       ------
Long-Term Liabilities
  Long-Term Debt and Capital Leases...................    285.6           --
  Deferred Tax Liability..............................      --          15.4
  Other Liabilities...................................      2.7          0.5
                                                         ------       ------
   Total Long-Term Liabilities........................    288.3         15.9
Total Liabilities.....................................    446.8        100.5
                                                         ------       ------
Minority Interest--Exchangeable Preferred Stock.......     24.4           --
                                                         ------       ------
Stockholders' Equity or Divisional Control Account
  Preferred Stock at June 25, 1999: $0.01 par value,
   1,000,000 Shares Authorized, None Outstanding......       --           --
  Common Stock at June 25, 1999: $0.01 par value,
   20,000,000 Shares Authorized, 10,440,000 Issued and
   Outstanding........................................      0.1           --
  Additional Paid in Capital..........................    104.3           --
  Retained Earnings (Accumulated Deficit).............   (143.3)          --
  Divisional Control Account..........................       --         55.6
                                                         ------       ------
   Total Stockholders' Equity (Deficit) or Divisional
    Control Account...................................    (38.9)        55.6
                                                         ------       ------
Total Liabilities and Equity or Divisional Control
 Account..............................................   $432.3       $156.1
                                                         ======       ======


   The accompanying notes are an integral part of the condensed consolidated
                             financial statements.

                                      F-15


                   PACER INTERNATIONAL, INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS



                                                           Six Months Ended
                                                        -----------------------
                                                         June 25,    June 26,
                                                           1999        1998
                                                        ----------- -----------
                                                        (Unaudited) (Unaudited)
                                                             (In millions)
                                                              
Gross revenues.........................................   $358.7      $285.4
Cost of purchased transportation and services..........    286.6       228.2
                                                          ------      ------
  Net revenues.........................................     72.1        57.2
Operating expenses:
  Direct operating expenses............................     34.0        33.8
  Selling, general and administrative expenses.........     15.8        11.6
  Depreciation and amortization........................      3.6         3.3
                                                          ------      ------
    Total operating expenses...........................     53.4        48.7
                                                          ------      ------
Income from operations.................................     18.7         8.5
Interest expense ......................................      2.4         0.3
                                                          ------      ------
Income before income taxes and minority interest.......     16.3         8.2
Income taxes or charge in lieu of income taxes.........      6.1         3.2
Minority interest......................................      0.1         --
                                                          ------      ------
Net income.............................................   $ 10.1      $  5.0
                                                          ======      ======



   The accompanying notes are an integral part of the condensed consolidated
                             financial statements.

                                      F-16


                   PACER INTERNATIONAL, INC. AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
                                  (Unaudited)



                                Additional             Divisional      Total
                         Common  Paid-in-  Accumulated  Control    Stockholders'
                         Stock   Capital     Deficit    Account   Equity (Deficit)
                         ------ ---------- ----------- ---------- ----------------
                                                   
December 25, 1998.......  $ --    $   --     $    --     $ 55.6       $  55.6
Distribution to
 Shareholders...........    --        --      (300.0)        --        (300.0)
Effects of
 Recapitalization.......    --        --       146.6      (55.6)         91.0
Issuance of Common
 Stock..................   0.1     104.3          --         --         104.4
Net income..............    --        --        10.1         --          10.1
                          ----    ------     -------     ------       -------
June 25, 1999...........  $0.1    $104.3     $(143.3)    $   --       $ (38.9)
                          ====    ======     =======     ======       =======




   The accompanying notes are an integral part of the condensed consolidated
                             financial statements.

                                      F-17


                   PACER INTERNATIONAL, INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



                                              Six Months Ended Six Months Ended
                                               June 25, 1999    June 26, 1998
                                              ---------------- ----------------
                                                (Unaudited)      (Unaudited)
                                                        (In millions)
                                                         
Cash Flows from Operating Activities:
Net Income..................................       $ 10.1           $  5.0
Adjustments to Reconcile Net Income to Net
 Cash Provided by (used in) Operating
 Activities:
  Depreciation and Amortization.............          3.6              3.3
  Deferred Income Taxes.....................          0.4               --
  Change in Current Assets and Liabilities:
   Trade and Other Receivables..............        (40.5)           (27.8)
   Prepaid Expenses and Other Current
    Assets..................................        (23.3)            (1.2)
   Accounts Payable and Accrued
    Liabilities.............................         33.5             23.7
                                                   ------           ------
    Net Cash Provided by (used in) Operating
     Activities.............................        (16.2)             3.0
                                                   ------           ------
Cash Flows from Investing Activities:
Purchase of Business, Net of Cash Acquired..       (111.3)              --
Capital Expenditures........................         (0.1)           (39.7)
Proceeds from Sales of Property and
 Equipment..................................         39.6               --
                                                   ------           ------
    Net Cash used in Investing Activities...        (71.8)           (39.7)
                                                   ------           ------
Cash Flows from Financing Activities:
Cash Overdrafts.............................         (2.0)              --
Proceeds of Long-term Debt..................        287.0               --
Intercompany Funding, Net...................           --             36.7
Proceeds from Issuance of Common Stock......        104.4               --
Distribution to Shareholders................       (300.0)              --
                                                   ------           ------
    Net Cash Provided by Financing
     Activities.............................         89.4             36.7
                                                   ------           ------
Net Increase in Cash and Cash Equivalents...          1.4               --
Cash and Cash Equivalents--Beginning of
 Period.....................................           --               --
                                                   ------           ------
Cash and Cash Equivalents--End of Period....       $  1.4           $   --
                                                   ------           ------




   The accompanying notes are an integral part of the condensed consolidated
                             financial statements.

                                      F-18


                   PACER INTERNATIONAL, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

   Prior to November 1998 APL Land Transport Services, Inc. consisted of two
operating divisions: Stacktrain Services Division and the Automotive Division.
However, on November 20, 1998, APL Land Transport Services transferred all of
its assets, except those of the Stacktrain Services Division, to its parent,
APL Limited. As of May 28, 1999 APL Land Transport Services, Inc. was
recapitalized through (1) the purchase by entities formed by affiliates of
Apollo Management, L.P., Deutsche Bank Securities Inc. and Credit Suisse First
Boston Corporation of shares of the Company's common stock from APL Limited and
(2) the Company's redemption of shares of its common stock held by APL Limited.
As part of the recapitalization, the assets and liabilities of the Company
remain at their historical basis for financial reporting purposes; for income
tax purposes, the transaction has been treated as a taxable transaction such
that the consolidated financial statements reflect a "step-up" in tax basis
resulting in the establishment of a deferred tax asset. See Note 4. Immediately
following its recapitalization, the Company acquired Pacer Logistics, Inc.
through the merger of a transitory subsidiary with and into Pacer Logistics,
Inc., resulting in Pacer Logistics becoming a subsidiary of the Company. The
acquisition of Pacer Logistics was accounted for using the purchase method of
accounting. See Note 2. In connection with the completion of these
transactions, APL Land Transport Services, Inc. was renamed Pacer
International, Inc.

Basis of Presentation

   The unaudited interim financial statements as of June 25, 1999 and for the
six months ended June 25, 1999 and June 26, 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 amounts for the
Statement of Assets, Liabilities and Divisional Control Account as of December
25, 1998 were derived from the audited financial statements of the Company,
formerly known as American President Lines Stacktrain Services, a division of
APL Land Transport Services, Inc., presented elsewhere in this prospectus, and
include a summary of significant accounting policies which should be read in
conjunction with these interim financial statements.

Principles of Consolidation

   The consolidated financial statements as of and for the six months ending
June 25, 1999 include the accounts of the Company and its subsidiary, Pacer
Logistics, Inc., acquired May 28, 1999. All significant intercompany
transactions and balances have been eliminated in consolidation.

Industry Segments

   The Company operates in two reportable industry segments, providing
intermodal rail services and providing logistic services in North America.

Goodwill

   Goodwill represents the excess of cost over the estimated fair value of the
net tangible and intangible assets acquired and is being amortized over 40
years on a straight-line basis. The Company evaluates the carrying value of
goodwill and recoverability should events or circumstances occur that bring
into question the realizable value or impairment of goodwill. The Company's
principal considerations in determining impairment include the strategic
benefit to the Company of the business related to the goodwill as measured by
undiscounted current and expected future operating income levels of the
business and expected undiscounted future cash flows. When goodwill is
determined to not be recoverable, an impairment is recognized as a charge to
operations to the extent the carrying value of related assets (including
goodwill) exceeds the sum of the undiscounted cash flows from those related
assets.

                                      F-19


                   PACER INTERNATIONAL, INC. AND SUBSIDIARIES

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


Deferred Financing Costs

   The deferred financing costs relate to the cost incurred in the placement of
the Company's debt and are being amortized using the effective interest method
over the terms of the related debt which range from 5 to 7 years.

Reclassification

   Certain classifications have been made to the 1998 balances to conform with
the 1999 presentation. These reclassifications had no effect on the Company's
financial position or net income.

NOTE 2. THE RECAPITALIZATION AND ACQUISITION OF PACER LOGISTICS

   The recapitalization, financed primarily with the issuance of $150 million
in senior subordinated notes, $135 million in term loans, $133 million in
issued, rolled or exchanged equity and $40.0 million in proceeds from the sale
and leaseback of 199 railcars purchased in 1998, resulted in affiliates of
Apollo Management, LP holding 89.9%, APL Limited holding 7.2% and affiliates of
Deutsche Bank Securities, Inc. and Credit Suisse First Boston holding 2.9 % of
the Company's outstanding common stock.

   As discussed in Note 1, on May 28, 1999, the Company acquired the common
stock of Pacer Logistics, Inc. (formerly known as Pacer International, Inc.), a
privately-held third party logistics provider pursuant to a stock purchase
agreement (the "Purchase Agreement"), dated as of March 15, 1999 between APL
Limited and Coyote Acquisition LLC.

   The Company paid approximately $137.5 million, which included acquisition
fees of $2.9 million and assumed indebtedness of $62.6 million. The Company
financed the acquisition with a portion of the proceeds raised in the note
offering and with funds under the Credit Facility as discussed in Note 3. The
acquisition of Pacer Logistics has been accounted for as a purchase in
accordance with Accounting Principles Board Opinion No. 16, "Business
Combinations." The aggregate purchase price has been allocated to the
underlying assets and liabilities acquired based upon preliminary estimates of
fair values at the date of acquisition, which may be updated based on final
appraisals, with the remainder allocated to goodwill to be amortized over 40
years. The Company determined a 40-year amortization period was appropriate
after considering that there are no legal, regulatory or contractual provisions
associated with the logistics segment that may limit the useful life of the
goodwill, the service provided by the logistics segment is not subject to
obsolescence, the Company is not aware of any expected actions of competitors
and others that may restrict the logistics segment's ability to successfully
compete in the industry and the predecessor company of the logistics segment
has successfully operated since 1928. Though the fair value estimates are
preliminary, we do not believe there will be a material change to goodwill when
these estimates are finalized. The results of operations for the acquired
business are included in the Company's consolidated financial statements
beginning May 28, 1999. The purchase price allocation, preliminary in nature
and subject to change, is as follows: (in millions)

                                                                   
   Accounts receivables, net............................................ $ 45.9
   Prepaid expenses and other current assets............................    2.9
   Property, plant and equipment, net...................................    4.4
   Other non-current assets.............................................    2.1
   Goodwill.............................................................  122.8
   Current liabilities..................................................  (39.9)
   Long-term liabilities................................................   (0.7)
                                                                         ------
     Total purchase price............................................... $137.5
                                                                         ======

   

                                      F-20


                   PACER INTERNATIONAL, INC. AND SUBSIDIARIES

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

NOTE 3. NOTES PAYABLE

   In conjunction with the transactions described above, the Company issued
$150 million aggregate principal amount of 11 3/4% senior subordinated notes
due June 1, 2007 under the indenture dated as of May 28, 1999. Interest on the
notes is payable semi-annually in cash on each June 1 and December 1,
commencing on December 1, 1999. The Company 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:
2003--105.875%; 2004--102.938% and 2005 and thereafter--100.00%. 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 at a purchase price equal to 101.0% of the
principal amount thereof plus accrued interest to the date of purchase.

   The notes are fully and unconditionally guaranteed, on a senior subordinated
basis, jointly and severally, by each of the Company's subsidiaries. The
indenture contains covenants limiting the Company's ability to incur additional
indebtedness, and restricts the Company's ability to pay dividends or make
certain other restricted payments, consummate certain asset sales, or otherwise
dispose of all or substantially all of the assets of the Company and its
subsidiaries.

   The Company also entered into a credit agreement that provides for a seven-
year $135.0 million term loan which was used to finance the recapitalization
and certain indebtedness of the Company and a five-year $100.0 million
revolving credit facility. The interest rate for the term loan is the lesser of
2% in excess of the prime lending rate as determined by administrative agent,
2.5% in excess of the federal funds rate or 3% in excess of the Eurodollar rate
subject to increases and decreases based upon achievement of certain financial
ratios. The interest rate for the revolving credit facility is the lesser of
1.5% in excess of the prime lending rate as determined by the administrative
agent, 1.5% in excess of the federal funds rate or 2.5% in excess of the
Eurodollar rate subject to increases and decreases based upon achievement of
certain financial ratios.

   The Company must pay a commitment fee equal to a percentage equal to 0.5%
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. In addition, the credit agreement contains customary covenants the
most restrictive of which limits the Company's ability to declare dividends,
prepay debt, make investments, incur additional indebtedness, make capital
expenditures, engage in mergers, acquisitions and asset sales, and issue
redeemable common stock and preferred stock, subject to certain exceptions. In
addition, the Company is required to comply with specified financial covenants.

NOTE 4. INCOME TAXES

   The Company is required to file separate U.S. corporate income tax returns,
independent of Pacer Logistics, Inc. and its subsidiaries. The Company and its
subsidiary, Pacer Logistics, Inc., would be eligible to elect and file U.S.
consolidated corporation income tax returns if the Company owns at least 80% of
the total voting power and total value of the stock of Pacer Logistics, Inc.
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 in the
financial statement carrying amounts and the tax basis of existing assets and
liabilities.

   For federal and state income tax purposes, the recapitalization of the
Company was a taxable business combination and a qualified stock purchase. The
buyer and seller jointly agreed to treat the transaction as an

                                      F-21


                   PACER INTERNATIONAL, INC. AND SUBSIDIARIES

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
asset acquisition in accordance with Section 338 (h)(10) of the Internal
Revenue Code and such election has been made. A preliminary allocation of the
purchase price to the tax basis of assets and liabilities based on their
respective fair value at May 28, 1999 was made for income tax purposes and will
be finalized during 1999.

   In connection with the transaction, the Company recorded a deferred tax
asset of approximately $85 million at May 28, 1999 related to future tax
deductions for the net excess of the tax basis of the assets and liabilities
over the financial statement carrying amounts with a corresponding credit to
Stockholders' Equity. Historically the Company has generated operating income
and realization of the deferred tax assets is dependant upon the Company's
ability to generate sufficient future taxable income which management believes
is more likely than not, and accordingly, no valuation allowance has been
recorded.

NOTE 5. PENSION PLANS AND STOCK OPTION PLANS

   Effective May 28, 1999, the Company's employees were eligible for the Pacer
Logistics, Inc. 401(k) plan and no longer participated in the former parent's
pension plans.

   On May 28, 1999, the Board of Directors authorized the creation of the Pacer
International, Inc. 1999 Stock Option Plan under which 1,348,500 options for
the Company's common stock were authorized of which 1,078,114 options have been
granted at or above fair market value at the date of grant. Of the options
granted, 92,614 were part of the 1998 Pacer Logistics, Inc. Stock Option Plan
that were rolled over as part of the acquisition of Pacer Logistics.

NOTE 6. RELATED PARTY TRANSACTIONS

   Prior to the recapitalization, APL Land Transport Services, Inc. shared in
certain expenses of the former parent for services including systems support,
office space and other corporate services. Subsequent to the recapitalization,
the Company intends to sign long-term agreements with APL Limited to provide
such services. According to a term sheet upon which negotiations are based, the
information technology services would be provided to the Company for an annual
fee of $10.0 million. The Company entered into a service agreement with APL
Limited to receive a $6.6 million management fee. The Company has 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 the recapitalization or earlier as
determined by the Company.

NOTE 7. CONTINGENCIES

   In June 1995, APL Limited, the Company's former 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 APL Limited
and the Company that it believed the Company breached the service agreement
when APL Limited 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. APL Limited and the Company filed motions to dismiss both complaints.
On November 13, 1998, APL Limited 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 APL Limited or the Company, and has not reserved
for this contingency.

                                      F-22


                   PACER INTERNATIONAL, INC. AND SUBSIDIARIES

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

   The Company is a party to various legal proceedings, claims and assessments
arising in the course of its business activities. Two subsidiaries of Pacer
Logistics, Interstate Consolidation, Inc. and Intermodal Container Service,
Inc., are named defendants 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. The defendants have 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. A
decision is expected in November of 1999. The Company has defended and will
continue 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 Company's consolidated financial position
or results of operations.


NOTE 8.  SEGMENT INFORMATION

   The Company has adopted SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information, which changes the way the Company reports
information about its reportable operating segments.

   With the acquisition of Pacer Logistics on May 28, 1999, the Company has two
reportable segments, the stacktrain segment and the logistics segment, which
have separate management teams and offer different but related products and
services. The stacktrain segment provides intermodal rail service in North
America by selling intermodal service to shippers while buying space on
intermodal rail trains. The large majority of business is conducted
domestically, with minor services in Mexico and Canada. Customers include
intermodal marketers which serve customers in various industries as well as the
ocean carrier industry. The logistics segment supports the stacktrain segment
by offering marketing, freight handling, truck and local pickup and delivery
services.

   The following table presents reportable segment information for the six
months ended June 25, 1999 and June 26, 1998:



                                           1999                             1998
                          ---------------------------------------- -----------------------
                          Stacktrain Logistics Other  Consolidated Stacktrain Consolidated
                          ---------- --------- -----  ------------ ---------- ------------
                                                   (in millions)
                                                            
Gross revenues..........    $326.9     $34.4   $(2.6)    $358.7      $285.4      $285.4
Net revenues............      66.6       5.5     --        72.1        57.2        57.2
Income from operations..      17.3       1.5    (0.1)      18.7         8.5         8.5
Interest expense........       1.8       0.6     --         2.4         0.3         0.3
Tax expense.............       5.7       0.4     --         6.1         3.2         3.2
Net income..............       9.8       0.5    (0.2)      10.1         5.0         5.0
Total assets............     370.1     125.5   (63.3)     432.3       177.3       177.3
Depreciation and
 amortization...........       3.2       0.3     0.1        3.6         3.3         3.3
Capital expenditures....       --        0.1     --         0.1        39.7        39.7


   Data in the "Other" column includes elimination of intercompany balances and
subsidiary investment. For the six months ended June 25, 1999, the Company had
two customers, Hub City and Union Pacific, which contributed more than 10% of
the Company's total revenues. Total revenues from Hub City, generated by the
stacktrain segment, were $65.1 million and total revenues from Union Pacific,
generated by both reporting segments, were $45.4 million for the six months
ended June 25, 1999.

                                      F-23


                    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.

                                             /s/ ARTHUR ANDERSEN LLP

San Francisco, California
 February 10, 1999

                                      F-24


                   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-25


                   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-26


                   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-27


                   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-28


                   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-29


                   PACER INTERNATIONAL, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


Nature of Operations

   The Company's 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
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-30


                   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-31


                   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-32


                   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-33


                   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-34


                   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-35


                   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-36


                   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-37


                  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-38


                   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-39


                   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-40


                   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-41


                   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-42


                   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 Cross Con 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-43


                   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 course of its business activities. Two subsidiaries of the
Company, Interstate Consolidation, Inc. and Intermodal Container Service, Inc.,
are named defendants 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. The defendants have 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. A
decision is expected in November of 1999. The Company has defended and will
continue 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 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-44


                   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 $8.5
million, including acquisition fees. 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-45


                     PACER LOGISTICS, INC AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS



                                                                 (Unaudited)
                                                              Five Months Ended-
                                                                 May 31, 1999
                                                              ------------------
                                                                (In thousands)
                                                           
REVENUES.....................................................      $151,708
COST OF PURCHASED TRANSPORTATION AND SERVICES................      (127,157)
                                                                   --------
  Net revenues...............................................        24,551
OPERATING EXPENSES:
  Selling, general and administrative expenses...............        17,877
  Depreciation and amortization..............................         1,279
                                                                   --------
    Income from operations...................................         5,395
INTEREST EXPENSE (INCOME)....................................         1,972
                                                                   --------
Income before income tax provision...........................         3,423
INCOME TAX PROVISION.........................................         1,465
                                                                   --------
Net income...................................................      $  1,958
                                                                   ========




   The accompanying notes are an integral part of the condensed consolidated
                             financial statements.

                                      F-46


                     PACER LOGISTICS, INC AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS



                                                                 (Unaudited)
                                                              Five Months Ended
                                                                May 31, 1999
                                                              -----------------
                                                               (In thousands)
                                                           
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income.................................................      $ 1,958
  Adjustments to reconcile net income to net cash provided by
   (used in) operating activities
  Depreciation and amortization..............................        1,279
  Deferred income taxes......................................           --
  Changes in operating assets and liabilities:
    Increase in accounts receivable, net of allowances.......       (4,317)
    Decrease (increase) in prepaid expenses and other........         (386)
    Decrease (increase) in other assets......................         (899)
    Increase in accounts payable.............................        2,073
    Increase (decrease) in accrued expenses..................       (2,446)
    Decrease in employee benefits............................          (28)
                                                                   -------
    Net cash used in operating activities....................       (2,766)
                                                                   -------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of business, net of cash acquired.................       (8,500)
  Purchases of property and equipment........................         (887)
  Proceeds from equipment sales..............................        3,035
                                                                   -------
    Net cash used in investing activities....................       (6,352)
                                                                   -------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Cash overdrafts............................................       (1,169)
  Proceeds on long-term debt.................................       80,021
  Principal payments on long-term debt.......................      (70,434)
  Additional paid-in capital.................................          700
                                                                   -------
    Net cash provided by financing activities................        9,118
                                                                   -------
NET INCREASE IN CASH AND
 CASH EQUIVALENTS............................................           --
CASH AND CASH EQUIVALENTS AT BEGINNING
 OF PERIOD...................................................           10
                                                                   -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD...................      $    10
                                                                   =======



   The accompanying notes are an integral part of the condensed consolidated
                             financial statements.

                                      F-47


                     PACER LOGISTICS, INC AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF INTERIM PERIOD PRESENTATION

   The unaudited interim financial statements for the five months ended May 31,
1999 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. ACQUISITIONS

   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 $8.5
million, including acquisition fees. 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 Logistics 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. A
decision is expected in November of 1999. The Company has defended and will
continue 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 Company's consolidated financial position
or results of operations.

                                      F-48


            REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE II

To APL Limited:

   We have audited in accordance with generally accepted auditing standards,
the financial statements 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) included in this Form S-4, and have
issued our report thereon dated January 29, 1999. Our audit was made for the
purpose of forming an opinion on those statements taken as a whole. Schedule
II, "Valuation and Qualifying Accounts," is the responsibility of the Company's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the
audit of the basic financial statements and, in our opinion, fairly states in
all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.

                                          /s/ Arthur Andersen LLP

Memphis, Tennessee
 January 29, 1999

                                      F-49


                                  Schedule II

     Pacer International, Inc. (Formerly known as American President Lines
                              Stacktrain Services)

                       Valuation and Qualifying Accounts

 For the years ended December 25, 1998, December 26, 1997 and December 27, 1996
                                 (in millions)



      Column A        Column B   Column C          Column D          Column E
      --------       ---------- ---------- ------------------------ ----------
                     Balance at                                     Balance at
                     Beginning  Additions                             End of
                     of Fiscal  Charged to                            Fiscal
    Description        Period     Income   Deductions (a) Other (b)   Period
    -----------      ---------- ---------- -------------- --------- ----------
                                                     
December 25, 1998
  Allowance for
   doubtful
   accounts.........    $0.9       $--         $  --        $(0.2)     $0.7
December 26, 1997
  Allowance for
   doubtful
   accounts.........    $0.7       $0.4        $(0.2)        $--       $0.9
December 27, 1996
  Allowance for
   doubtful
   accounts.........    $0.7       $ --        $  --         $--       $0.7

- --------
(a) Represents write-off of uncollectible amounts
(b) Represents a reduction of the allowance based on historical analysis

                                      F-50


- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

   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, Hand Delivery or Overnight Courier

                            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]

                                  $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.



 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      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).
              (Previously filed as Exhibit No. 4.2 to the Registration
              Statement on Form S-4 dated August 12, 1999.)
    4.2      Form of 11 3/4% Senior Subordinated Notes due 2007 (filed as part
              of Exhibit 4.1). (Previously filed as Exhibit No. 4.3 to the
              Registration Statement on Form S-4 dated August 12, 1999.)
    4.3      Shareholders' Agreement, dated as of May 28, 1999, among APL
              Limited, Pacer International, Inc., Coyote Acquisition LLC and
              Coyote Acquisition II LLC. (Previously filed as Exhibit No. 4.12
              to the Registration Statement on Form S-4 dated August 12,
              1999.)
    4.4      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. (Previously
              filed as Exhibit No. 4.13 to the Registration Statement on Form
              S-4 dated August 12, 1999.)
    4.5      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. (Previously filed as
              Exhibit No. 4.14 to the Registration Statement on Form S-4 dated
              August 12, 1999.)
    4.6      Registration Rights Agreement, dated as of May 28, 1999, between
              Pacer International, Inc., and the Purchasers named therein.
              (Previously filed as Exhibit No. 4.18 to the Registration
              Statement on Form S-4 dated August 12, 1999.)
    5.1      Opinion of Dewey Ballantine LLP as to the legality of the
              securities being registered.*
    10.1     Employment Agreement for Donald C. Orris.*



                                      II-1




 Exhibit No.                             Description
 -----------                             -----------
          
    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.*
    10.6     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. (Previously filed
              as Exhibit No. 4.1 to the Registration Statement on Form S-4
              dated August 12, 1999.)
    10.7     Stock Purchase Agreement, dated as of March 15, 1999, between APL
              Limited and Coyote Acquisition LLC. (Previously filed as Exhibit
              No. 4.4 to the Registration Statement on Form S-4 dated August
              12, 1999.)
    10.8     Non-Competition Agreement, dated as of May 28, 1999, among Neptune
              Orient Lines Limited, APL Limited, Pacer International, Inc. and
              Coyote Acquisition LLC. (Previously filed as Exhibit No. 4.5 to
              the Registration Statement on Form S-4 dated August 12, 1999.)
    10.9     Administrative Services Agreement, dated as of May 28, 1999,
              between APL Limited and Pacer International, Inc. (Previously
              filed as Exhibit No. 4.6 to the Registration Statement on Form S-
              4 dated August 12, 1999.)
    10.10    IT Supplemental Agreement, dated as of May 11, 1999, between APL
              Limited, APL Land Transport Services, Inc. and Coyote Acquisition
              LLC.*
    10.11    Stacktrain Services Agreement, dated as of May 28, 1999, among
              American President Lines, Ltd., APL Co. Pte. Ltd., APL Limited
              and Pacer International, Inc. (Previously filed as Exhibit
              No. 4.8 to the Registration Statement on Form S-4 dated August
              12, 1999.)
    10.12    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. (Previously filed as Exhibit
              No. 4.9 to the Registration Statement on Form S-4 dated August
              12, 1999.)
    10.13    Equipment Supply Agreement, dated as of May 28, 1999, among
              American President Lines, Ltd., APL Co. Pte. Ltd., APL Limited
              and Pacer International, Inc. (Previously filed as Exhibit
              No. 4.10 to the Registration Statement on Form S-4 dated August
              12, 1999.)
    10.14    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. (Previously
              filed as Exhibit No. 4.11 to the Registration Statement on Form
              S-4 dated August 12, 1999.)
    10.15    Management Agreement, dated as of May 28, 1999, between Apollo
              Management IV, L.P. and Pacer International, Inc. (Previously
              filed as Exhibit No. 4.15 to the Registration Statement on Form
              S-4 dated August 12, 1999.)
    10.16    Tax Sharing Agreement, dated as of May 28, 1999, by and among
              Coyote Acquisition LLC, Pacer International, Inc. and Pacer
              Logistics, Inc. (Previously filed as Exhibit No. 4.16 to the
              Registration Statement on Form S-4 dated August 12, 1999.)
    10.17    Purchase Agreement, dated as of May 24, 1999, among Pacer
              International, Inc., the Guarantors and the Placement Agents
              named therein. (Previously filed as Exhibit No. 4.17 to the
              Registration Statement on Form S-4 dated August 12, 1999.)
    10.18    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 10.17). (Previously filed as Exhibit
              No. 4.19 to the Registration Statement on Form S-4 dated August
              12, 1999.)



                                      II-2




 Exhibit No.                             Description
 -----------                             -----------
          
    10.19    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.*
    10.20    Domestic Incentive Agreement, dated as of May 4, 1999, between CSX
              Intermodal, Inc. and Pacer International, Inc.*
    10.21    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.*
    12.1     Statement of Computation of Ratio of Earnings to Fixed Charges.*
    12.2     Statement of Computation of EBITDA to Cash Interest Expense.*
    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.*

- --------
* Previously filed

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.

                                      II-3


   2. 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.

   3. 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.

   4. 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 October 25, 1999.

                                          Pacer International, Inc.

                                          By: /s/ Donald C. Orris
                                            -----------------------------------
                                                      Donald C. Orris
                                               Chairman, President and Chief
                                                     Executive Officer

   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     October 25, 1999
______________________________________  Chief Executive Officer
           Donald C. Orris

                  *                    Executive Vice President,   October 25, 1999
______________________________________  Chief Financial Officer
         Lawrence C. Yarberry           and Treasurer

                  *                    Vice President, Controller  October 25, 1999
______________________________________  and Secretary
          Joseph P. Atturio

                  *                    Director                    October 25, 1999
______________________________________
           Joshua J. Harris

                  *                    Director                    October 25, 1999
______________________________________
           Bruce H. Spector

                  *                    Director                    October 25, 1999
______________________________________
            Marc E. Becker

                  *                    Director                    October 25, 1999
______________________________________
           Timothy J. Rhein


   /s/ Donald C. Orris
*By: ____________________________
         Donald C. Orris
        Attorney-in-Fact

                                      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 October 25, 1999.

                                          Pacer Logistics, Inc.

                                          By:/s/ Donald C. Orris
                                             ----------------------------------
                                                      Donald C. Orris
                                               Chairman, President and Chief
                                                     Executive Officer

   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     October 25, 1999
______________________________________  Chief Executive Officer
           Donald C. Orris

                  *                    Executive Vice President    October 25, 1999
______________________________________  and Director
           Gary I. Goldfein

                  *                    Executive Vice President,   October 25, 1999
______________________________________  Chief Financial Officer
         Lawrence C. Yarberry           and Treasurer

                  *                    Vice President, Controller  October 25, 1999
______________________________________  and Secretary
          Joseph P. Atturio

                  *                    Director                    October 25, 1999
______________________________________
           Joshua J. Harris

                  *                    Director                    October 25, 1999
______________________________________
            Marc E. Becker



   /s/ Donald C. Orris
*By: ____________________________
         Donald C. Orris
        Attorney-in-Fact

                                      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 October 25, 1999.

                                          Cross Con Transport, Inc.

                                             /s/ Donald C. Orris
                                          By: _________________________________
                                                      Donald C. Orris
                                                         Chairman

   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                    October 25, 1999
______________________________________
           Donald C. Orris

                  *                    President, Chief Executive  October 25, 1999
______________________________________  Officer, Assistant
          Richard P. Hyland             Secretary and Assistant
                                        Treasurer

                  *                    Chief Financial Officer,    October 25, 1999
______________________________________  Secretary and Treasurer
         Lawrence C. Yarberry

                  *                    Director                    October 25, 1999
______________________________________
     Gerry Angeli

  /s/ Donald C. Orris
*By: ____________________________
         Donald C. Orris
        Attorney-in-Fact

                                      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 October 25, 1999.

                                          Cross Con Terminals, Inc.

                                              /s/ Donald C. Orris
                                          By: _________________________________
                                                      Donald C. Orris
                                                         Chairman

   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                    October 25, 1999
______________________________________
           Donald C. Orris

                  *                    President, Chief Executive  October 25, 1999
______________________________________  Officer, Assistant
          Richard P. Hyland             Secretary and Assistant
                                        Treasurer

                  *                    Chief Financial Officer,    October 25, 1999
______________________________________  Secretary and Treasurer
         Lawrence C. Yarberry

                  *                    Director                    October 25, 1999
______________________________________
     Gerry Angeli

  /s/ Donald C. Orris
*By: ____________________________
         Donald C. Orris
        Attorney-in-Fact

                                      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 October 25, 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

   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     October 25, 1999
______________________________________  Chief Executive Officer
           Donald C. Orris

                  *                    Executive Vice President    October 25, 1999
______________________________________  and Director
           Gary I. Goldfein

                  *                    Director                    October 25, 1999
______________________________________
           Joshua J. Harris

                  *                    Director                    October 25, 1999
______________________________________
            Marc E. Becker


  /s/ Donald C. Orris
*By: ____________________________
         Donald C. Orris
        Attorney-in-Fact

                                      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 October 25, 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

   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     October 25, 1999
______________________________________  Chief Executive Officer
           Donald C. Orris

                  *                    Executive Vice President    October 25, 1999
______________________________________  and Director
           Gary I. Goldfein

                  *                    Director                    October 25, 1999
______________________________________
           Joshua J. Harris

                  *                    Director                    October 25, 1999
______________________________________
            Marc E. Becker


  /s/ Donald C. Orris
*By: ___________________________
        Donald C. Orris
        Attorney-in-Fact

                                     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 October 25, 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

   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     October 25, 1999
______________________________________  Chief Executive Officer
           Donald C. Orris

                  *                    Executive Vice President    October 25, 1999
______________________________________  and Director
           Gary I. Goldfein

                  *                    Director                    October 25, 1999
______________________________________
           Joshua J. Harris

                  *                    Director                    October 25, 1999
______________________________________
            Marc E. Becker


       /s/ Donald C. Orris
*By: ___________________________
        Donald C. Orris
        Attorney-in-Fact

                                     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 October 25, 1999.

                                          Pacific Motor Transport Company

                                          By: /s/ Donald C. Orris
                                            -----------------------------------
                                                      Donald C. Orris
                                                          Chairman

   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                    October 25, 1999
______________________________________
           Donald C. Orris


                  *                    President, Chief Executive  October 25, 1999
______________________________________  Officer and Director
             Gerry Angeli

                  *                    Executive Vice President,   October 25, 1999
______________________________________  Chief Financial Officer
         Lawrence C. Yarberry           and Treasurer

                  *                    Controller and Secretary    October 25, 1999
______________________________________
          Joseph P. Atturio



  /s/ Donald C. Orris
*By: ____________________________
         Donald C. Orris
        Attorney-in-Fact

                                     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 October 25, 1999.

                                          Pacer Express, Inc.

                                          By: /s/ Donald C. Orris
                                            -----------------------------------
                                                      Donald C. Orris
                                                          Chairman

   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                    October 25, 1999
______________________________________
           Donald C. Orris


                  *                    President, Chief Executive  October 25, 1999
______________________________________  Officer and Director
           Gary I. Goldfein

                  *                    Executive Vice President,   October 25, 1999
______________________________________  Chief Financial Officer
         Lawrence C. Yarberry           and Treasurer

                  *                    Controller and Secretary    October 25, 1999
______________________________________
          Joseph P. Atturio



   /s/ Donald C. Orris
*By:_____________________________
        Donald C. Orris
        Attorney-in-Fact

                                     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 October 25, 1999.

                                          Pacer Integrated Logistics, Inc.

                                             /s/ Donald C. Orris
                                          By: _________________________________
                                                      Donald C. Orris
                                                         Chairman

   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                    October 25, 1999
______________________________________
           Donald C. Orris

                  *                    President Chief Executive   October 25, 1999
______________________________________  Officer, and director
             Gerry Angeli

                  *                    Executive Vice President,   October 25, 1999
______________________________________  Chief Financial Officer
         Lawrence C. Yarberry           and Treasurer

                  *                    Controller and Secretary    October 25, 1999
______________________________________
          Joseph P. Atturio



   /s/ Donald C. Orris
*By:_____________________________
        Donald C. Orris
        Attorney-in-Fact

                                     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 October 25, 1999.

                                          PLM Acquisition Corporation

                                             /s/ Donald C. Orris
                                          By: _________________________________
                                                      Donald C. Orris
                                                         Chairman

   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                    October 25, 1999
______________________________________
           Donald C. Orris

                 *                     Executive Vice President,   October 25, 1999
______________________________________  Chief Financial Officer
           Robert L. Cross              and Treasurer

                 *                     Vice President, Chief       October 25, 1999
                                        Financial Officer,
______________________________________  Secretary and Treasurer
         Lawrence C. Yarberry

                 *                     Director                    October 25, 1999
______________________________________
             Gerry Angeli


  /s/ Donald C. Orris
By: _____________________________
         Donald C. Orris
        Attorney-in-Fact

                                     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 October 25, 1999.

                                          Manufacturers Consolidation Service,
                                          Inc.

                                          By:  /s/ Donald C. Orris
                                            -----------------------------------
                                                     Donald C. Orris
                                                        Chairman

   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                    October 25, 1999
______________________________________
           Donald C. Orris

                 *                     President and Chief         October 25, 1999
______________________________________  Executive Officer
          Richard P. Hyland

                 *                     Executive Vice President,   October 25, 1999
______________________________________  Chief Financial Officer
         Lawrence C. Yarberry           and Treasurer

                 *                     Controller and Secretary    October 25, 1999
______________________________________
          Joseph P. Atturio

                 *                     Director                    October 25, 1999
______________________________________
     Gerry Angeli

  /s/ Donald C. Orris
By: _____________________________
         Donald C. Orris
        Attorney-in-Fact

                                     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 October 25, 1999.

                                          LEVCON, INC.

                                             /s/ Donald C. Orris
                                          By: _________________________________
                                                      Donald C. Orris
                                                          Chairman

   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                    October 25, 1999
______________________________________
           Donald C. Orris

                  *                    Chief Executive Officer     October 25, 1999
______________________________________
          Richard P. Hyland

                  *                    Executive Vice President    October 25, 1999
______________________________________  and Director
             Gerry Angeli

                  *                    Executive Vice President    October 25, 1999
______________________________________  and Chief Financial
         Lawrence C. Yarberry           Officer

                  *                    Controller and Secretary    October 25, 1999
______________________________________
          Joseph P. Atturio


  /s/ Donald C. Orris
*By: ____________________________
         Donald C. Orris
        Attorney-in-Fact

                                     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 October 25, 1999.

                                          Manufacturers Consolidation Service
                                          of Canada, Inc.

                                          By:/s/ Donald C. Orris
                                             ----------------------------------
                                                      Donald C. Orris
                                                          Chairman

   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                    October 25 1999
___________________________________________
              Donald C. Orris

                     *                      President and Chief         October 25 1999
___________________________________________  Executive Officer
             Richard P. Hyland

                     *                      Executive Vice President,   October 25 1999
___________________________________________  Chief Financial Officer
           Lawrence C. Yarberry              and Assistant Secretary

                     *                      Controller and Secretary    October 25 1999
___________________________________________
             Joseph P. Atturio

                     *                      Director                    October 25 1999
___________________________________________
               Gerry Angeli



  /s/ Donald C. Orris
*By: ________________________________
           Donald C. Orris
          Attorney-in-Fact

                                     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 October 25, 1999.

                                          Interstate Consolidation Service,
                                          Inc.

                                          By:  /s/ Donald C. Orris
                                            -----------------------------------
                                                      Donald C. Orris
                                                          Chairman

   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                    October 25, 1999
______________________________________
           Donald C. Orris


                                       President, Chief Executive  October 25, 1999
______________________________________  Officer and Director
           Gary I. Goldfein

                 *                     Executive Vice President,   October 25, 1999
______________________________________  Chief Financial Officer
         Lawrence C. Yarberry           and Treasurer

                 *                     Controller and Secretary    October 25, 1999
______________________________________
          Joseph P. Atturio


  /s/ Donald C. Orris
By: _____________________________
         Donald C. Orris
        Attorney-in-Fact

                                     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 October 25 , 1999.

                                          Interstate Consolidation, Inc.

                                          By:  /s/ Donald C. Orris
                                            -----------------------------------
                                                      Donald C. Orris
                                                          Chairman

   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


                                                            
                 *                     Chairman                    October 25, 1999
______________________________________
           Donald C. Orris


                 *                     President, Chief Executive  October 25, 1999
______________________________________  Officer and Director
           Gary I. Goldfein

                 *                     Executive Vice President,   October 25, 1999
______________________________________  Chief Financial Officer
         Lawrence C. Yarberry           and Treasurer

                 *                     Controller and Secretary    October 25, 1999
______________________________________
          Joseph P. Atturio


  /s/ Donald C. Orris
By: _____________________________
         Donald C. Orris
        Attorney-in-Fact

                                     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 October 25, 1999.

                                          Intermodal Container Service, Inc.

                                             /s/ Donald C. Orris
                                          By: _________________________________
                                                      Donald C. Orris
                                                         Chairman

   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                             October 25, 1999
______________________________________
           Donald C. Orris

                  *                    President, Chief Executive Officer,  October 25, 1999
______________________________________  and Director
           Gary I. Goldfein

                  *                    Executive Vice President,            October 25, 1999
______________________________________  Chief Financial Officer and
         Lawrence C. Yarberry           Treasurer

                  *                    Controller and Secretary             October 25, 1999
______________________________________
            Joseph P. Atturio


  /s/ Donald C. Orris
*By: ____________________________
         Donald C. Orris
        Attorney-in-Fact

                                     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 October 25, 1999.

                                          Keystone Terminals Acquisition Corp.

                                             /s/ Donald C. Orris
                                          By: _________________________________
                                                      Donald C. Orris
                                               Chairman, President and Chief
                                                     Executive Officer

   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     October 25, 1999
______________________________________  Chief Executive Officer
           Donald C. Orris

                  *                    Executive Vice President,   October 25, 1999
______________________________________  Chief Financial Officer
         Lawrence C. Yarberry           and Treasurer

                  *                    Vice President, Controller  October 25, 1999
______________________________________  and Secretary
          Joseph P. Atturio


  /s/ Donald C. Orris
*By: ____________________________
         Donald C. Orris
        Attorney-in-Fact

                                     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      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).
              (Previously filed as Exhibit No. 4.2 to the Registration
              Statement on Form S-4 dated August 12, 1999.)
    4.2      Form of 11 3/4% Senior Subordinated Notes due 2007 (filed as part
              of Exhibit 4.1). (Previously filed as Exhibit No. 4.3 to the
              Registration Statement on Form S-4 dated August 12, 1999.)
    4.3      Shareholders' Agreement, dated as of May 28, 1999, among APL
              Limited, Pacer International, Inc., Coyote Acquisition LLC and
              Coyote Acquisition II LLC. (Previously filed as Exhibit No. 4.12
              to the Registration Statement on Form S-4 dated August 12, 1999.)
    4.4      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. (Previously
              filed as Exhibit No. 4.13 to the Registration Statement on Form
              S-4 dated August 12, 1999.)
    4.5      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. (Previously filed as Exhibit
              No. 4.14 to the Registration Statement on Form S-4 dated August
              12, 1999.)
    4.6      Registration Rights Agreement, dated as of May 28, 1999, between
              Pacer International, Inc., and the Purchasers named therein.
              (Previously filed as Exhibit No. 4.18 to the Registration
              Statement on Form S-4 dated August 12, 1999.)
    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.*
    10.6     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. (Previously filed
              as Exhibit No. 4.1 to the Registration Statement on Form S-4
              dated August 12, 1999.)
    10.7     Stock Purchase Agreement, dated as of March 15, 1999, between APL
              Limited and Coyote Acquisition LLC. (Previously filed as Exhibit
              No. 4.4 to the Registration Statement on Form S-4 dated August
              12, 1999.)
    10.8     Non-Competition Agreement, dated as of May 28, 1999, among Neptune
              Orient Lines Limited, APL Limited, Pacer International, Inc. and
              Coyote Acquisition LLC. (Previously filed as Exhibit No. 4.5 to
              the Registration Statement on Form S-4 dated August 12, 1999.)
    10.9     Administrative Services Agreement, dated as of May 28, 1999,
              between APL Limited and Pacer International, Inc. (Previously
              filed as Exhibit No. 4.6 to the Registration Statement on Form S-
              4 dated August 12, 1999.)






 Exhibit No.                             Description
 -----------                             -----------
          
    10.10    IT Supplemental Agreement, dated as of May 11, 1999, between APL
              Limited, APL Land Transport Services, Inc. and Coyote Acquisition
              LLC.*
    10.11    Stacktrain Services Agreement, dated as of May 28, 1999, among
              American President Lines, Ltd., APL Co. Pte. Ltd., APL Limited
              and Pacer International, Inc. (Previously filed as Exhibit No.
              4.8 to the Registration Statement on Form S-4 dated August 12,
              1999.)
    10.12    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. (Previously filed as Exhibit No.
              4.9 to the Registration Statement on Form S-4 dated August 12,
              1999.)
    10.13    Equipment Supply Agreement, dated as of May 28, 1999, among
              American President Lines, Ltd., APL Co. Pte. Ltd., APL Limited
              and Pacer International, Inc. (Previously filed as Exhibit No.
              4.10 to the Registration Statement on Form S-4 dated August 12,
              1999.)
    10.14    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. (Previously
              filed as Exhibit No. 4.11 to the Registration Statement on Form
              S-4 dated August 12, 1999.)
    10.15    Management Agreement, dated as of May 28, 1999, between Apollo
              Management IV, L.P. and Pacer International, Inc. (Previously
              filed as Exhibit No. 4.15 to the Registration Statement on Form
              S-4 dated August 12, 1999.)
    10.16    Tax Sharing Agreement, dated as of May 28, 1999, by and among
              Coyote Acquisition LLC, Pacer International, Inc. and Pacer
              Logistics, Inc. (Previously filed as Exhibit No. 4.16 to the
              Registration Statement on Form S-4 dated August 12, 1999.)
    10.17    Purchase Agreement, dated as of May 24, 1999, among Pacer
              International, Inc., the Guarantors and the Placement Agents
              named therein. (Previously filed as Exhibit No. 4.17 to the
              Registration Statement on Form S-4 dated August 12, 1999.)
    10.18    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 10.17). (Previously filed as Exhibit
              No. 4.19 to the Registration Statement on Form S-4 dated August
              12, 1999.)
    10.19    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.*
    10.20    Domestic Incentive Agreement, dated as of May 4, 1999, between CSX
              Intermodal, Inc. and Pacer International, Inc.*
    10.21    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.*
    12.1     Statement of Computation of Ratio of Earnings to Fixed Charges.*
    12.2     Statement of Computation of EBITDA to Cash Interest Expense.*
    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.*

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* Previously filed